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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.

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