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All-Party Parliamentary Groups (APPG) Enterprise Forum (House of Lords) - Slides

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  • 1. Supporting sustained growth in SMEs – policy approaches Professor Stephen Roper and Professor Mark Hart Enterprise Research Centre Stephen.roper@wbs.ac.uk mark.hart@aston.ac.uk
  • 2. Introducing the Enterprise Research Centre • The Enterprise Research Centre (ERC) is an independent research centre which conducts policy relevant research on SME growth and development – launched January 2013 (www.enterpriseresearch.ac.uk) • ERC is a research partnership of Warwick Business School, Aston Business School, Imperial College Business School, Strathclyde Business School and Birmingham Business School. • £3m funding from the Economic and Social Research Council, the UK government Department for Business, Innovation and Skills, the British Bankers’ Association and the Technology Strategy Board. • Research on entrepreneurial ambition and inclination, leadership capabilities in the management teams of SMEs, the impact of diversity on SME start-up and growth, the financing of growth companies, innovation and exporting in SMEs and the role of SMEs in UK jobs growth.
  • 3. HGFs & Job Creation Re-visited UK – 2007-2010 66% 6% 1% 27% 41% 22% 22% 15% 0% 10% 20% 30% 40% 50% 60% 70% New firms Small and Larger firms – non-HGF High-Growth Firms (OECD Definition) Micro-enterprises – non-HGF Proportion of Job Creating Firms Proportion of Job Creation Source: Anyadike-Danes; Hart and Du (2013) “Firm Dynamics and Job Creation in the UK” ERC White Paper 6, April 2013.
  • 4. The problem of sustained growth • High growth small firms play a crucial role in job creation in the UK and internationally • From 2007-2010 high growth firms accounted for around 1 per cent of firms but 22 per cent of new jobs • But: – High growth is often short-lived with growth often slowing – The contribution of high growth firms to UK job creation has fallen by a third since 2005. • The UK has a sustained growth problem. How can we support sustained high-growth in our most ambitious SMEs?
  • 5. Defining the sustained growth problem… • For small firms growing rapidly from say £2m to £5m turnover the business and leadership challenges are immense • Growth means the nature of the business is transformed rapidly –this creates issues around finance, organisational structure, innovation and markets (to name just a few…) • Leadership and management demands are also transformed, with rapid growth challenging the capabilities of the owner-manager and leadership team.
  • 6. … and the solution • These dual challenges – business transformation and leadership development – define the sustained growth problem at the level of the firm. To achieve sustained growth it helps to deliver: – Support business development – Support leadership development • And, the international evidence is clear. Schemes which work in this way can deliver real benefits - 8-10 % a year increased and sustained growth • So the problem is not ‘what’ we need to deliver to support sustained growth, the question is ‘how’ we best do this in the UK.
  • 7. An example – the Dutch Growth Accelerator – 1/2 • Introduced in 2008 with the objective of supporting growth of two hundred SMEs from a turnover of approximately €2m to €20m over five years. • The GA provides a structured programme of leadership development modules, business mentoring, peer group learning sessions and leadership master- classes over five years. • Two cohorts of around 15-20 companies start once or twice a year. Firms are very carefully selected for the programme on the basis of past growth, ambition and willingness to commit to the five year duration of the programme. • The average firm participating is 5-10 years old and has turnover of around €3.6m. It has a highly ambitious Director-Manager of approximately 40 years old who has full ownership of the company.
  • 8. An example – the Dutch Growth Accelerator – 2/2 • Delivery is through a consortium of five private sector organisations (PwC, De Baak Management Centre, AKD (law), Philips Innovation Services) and Port4Growth. • Public investment in the programme - €5m - was used primarily for programme development. After the first five- year-period, the programme will be self-sustaining and be directly funded via beneficiary firms’ contributions (€75k per firm). • Benefits - firms in the programme grew sales 22 per cent more than a control group over two years, sales by 8 per cent and had a 55 per cent higher foreign sales increase.
  • 9. Supporting sustainable growth – what works? ERC White Paper reviewed: Systemic Approaches • Danish Growth Houses • U.S. Jobs and Innovation Accelerator Challenge Holistic Approaches • Sweden’s national incubator program • Ontario's Medical and Related Science Discovery District (MaRS) • The Dutch Growth Accelerator • Scotland's ‘Companies of Scale’ programme Thematic measures • Germany's high-tech grunderfonds • Commercialisation Australia • England's Growth Accelerator • Ireland's Management for Growth Programme • This leads to best practice guidelines for supporting sustainable growth relating to: – Enabling effective self-selection into support schemes – Firm selection criteria need to be strong, and reflect both the private and social benefits of supporting the development of specific businesses – Schemes are likely to involve sustained engagement with a business over a period of years. – Supporting sustained fast growth requires a dual focus on the development of the business and the capabilities of the entrepreneur. – Measures should be partnership based - business schools perhaps in partnership with banks or Chambers. – Delivery is likely to be regionally organised to facilitate attendance and peer-group learning.
  • 10. Delivering support for sustained growth in the UK… • The need: episodic high growth and a declining high growth contribution to new jobs • The appetite: UK experience with programmes such as the GS10ksb, BIG, LEAD suggests ambitious firms are keen and would contribute • The focus: delivering integrated business and leadership support over a sustained period with extensive peer group learning • Existing resources: a resource rich but un-coordinated and unfocused UK eco-system of mentors, financiers, leadership training organisations • One possible solution…. a National Growth College
  • 11. A National Growth College • Business school or university led regional delivery consortia involving banks, Chambers and other business support partners • NGC would support ambitious businesses to grow turnover from £1-2m to £3-5m over 3 years – around 31,000 companies in this target group. • Work through an intensive programme of leadership training, mentoring, growth planning, peer-group workshops and accredited personal development activities – a ‘growth MBA’ • Regional consortia could be supported by small national group to co- ordinate a ‘curriculum for growth’ and share best practice • Public funding might be needed initially to support programme development and proof of concept
  • 12. Contact us: If you would like any more information about the ERC and any of its activities please contact the Director, Stephen Roper at stephen.roper@wbs.ac.uk or the Deputy Director, Mark Hart at mark.hart@aston.ac.uk. More details about the activities of the ERC and our latest events can be found at: www.enterpriseresearch.ac.uk