As a general rule the number of businesses in the UK has grown by around 120,000 each year since 2000. That is until we got to 2011 when the increase almost doubled to approximately 225,000 following two years of below average growth*. The recent publication of the annual Business Population Estimates by the ONS shows that in 2012 we returned roughly to trend with an increase of 102,000.
Why should 2011 have been such a bumper year for the number of start-ups? Was it something the Government did? Maybe the introduction of more support for new businesses.
Or could it be that the surge in unemployment after the 2009 recession forced people into business once they realised a new job was not forthcoming?
What I think the data actually shows is that people’s propensity to be entrepreneurial is largely (although not entirely) driven by the big shifts that occur in the wider economy. The evidence for this is that we saw a very similar trend in business population growth in the early years of the century. 2003 enjoyed an almost identical leap in business population with a sudden surge of 248,000. As with the more recent growth, this earlier surge followed a couple of years of below average increases. It is relevant, I would argue, that the earlier surge followed the confidence sapping dotcom bust of 2000 just as the later surge followed the 2008 Crash.
What this may be telling us is that after an economic crisis, the UK’s potential entrepreneurs are like a coiled spring. Plans to start up are put on hold as confidence and trading conditions worsen but at the first sign of light, entrepreneurs just as suddenly revive those plans and put them into action except that by then a lot more entrepreneurs are waiting to move than exist under normal conditions.
What is remarkable about the surge in 2011 is how quickly we got back to entrepreneurial ways. Clearly the 2008 Crash was far more serious than the 2000 crisis especially as it was followed by two periods of recession. And yet the surge happened over the same time frame as the earlier crisis and with close to equal vigour.
In short, it seems the entrepreneurial spirit has proved more resilient, bouncing back just as quickly from a deeper economic crisis. Indeed the bounce may have been helped by the more profound nature of the 2008 crisis as more businesses went to the wall creating greater opportunities for new companies once conditions began to return to normality.
It should also put to rest, in my view, any notion that the recent rise in entrepreneurial activity is being largely driven by desperation as the unemployed or low paid seek any way of making a living. It is notable, for example, that after the surge of 2003, growth in the business population continued unabated. There is no indication that those new entrepreneurs returned to ‘proper jobs’ once the crisis passed. This time could be different, of course, but we shall have to wait until the next year or two of data to know for sure.
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*Due to a methodological change, the ONS can only estimate the business population growth for 2011 as being somewhere between 200,000 and 253,000 rather than being a single figure. I’ve roughly split the difference to recognise this.
On Wednesday the annual edition of the Business Population Estimates for 2012 will be published by the Office for National Statistics. It’s a publication that attracts far less attention than the regular inflation, employment and growth reports but it deserves more for it will almost certainly present a worrying picture of an emerging ‘entrepreneurial divide’ between the north and the south.
The last two editions of the report for 2010 and 2011 show a country where the number of businesses has been rising inexorably since 2000 from 3.5 million to 4.5 million – a rise of over 30%. Even the most severe financial and economic crisis since the 1930s has not dented the appetite for start-ups.
But this hides the reality of a divided nation. While southern regions boasted 1,126 enterprises per 10,000 people in 2011, northern regions (including Scotland and Northern Ireland) could muster only 773.
More worryingly, the recent acceleration in the establishment of start-ups is happening far faster in the south than the north with a 6% and 2.5% rise respectively in the number of enterprises per 10,000 people between 2010 and 2011. Wales and Northern Ireland actually saw a 5% fall.
The sheer scale of the entrepreneurial divide is shocking. The most entrepreneurial region (London) had 1,231 enterprises per 10,000 people in 2011. The least entrepreneurial (the North East) had very nearly 50% less at 625.
Why this divide is so stark urgently needs further investigation. As Ben Dellot points out in his blog post today:
where once we were a nation of shopkeepers, now we are seemingly one of consultants, freelancers, entrepreneurs, online marketplace traders.
This is the reality of the new economy that is being created in the UK and those regions that fail to nurture the intense entrepreneurial spirit required to adapt to this challenging world will inevitably be left behind.
Undoubtedly there is a strong element of Catch 22 about all this: regions that have more active labour markets and more enterprises are inevitably more likely to generate further entrepreneurial activity. The regions with more businesses and start-ups do, for example, have higher employment rates and lower unemployment rates (although London, interestingly, bucks this trend).
But to simply accept this as a sad fact of life is to condemn northern regions to their fate in an economy where entrepreneurial oomph increasingly counts. Instead, we desperately need to understand more about the motivations and needs of the new wave of business people and then explore how those motivations can be nurtured and those needs supported in the regions where the entrepreneurial fire merely flickers rather than roars.
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The idea of a trade union representing entrepreneurs, first mooted by Doug Richard exactly three years ago, is suddenly back in the ether. Former No.10 adviser, Rohan Silva has called for such a beast to counter the “immoral” hold big business has over government while City AM Editor, Allister Heath has demanded:
a slick, professional pressure group relentlessly fighting for wealth creators and promoting mass entrepreneurship as the answer to the crisis of confidence that is currently engulfing capitalism.
It’s not an idea without merit. Indeed, it reflects the themes I’ve been exploring on this blog over the last few months. There is undoubtedly a need to challenge the grip sluggish, rent-seeking business has over the UK to allow an economy built around the small and the imaginative.
But it’s also a proposal that begs two big questions.
What form would such a body take?
The traditional membership body structure strikes me as inappropriate. Your average start-up entrepreneur is unlikely to be a natural joiner or committee hack plus s/he has limited time to volunteer. To secure membership from such a group something of direct benefit beyond the promise of better government policy would have to be offered such as business support or investment opportunities. But as RSA research has shown, this is already offered by a very crowded and confusing market not desperately in need of a new entrant.
What would it actually lobby for?
Allister Heath suggests that the focus of such a group must be to break up monopolies and oligopolies to allow new, innovative players in. Amen to that. But the problem with any body that seeks to “represent” a certain social or economic group is that it usually drifts into an effort to squeeze special favours out of the state: byzantine tax breaks, ear-marked procurement deals, distortionary regulation. The reason being that it is far easier to secure these ‘quick wins’ to justify the body’s existence to its supporters than bring about profounder change.
Both of these concerns lead to a more fundamental point which is that entrepreneurs generate change (sometimes world shattering) by offering a service or a product in such an effective way that consumers can’t resist. It’s a grassroots, messy, creative approach to transformation that needs to be left free to flourish. I’m not sure it is best served by engaging over the long term with the clunky, hierarchical, hide bound world of government and politics where change is generated in very different and often less effective ways. Entrepreneurs challenge monopolies by being entrepreneurial not by asking for government help which is precisely what monopolies themselves do.
Ultimately, it seems to me that what is required is not so much an official union for entrepreneurs as a loose alliance of like-minded people and organisations who see the value in creating an economy where enterpreneurial challenge to oligopoly and monopoly can thrive. That would mean seminars, conferences, papers, conversations with the powerful generated by a variety of organisations sharing a similar goal: a once in a generation shift in favour of the entrepreneurial and creative.
The work of the RSA around young entrepreneurs, social enterprise and micro-business, the new Centre for Entrepreneurs and a wide host of business support organisations, start-up incubators and various loose networks provide a fertile soil within which to start creating such a movement.
Maybe we should just all get together some time soon.
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By Adam Lent, Director of the Action and Research Centre, RSA
Nicole Vanderbilt, Managing Director for Europe, Etsy
The rise of the very small business seems unstoppable. Over the last forty years the total number of businesses in the UK has grown from around 800,000 to almost 5 million. Over 95% of these employ less than nine people meaning they are officially ‘micro-businesses’. That’s an awfully rapid growth in this type of company and a very big shift in the way our economy works.
And the trend only seems to be accelerating: the number of micro-businesses has grown by 40% in the last decade alone.
These micro-businesses may be small but they are powerful. They now account for a third of all employment in the UK (almost 8 million people) and a fifth of private sector turnover. It is also clear that smaller companies have generated more jobs in recent years than big business.
Strangely, however, we do not know much about this increasingly central part of our economy. Why has there been such an explosion of micro-businesses? What does it mean for the future of the economy? What impact has it had on our society’s values and politics? We can speculate but there has been little hard thinking or rigorous research.
We also know surprisingly little about the motivations and hopes of the people who run micro-businesses. How many, for example, run a micro-business primarily because it gives them greater autonomy and the freedom to be creative and how many are looking to make their fortune? We simply do not know.
This is why the RSA and Etsy have teamed up to launch a research project – called The Power of Small – to answer these and other questions. Over eighteen months, we will run surveys, conduct interviews and analyse data to understand as much as we can about micro-business in the UK. Our findings will be presented through a series of reports, public events and on the RSA and Etsy blogs.
A central part of the project will be to find out as much as we can about the many Etsy sellers in the UK. We’re particularly interested in the connections they form with each other, their customers and the world outside Etsy.
The aim is not just to find out more about micro-business for its own sake. Ultimately, we want to help government, support organisations and, of course, micro-businesses themselves understand how small-scale enterprise can build the more creative society for which both the RSA and Etsy are aiming.
If you’d like to know more about The Power of Small project and want to be kept up to date with developments contact Ben Dellot by emailing him at firstname.lastname@example.org
We seem to be entering the era of clunky.
A growing desire on the part of politicians and public to deal with inequality and the cost of living is colliding spectacularly with the impossibility of delivering tax and spend solutions. The result is politicians turning to the regulatory rather than the spending power of the state through things like crackdowns on executive pay, price freezes, changes to the minimum wage and a general ramping up of the rhetoric against ‘predatory’ businesses that treat their staff and customers badly.
The problem with this drift is that the solutions tend to have unintended consequences which can often (particularly in the longer term) negate the very purpose for which they were designed. In other cases they simply fail to work as planned.
Playing around with the minimum wage, for example, always runs the risk of generating unemployment for the very people it is supposed to help. Controlling executive pay is becoming one of those knotty issues for which the blunt tools of government seem particularly unfit. And price freezes, as Ed Miliband is discovering, bring with them a wide range of troubling economic, legal and political questions.
A less messy way through the dilemma could be to ensure that a larger proportion of our economy is delivered by small companies.
Currently around half of private sector turnover is accounted for by large businesses and half by small and medium sized businesses. That in itself is quite a striking fact when you consider that there are only 6,500 large businesses in the UK but almost 4.8 million SMEs. In fact, micro-businesses (those with less than 10 employees) number around 4.5 million and employ 32% of the workforce but only account for 20% of turnover (Data available here and here). So there is, on the face of it, a great deal of room for small businesses to play a bigger role.
One outcome if they did might be a wider spread of vibrant economies across the UK. We tend to think of inequality as being a matter of individual or household incomes and wealth but, of course, the geographical factor is crucial. People who live in areas with healthy labour markets, lots of business activity and high investment are much more likely to be far better off than those who do not. As is widely known, this has led to the much discussed regional imbalances and inequalities that afflict the country.
A more bigger small business sector could help address this because, as research has shown, smaller businesses tend to spend more of the money they make from a local area within that area. For example, one report found that for every £1 a local authority spent with an SME, 63p was re-spent in the local area compared to 40p in every £1 spent with a large business.
This is not just chance: large businesses will inevitably shift their money around their organisation which may well mean moving it to locations many miles from its origin. Large businesses will also have a much wider range of stakeholders, investment needs and suppliers with a claim on revenues who have no link to the original area.
Another aspect is the role that smaller companies can play in driving innovation and productivity: two of the main factors which over time make an economy more competitive hence driving up employment and living standards. Having a wide spread of smaller companies working in all sectors keeps the big guys on their toes, breaks down oligopolies and ensures a good flow of new market-shaping ideas makes an economy more innovative. It also tends to create more price competition and so delivers a better deal for consumers.
The energy sector which has been the focus of so much attention over the last few days is a case in point. Dominated by six very large companies, the sector is widely regarded as unimaginative and famously takes its customers for granted.
Inequality is heavily gendered. Women have a median weekly income that is only two thirds of that earned by men. Even young women, who have the same or higher qualifications than men, still earn less.
It seems here too small business may have an important role to play if the behaviour of women themselves is anything to go by. In effect, women are voting with their feet with a significant recent growth in the numbers establishing and running their own small business. For example, the number of female entrepreneurs has grown by 9.6% during the past two years, compared with a 3.3% rise for men.
The reasons for this shift are not clear but I suspect that many women are now taking advantage of the lower costs of setting up a business provided by the internet to add an extra income on top of their salary. I also imagine that for many it provides a route to a job and earnings determined by their own abilities rather than the discrimination faced in the labour market and workplace.
It could also be added that although wages in smaller businesses are generally lower than big businesses, I would be willing to bet that the sorts of absurd wage differentials between directors and other staff that is found in large corporations is far rarer in small businesses. Indeed, there is evidence that while executive incomes in large businesses have continued to rise rapidly despite recent economic conditions, those in small businesses have actually fallen since the credit crunch hit. The fact that average pay for a FTSE 100 executive stood at £4 million in 2011 but at £87,000 for an executive of a small company tells its own story.
So there are good reasons to suspect that an economy where the majority of turnover is generated by small businesses could be one with a better record on equality and living standards.
The big question then, of course, is how do you ensure that smaller companies can deliver the majority of a nation’s economy. That is a question for a future post but my hunch is that the answer will be a lot less clunky than the regulatory solutions currently enthralling our leaders.
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Back in April I wrote a blog post suggesting light-heartedly that we ban the word ‘entrepreneur’ because of its misleading connotations and replace it with a completely new word – I proposed ‘Venturist’. Much of the thinking behind the post arose from my engagement, through the RSA, with a new generation of young entrepreneurs who seem to me to be all about the mission rather than the money.
The post proved pretty popular so I thought I’d write a short think piece about what a Venturist might actually be and why they could be the most important force for change in our economy today. Here’s a short extract from the introduction that should give you an idea of the main themes. If you’re interested, you can read the whole thing here. It’s not long!
The Irresistible Rise of the Venturist
Every era has its iconic lifestyle. A way of being that comes to encapsulate the aspirations and values of a generation.
In the 1950s, it was the nuclear family: stable, conservative and, most importantly, powering an economic boom with its taste for the ‘mod cons’ churned out by factories tooled with the latest technology.
When that cosy post-war glow faded with the recessions of the 1970s, it was some time before a new icon emerged in the form of the yuppie. Initially derided, the yuppie taste for conspicuous consumption, real estate and hedonism ultimately set the tone for the long boom that lasted from the mid-1990s to 2007.
Now we are in the down time again. Five years of economic crisis is making the 1970s look like a cakewalk. Boom may return, one day, but no-one is holding their breath. Into this slough, however, has stepped a new type of icon tailored for an era unlike any we have experienced since the end of the Second World War.
The Venturist is usually young, energetic and sharp but, most importantly, they are on a mission to solve a problem or seize an opportunity. The nature of that venture can vary widely set up as a charity, a business, a grass roots movement, a loose network or an on-line initiative with a focus on anything from supporting a local community to providing a service to customers. But whatever the form, venturists have a burning desire to be “an agent of change”…
… Venturists don’t wait for or ask others to deliver. They get on with delivery themselves.
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As contestants on The Apprentice never tire of telling us you have to give 110% to make a business work. A survey that came out a few days ago seems to give statistical backing to this unmathematical assertion.
The survey of 2,000 micro-business leaders found they work, on average, 52 hours a week. That’s 63% longer than the average British worker.
How do we square this then with another recent survey which found that almost 70% of entrepreneurs say they started their business to secure more autonomy over their time?
Could it be that entrepreneurs aren’t aware of how time consuming it is to run a business when they first set it up? That seems highly unlikely. As I know from my own experience, there are plenty of people happy to warn you to sell your bed and use the proceeds to buy a truck-load of Red Bull as soon as you mention starting a business.
Maybe entrepreneurs just exaggerate how hard they work to impress investors, customers and the wider world. The first survey gives some credence to this when it shows that London based entrepreneurs stated they put in 62 hours a week – a full 10 hours more than the average. Bluff, straight-talking northerners may have a view on such a claim! But this can’t be anything close to a full explanation because it is without doubt true that starting and running a small business is genuinely demanding particularly in the period before funds are available to hire staff and before you have found a relatively secure customer base.
I think the truth is that when entrepreneurs say they want autonomy over time they mean something different to what most people mean. As I’ve suggested elsewhere, entrepreneurs are often people who want to pursue their own mission or idea - in short they want to be agents of change on their own terms. So, for an entrepreneur, autonomy over time doesn’t mean having free time or better work-life balance - it really means having the freedom to spend time on something they want to do rather than what a manager or employer tells them to do.
Strange as it may seem, entrepreneurs can spend every waking hour serving customers, keeping investors happy and chasing suppliers and still feel entirely autonomous. As the entrepreneurial spirit infuses our culture and economy more and more that may be something to keep in mind as we try to understand what type of people we could become in this post-Crash world.
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I’ve been re-reading E.F Schumacher’s Small Is Beautiful having not picked it up in about twenty years. It seemed like a good point to do so given the rise of micro-business that I’ve been exploring on this blog and elsewhere. The book was also first published forty years ago this year.
For those who don’t know, Schumacher was (rather incongruously) the chief economist for the UK’s National Coal Board whose most famous work was an enormous influence on three separate movements: modern environmentalism, intermediate technology, and the well-being movement.
The book is a frustrating read. In more than a few places it makes very sweeping statements about the nature of capitalism and the West that are justified on the grounds of “wisdom” or “common sense” rather than evidence. It also has that common oppositional failing of characterising capitalism and modernity solely through their negatives while ignoring their rather significant positives.
Nevertheless the book is strikingly fresh when it deals with its core theme of the small scale enterprise.
Schumacher advances a number of arguments in favour of “smallness” but it is his emphasis on human creativity that is particularly interesting in an economy where the mission-focused, innovative micro-business seems to be growing in importance.
He argues that the notion of private property can only be truly meaningful when it operates at a small enough scale to allow people to act creatively. As soon as private property is applied at such a large scale that ownership is exercised passively then creativity for the owner and those working in the enterprise is destroyed.
As regards private property the first and most basic distinction is between (a) property that is an aid to creative work and (b) property that is an alternative to it. There is something natural and healthy about the former – the private property of the working proprietor; and there is something unnatural and unhealthy about the latter – the private property of the passive owner who lives parasitically on the work of others.
Private enterprise carried on with property of the first category is automatically small-scale, personal, and local. It carries no wider social responsibilities. Its responsibilities to the consumer can be safeguarded by the consumer himself. Social legislation and trade union vigilance can protect the employee. No great private fortunes can be gained from small-scale enterprises, yet its social utility is enormous.
It is immediately apparent that in this matter of private ownership the question of scale is decisive. When we move from small-scale to medium scale, the connection between ownership and work already becomes attenuated; private enterprise tends to become impersonal… The very idea of private property becomes increasingly misleading.
Schumacher argues that a number of aspects of our society and culture favour the large scale enterprise which crushes creativity but he feels technology plays a primary role. For too long there has been a focus on creating technologies for production by very large companies. He calls instead for:
methods and equipment which are: cheap enough so that they are accessible to virtually everyone; suitable for small-scale application; and compatible with man’s need for creativity…
Suppose it becomes the acknowledged purpose of inventors and engineers, observed Aldous Huxley, to provide ordinary people with the means of ‘doing profitable and intrinsically significant work, of helping men and women to achieve independence from bosses, so that they may become their own employers, or members of a self-governing, co-operative group working for subsistence and a local market … this differently orientated technological progress (would result in) a progressive decentralisation of population, of accessibility of land, of ownership of the means of production, of political and economic power’.
This is, of course, remarkably prescient. The development of the PC, then the internet and now digital fabrication technology has been a major driving force of the rise of micro-business and has unleashed a new wave of creativity in just the form Schumacher hoped for.
His overall view is summarized well below and also stands, I think, as a rather elegant summary of the ethos of the emerging micro-business movement:
The economics of gigantism and automation is a left-over of nineteenth-century conditions and nineteenth-century thinking and it is totally incapable of solving any of the real problems of today. An entirely new system of thought is needed … It could be summed up in the phrase, ‘production by the masses, rather than mass production’. What was impossible, however, in the nineteenth century, is possible now …
The system of mass production, based on sophisticated, highly capital-intensive, high energy input dependent, and human labour-saving technology, presupposes that you are already rich, for a great deal of capital investment is needed to establish one single workplace. The system of production by the masses mobilises the priceless resources which are possessed by all human beings, their clever brains and skilful hands, and supports them with first-class tools.
The Alternative to the Alternative?
Schumacher’s concerns, however, go much further than an interest in small-scale enterprise for the sake of human creativity. Like much of the world now after the 2008 Crash, his core concerns were to create a more stable economy that serves the interests of the less well-off far better, is more environmentally sustainable and offers more satisfying and secure employment.
However, unlike the current consensus on the alternative to pre-2008 capitalism, he doesn’t see any meaningful solutions coming from those who run the big state, big business or big monetary systems. Schumacher believes it is the very “bigness” of these structures that is the cause of so many problems. It is this that concentrates wealth and power to such a degree that it makes a mockery of the notions of private property and enterprise and stifles the human creativity that can flow from those concepts. It is that concentration of wealth and power that allows bad decisions and greed by elites to lead to crises of such depth that they threaten economic systems and the well-being of whole populations as was the case in 2008.
The underlying assumption behind much of the accepted alternative to the pre-2008 economy is that those in charge simply made the wrong calls and with better guidance and analysis will not make them again. All we need is more socially minded corporate boards, better regulation of the banks, wiser central bankers and a bit of state intervention to balance the economy.
It is an assumption that occludes a very tough question that Schumacher might pose were he alive today: why did anyone ever have so much political and economic power in the first place to make mistakes with such all-encompassing and existential consequences not just in the banking sector but in politics, central banking and the wider corporate world?
It’s a tough question because it immediately reveals that an alternative that relies on exactly the same super-powerful elites to solve our problems can never remove the risk that the same all-encompassing and existential crises will occur again in the future. It wasn’t just the banks that were too big to fail but the giant political, corporate and monetary infrastructure built around them as well.
These insights raise the intriguing possibility that as the number and nature of micro-businesses expand and as a new generation looks to self-generated, small-scale experimental solutions to the world’s problems that a more stable, fairer and sustainable economy might be being created from the bottom up and under the very noses of the powerful elites who claim to have the solutions so soon after they delivered crisis.
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The knee-jerk opposition from libertarian leaning types such as Toby Young and others to the calls for firmer action by Twitter against abusive trolls reveals quite how confused some libertarians are about their own ideology.
Libertarianism, if it is anything, is the belief that society is better governed by a plethora of voluntary agreements given force by mutual benefit rather than law given force by the coercive power of the state.
If Twitter’s management decide that all its users should now abide by certain stricter standards through the use of a ‘report abuse’ button then that is a change to the voluntary agreement between Twitter and its users. If a Twitter user does not like that change then they can stop using Twitter.
One may regret that Twitter’s decision will make the site a less interesting place (although I think that view is probably wrong as well) but that decision cannot be compared, as Toby Young does, to state denial of free speech. The difference is absolutely fundamental: even if Twitter or any other website stops me saying what I want to say, I am still free to say it elsewhere or set up a new site that let’s me say it. The state on the other hand does its best to stop me saying what it doesn’t like everywhere and may ultimately prosecute or persecute me, my family and my friends to achieve that.
In fact, it may actually be more consistent for a libertarian to heartily welcome the Twitter move. It is a sign that mutual arrangements can work their way to strong standards of decent conduct without the need for state coercion. Young may fear that the ‘report abuse’ button will “domesticate the wild west” but this is precisely what libertarians claim can be achieved through the power of voluntary agreement.
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Two recent papers on entrepreneurship develop two different approaches to identifying and supporting high growth start-ups and micro-businesses. In their own way they also highlight an emerging and maybe not always helpful hierarchy in public policy attitudes to different types of entrepreneur.
The first report written by Nida Broughton and former Treasury minister Kitty Ussher for the Social Market Foundation (SMF) argues that the highest growth enterprises (meaning those most likely to take on employees) have two key characteristics. Firstly, they are led by entrepreneurs aiming exploit a market opportunity rather than out of necessity such as the need to generate an income following redundancy. Secondly they operate in a sector that has high levels of innovation and where the potential customer base is large.
Broughton and Ussher claim that if entrepreneurialism is to be as beneficial to economic growth as possible then it is vital that government policy and enterprise support gets more focused on identifying and backing businesses with these characteristics rather than wasting resources on low growth ventures.
The second report by Rebecca Harding for Co-operatives UK takes a different approach. Harding argues that it is the goals and values of the individual entrepreneur that indicates the likelihood of a high growth venture. In particular, Harding claims that those entrepreneurs that are “value driven” (meaning those who state that their primary aim for setting up a business is to “make a difference”) create more jobs than their “mainstream” counterparts and tend to be much more innovative. In an international survey of 2,500 entrepreneurs, Harding says about one fifth proved to be value driven.
The lesson Harding draws from this is that there needs to be a shift away from the money-focused, ultra-individualistic image of the entrepreneur that pervades TV programmes such as The Apprentice and Dragons’ Den (a not dissimilar call to one I made in a recent post). She also argues that government policy should focus more on encouraging and supporting collaboration between value driven entrepreneurs and others rather than focusing too heavily on financial needs and market imperatives.
Despite their differences my hunch is that the two approaches are not mutually exclusive. It could be, for example, that by combining the two we can identify the four characteristics of the highest growth enterprises:
- led by someone whose primary stated goal is to ‘make a difference’
- has a clear focus on the market opportunity it wants to exploit
- operates in a high innovation sector such as manufacturing or business services
- has a product attractive to a potentially large customer base.
However, before working up the full policy implications of such an approach it would be worth undertaking a critical exploration of an underlying assumption that informs both reports. This is that the primary or even sole goal of enterprise policy is to generate growth and employment.
For example, both reports acknowledge but then exclude from their considerations the fact that entrepreneurialism can be a very important source of income for the many individuals working in a sole trading structure even though many of these enterprises will never employ anyone or be classed as high growth. Many may indeed, at least initially, be the necessity driven enterprises that the SMF report dismisses.
Harding’s survey also finds that almost 70% of the entrepreneurs questioned gave greater autonomy over time as a trigger for starting their business; the second most popular reason after following a business idea or dream. Improved work-life balance is clearly an important goal in itself with the potential to generate all sorts of benefits such as greater individual well-being and stronger families. It may well be that this is in itself a good reason to encourage and support entrepreneurial activity even if it doesn’t aid the high growth ventures.
It also seems at least possible that the growth of entrepreneurial activity and micro-business over the last few decades could be having profounder benefits such as encouraging self-reliance and resilience.
Of course at a time of low growth and unemployment it makes sense to focus public resources on the fastest growing enterprises. But it is important not to lose sight of the fact that entrepreneurial activity has a wide variety of benefits beyond the purely macro-economic and these may also be legitimate outcomes of policy and support.