Type
Theme
Insight

High performing firms and job creation: a longitudinal analysis (1998-2013) ERC Insight Paper

The OECD High-Growth Firm (HGF) measure was a pragmatic solution to a practical problem. It was designed to assist in identifying the small group of firms which contributed disproportionately to job creation. This statistic could be used to inform national policy and to make comparisons across countries, since it could be readily replicated using business register data. The decade since the measure was first published has seen increasing dissatisfaction amongst the academics and policymakers seeking to make use of it. There are two important criticisms. First, it focuses attention on relatively short ‘bursts’ of growth rendering invisible the reality of growth for the majority of businesses, and second, it does not in fact capture some important members of its target group the ‘relatively small proportion of firms that contribute disproportionately to job creation’.
We present a new analysis of job creation in the UK, using data on a cohort of start-ups born in 1998 to identify three different groups of high performing firms. Of these three groups we find that HGFs as defined by the OCED do not create the most jobs, in fact they grow more slowly and have a lower survival rate than the comparators. Notably, though, most of the observed growth in all three groups takes place within the first five years after start-up.

Associated Themes
  • Business Demography Research Theme
Insight

Understanding self-employment – ERC Insight Paper

This Insight Paper presents the key findings of studies presented at the "Understanding Self-Employment” workshop organised by the Microbusiness Research Portal with the support of the Centre for Enterprise and Economic Development Research (CEEDR) at Middlesex University Business School on the 7th June 2016. The seminar explored the recent increase in self-employment in the UK, discussed the problems related to the definition of self-employment and presented the implications for policy development.

Authors
Associated Themes
Insight

Sustaining growth – the HR dimension HR practices and management and leadership skills of High Growth SMEs

This research set out to investigate human resource management (HRM) practices and leadership behaviours in UK SMEs that represent a small proportion of firms to have achieved long-term growth. We interviewed 30 senior leaders of such SMEs and found that most leaders espouse key high performance work practices such as selective hiring, employee development, open communication, and, to a varying degree, performance management and employee participation. Through flexible informal practices, SME leaders tap into employee’s intrinsic motivation to enhance performance and to develop personal trust and reciprocity. Overall, our research paints a picture of HRM in growth-oriented UK SMEs as a complex phenomenon where a number of formal and informal HR levers interact, guided by a compelling vision, and creating a positive company culture in the process.

Associated Themes
Insight

Spatial Incidence of High Growth Firms.

High-Growth Firms (HGFs) are a very small proportion of the UK business population yet they have a disproportionate impact on job creation.
We present data at local economic area level over time to show that there is a very distinct geography emerging for the incidence rate of HGFs since the recession.

Associated Themes
  • Business Demography Research Theme
Insight

Contribution to Job Creation by High Growth SMEs.

High-Growth Firms (HGFs) are a very small proportion of UK businesses population yet they have a disproportionate impact on job creation. We re-visit the issue to confirm that typically, over a three year period, high growth SMEs represent less than 1% of established businesses, but generate 20% of all job growth amongst established businesses which grow

Associated Themes
  • Business Demography Research Theme
Insight

LEP Innovation Benchmarks 2002. 2010

The UK Innovation Survey provides information on product/service and process innovation as well as the barriers to innovation activity for a relatively large number of UK firms.
In this paper we present the first local economic area analysis of this data derived from four surveys covering the 2002-04, 2004-06, 2006-08 and 2008-10 periods.

Associated Themes
  • Innovation and Exporting
Insight

UK’s Hidden Growth Champions

The Enterprise Research Centre (ERC) has developed an alternative approach to identifying groups of fast-growing firms which contribute disproportionately to job creation and output. This will have significant implications for policy discussions on the relative importance of SMEs and which types of firms drive growth in the economy.

Associated Themes
  • Business Demography Research Theme
Insight

Growing Global – Moving Up the Exporting Ladder

Much has been done to support SME exporting in the UK in recent years. Only around a quarter of UK SMEs currently export, however, and a very small group - only 6 per cent of SMEs - currently export more than 50 per cent of their sales. For a very significant proportion of UK SMEs, therefore, the potential opportunities provided by exporting remain unexploited. Who are these SMEs? This question is important if we are to effectively target support and enable these firms to reap the growth benefits of exporting. ERC research helps to identify some markers of export potential which should allow more effective profile-led marketing of export support.

Associated Themes
  • Innovation and Exporting
Insight

Financing Growth

Recent ERC research provides new insights into bank borrowing among UK SMEs and emphasises the potential value of effective company boards in helping firms to access appropriate finance. The evidence suggests that only around 1 in 7 small businesses in the UK seek bank funding. Yet we know that firms which do utilise external finance grow more rapidly. As the upswing takes hold what can be done to encourage more small firms to seek external finance to support their growth? Recent ERC research provides some of the answers and highlights other ‘known unknowns’.

Associated Themes
  • Finance and Governance Research Theme
Insight

Explaining the US-UK Ambition Gap

Data from the Global Entrepreneurship Monitor highlights a persistent gap between the US and the UK in the proportion of business owner-managers with high growth expectations. Professor Jonathan Levie examines the evidence and finds that employers in the UK and the US are in fact equally likely to be ambitious. He concludes that the ambition gap is a result of a rising proportion of new self-employed with no employees and relatively low growth ambition in the UK and a significant increase in the number of established business owners with employees in the US.

Associated Themes
  • Ambition
Insight

Innovation or imitation: Which boosts growth in recession?

Innovation or imitation which leads to faster growth? Innovation – introducing products or services which are new to the market – may yield first mover advantages. Imitation – introducing new to the firm but not new to the market products or services is a safer, more conservative strategy. Drawing on data from UK innovation surveys, Stephen Roper, Director of ERC identifies some key trends

Associated Themes
  • Innovation and Exporting
Insight

Moving on from the ‘Vital 6%’

High-Growth Firms (HGFs) represent only a small minority - the ‘Vital 6%’ - of the UK business population yet they have a disproportionate impact on job creation and innovation. This paper confirms the headline conclusion for job creation: that is, a small number of job creating firms (mostly small firms) are responsible for a significant amount of net job creation in the UK. It also suggests the existence of a smaller group of 'extraordinarily prolific job creating firms' who were micro firms in 1998 and now employ almost 100,000 people.

Associated Themes
  • Business Demography Research Theme
Insight

UK Mid-Market – ‘Overlooked Middle’ or Lair of the Hidden Champions?

This paper highlights two alternative views of the UK mid-market. The ‘overlooked middle’ perspective emphasises that UK economic policy in relation to Medium Sized Businesses (MSBs) has been symbolic rather than substantive, lacking scale and consistency. The 'Hidden Champions' perspective recognises the rapid growth of leading MSBs and the lack of acknowledgement they receive in the UK.

Associated Themes
  • Innovation and Exporting
Insight

Gearing up for Growth Vouchers

This paper suggests some key lessons for the Growth Vouchers scheme based on the experience of the Nesta Creative Credits Project.

Associated Themes
  • Innovation and Exporting