Local Policies for
High-Employment Growth
Enterprises
Niels Bosma
Erik Stam
Utrecht University School of Economics
Perspectives on High-Growth Enterprises
Issue
External Resource
providers
Public Policy advisers
Firm owners
Roles for management
in rapid growth
Management is key but
need to be receptive to
outside help
Management is key but
outside advice can help
Management’s vision
and experience are key
Roles of external
resource providers
External resource
providers are key
External resource
providers can be
beneficial but peer
mentors can substitute
External resource
providers are
sometimes necessary,
but expensive
Roles of Government in
supporting rapid growth
Governments have no
direct role to play
Governments have
multiple, critical roles to
play
Governments can be
helpful but public
support is not
necessary and cannot
be relied on
Is rapid growth good?
Rapid-growth is good
for (our) business
Rapid-growth firms are
good for the economy
and politically beneficial
Controlled growth is
preferable
Source: Fischer and Reuber (2003), with minor adaptations
Perspectives on High-Growth Enterprises
Issue
External Resource
providers
Public Policy advisers
Firm owners
Roles for management
in rapid growth
Management is key but
need to be receptive to
outside help
Management is key but
outside advice can help
Management’s vision
and experience are key
Roles of external
resource providers
External resource
providers are key
External resource
providers can be
beneficial but peer
mentors can substitute
External resource
providers are
sometimes necessary,
but expensive
Roles of Government in
supporting rapid growth
Governments have no
direct role to play
Governments have
multiple, critical roles to
play
Governments can be
helpful but public
support is not
necessary and cannot
be relied on
Is rapid growth good?
Rapid-growth is good
for (our) business
Rapid-growth firms are
good for the economy
and politically beneficial
Controlled growth is
preferable
Source: Fischer and Reuber (2003), with minor adaptations
Perspectives on High-Growth Enterprises
Issue
External Resource
providers
Public Policy advisers
Firm owners
Roles for management
in rapid growth
Management is key but
need to be receptive to
outside help
Management is key but
outside advice can help
Management’s vision
and experience are key
Roles of external
resource providers
External resource
providers are key
External resource
providers can be
beneficial but peer
mentors can substitute
External resource
providers are
sometimes necessary,
but expensive
Roles of Government in
supporting rapid growth
Governments have no
direct role to play
Governments have
multiple, critical roles to
play
Governments can be
helpful but public
support is not
necessary and cannot
be relied on
Is rapid growth good?
Rapid-growth is good
for (our) business
Rapid-growth firms are
good for the economy
and politically beneficial
Controlled growth is
preferable
Source: Fischer and Reuber (2003), with minor adaptations
High-growth enterprise
Ambitious entrepreneur
Gazelle
High-growth enterprise
High-growth firm
someone who engages in
the entrepreneurial
process with the aim to
create as much value as
possible (Stam et al.
2012: 26)
>20% growth per year in
3 subsequent years, for
firms with 10 employees
or more; born 5 years or
less before the end of the
3-year observation period
(OECD 2008: 20)
>20% growth per year in
3 subsequent years, for
firms with 10 employees
or more (OECD 2008: 10)
Firm belonging to the
group with the highest
rate of growth of a
population, in a particular
period (e.g. Ten
Percenters; see Parker et
al. 2010)
Local Policies
Policies that are designed and delivered by subnational governments and (semi)public
organizations, including actions by regional and
local governments and by state governments in
federal countries, as well as policies that are
designed by national governments but that have
intended or unintended spatially uneven effects.
Relevance of High-growth Enterprises
• Disproportionate share in total employment creation
– NESTA (2009): 6 per cent of all UK firms with ten or more employees could be
seen as high-growth firms adopting the OECD definition. These 6% were
responsible for more than half of the new jobs generated by the UK firms
employing ten or more employees.
– The Canadian Growth Firms Project found that 2.7% of firms met the criteria for
“leading growth firms” and accounted for 60% of job growth between 1997 and
2000 (Davis 2009).
– Autio (2007) considers, rather than performance on hindsight, the expected
contribution of entrepreneurs. He finds that the X percent of entrepreneurs that
expect to create 20 or more jobs in the next five years, account for ....
• Creation and diffusion of innovation
• Create new markets
• NOTE: What are the main characteristics of high-growth
firms? Certainly not always in ‘high tech’ sectors…
Multilevel Policies
Policy effects
Local
Policy
source
Regional
Local
Municipal economic
policies (e.g.
incubators), land use
regulations
Regional
Regional development
US state level labour
agencies, regional public regulations (e.g. nonventure capital
compete agreements)
National
National science
policies (affecting local
university policies)
SBIR, industrial policies
(e.g. biotech), cluster
policies
Supranational
European structural
funds, European
Investment Bank capital
European structural funds
(ERDF), European
Investment Bank capital
National
National
employment
regulation
Types of High-Growth Policies
• Enabling policies for high growth enterprises
– Gov’t interventions not targeted at certain (high growth)
segments. It is basically assumed that new entrepreneurial
activities resulting form these policies would also yield high
growth enterprises (might sometimes be conflicting…)
• Targeted policies for high growth enterprises
– Ambitious entrepreneurs: target high potential individuals (see
Stam et al. 2012)
– Start-ups -> gazelles: business accelerator programs, based on
selection of (high potential) start-ups; seed capital
– Gazelles -> high-growth enterprises: peer learning, specialist
services and networking for continued growth; venture capital
Policy mix
•
•
•
•
•
Belgium
Canada
Netherlands
Spain
USA
Accelerator Programs
• Accelerator programs are ‘fashionable’;
high (local) beliefs in the merits of such
programs
• Programs are backed by public or private
organizations, often public-private support
Accelerator Programs: Examples
•
•
•
•
Belgium, Leuven: IMEC
Canada, Toronto: MaRS
Netherlands, Utrecht: UtrechtInc
USA, New York: General Assembly
Accelerator Programs: Success?
• Proper Evaluations still lacking
• No evidence of their effectiveness and
additionality
Conclusions: Main Findings
• Governments increasingly support ‘enabling’
policies over the more traditional ‘targeted’
policies
• Targets that are identified mostly have to do with
the local industry structure
– local strengths are being emphasized as potential
breeding grounds for new, promising activities
– ‘fashionable’ industries: clean tech, biotech / life
sciences, ICT / new media
• Local governments see a limited role for
themselves when it comes to picking winners
• Business accelerators programs pop-up
increasingly, however with unknown success
Conclusion: Propositions
• Proposition 1: Local policies for high employment growth
enterprises will be less successful in areas where
regional, national and supra-national policies are
potentially conflicting with the proposed local policies
– E.g. local initiatives for fostering high growth entrepreneurship
may be less effective in a national context of strong employment
protection legislation, or with disproportionate regulatory burdens
on firms beyond a certain firm size threshold
• Proposition 2: Local policies should appreciate the local
context in terms of and industry structure, resources,
demography, culture
• Proposition 3: Local policy makers need to be aware of
the strengths of close neighbors. Competing with them
may be far less rewarding than collaborating (for
example through niches and stressing other regional
amenities)
Conclusions: Critical Notes
• Local policies for high growth enterprises: Is high growth
enterprises the appropriate target?
– Enabling policies would not aim for high-growth per se (policies
for an entrepreneurial economy)
– Controlled growth sometimes preferred
– Growth may take within businesses through ambitious
entrepreneurial employees
• Local policies for high growth enterprises: What is the
scope for local policy?
– Many relevant determinants originate at the national level (formal
institutions, education, culture)
– Local policy should appreciate strengths and limitations of
neighboring regions
Local Policies for
High-Employment Growth
Enterprises
Niels Bosma
Erik Stam
Utrecht University School of Economics