Research Paper

Mapping Schumpeterian Outcomes in the UK Small Business Population over Time – The Effect of Social and Environmental Orientation on Innovation, Exporting & Growth

ERC Research paper No 104

Associated Themes
  • Business Growth
  • Innovation
  • Internationalisation
  • Sustainability

This report charts the Schumpeterian outcomes — innovation, exporting, and job creation (employment growth) — of socially and commercially orientated UK small businesses over time. Analyses also consider the effects of location (of being located in a deprived area) and the impact of the COVID pandemic. We conduct an econometric analysis of the Longitudinal Small Business Survey (LSBS) waves 2017, 2019, and 2021. We find that UK small business’ social and financial goals are both beneficial for innovation, but only financial goals stimulate exporting over time. More specifically we find that goal alignment, i.e., businesses prioritising both high levels of social and financial goals, benefits innovation. In contrast, goal misalignment — high levels of financial and low levels of social goals — increases the likelihood of exporting. The effect of social and financial goals on Schumpeterian outcomes did not differ across levels of deprivation but were impacted by the COVID pandemic. The positive effect of social and financial goals on innovation was no longer significant when businesses were negatively impacted by COVID. Socially orientated businesses were also negatively affected in terms of the COVID pandemic suppressing their likelihood of radical innovation. The COVID pandemic affected mostly businesses that were less likely to export. In terms of employment growth, 2017 – 2021 has been a period of relative stagnation or even relative degrowth across UK small businesses and was unaffected by small business’ social and financial goals.