High Growth Firms in Scotland
High growth firms (HGFs) are now widely accepted to be a key driver of economic development in advanced countries.
It has been shown in several studies that a small number of rapidly growing firms generate a disproportionately large share of all net new jobs. In the UK in the period 2002-2008 HGFs represented about 6% of the total number of businesses. They have been responsible for around half of the net job creation in this period. Updating this research to cover the recession found that the number of HGFs was very similar to both the 2002-2005 and 2005-2008 periods and that, as before, they generated more than half of all new jobs created by fi rms with 10 or more employees. This suggests that HGFs are equally significant in periods of economic growth and recession.
A study of HGFs in Scotland, undertaken by Strathclyde Business School on behalf of Scottish Enterprise confi rmed their importance in aggregate terms to the Scottish economy. In-depth investigation of a sample of HGFs highlighted their heterogeneity in terms of age, size, sector and origins. They were typically knowledge-based, innovative, strongly customer-oriented, with distinctive business models. Most were internationally-oriented with a strong physical presence in foreign countries. However, for the most part they were notdeeply embedded in Scotland. They were located in Scotland because that was where their founders were living.
The key policy implication to be drawn was that policy-makers are 'looking in the wrong places' for high growth firms. Specifically, for the most part they are not young, several are management buyouts rather than de novo start-ups and, perhaps most signifi cant of all, relatively few were in high technology sectors. However, innovation was a characteristic of most HGFs. The study therefore questioned the implicit assumption that lies behind the technology focus of much of industry policy, including schemes to commercialise university research, that this will generate high growth businesses. The report proposed various alternative ways in which to support high growth firms.
A report is available here.
This has led to a follow-up study looking specifi cally at high growth firms in high technology sectors.
For more information contact Professor Colin Mason.