Niels Bosma Erik Stam Utrecht University School of Economics Local Policies for High-Employment Growth Enterprises

Perspectives on High-Growth Enterprises IssueExternal Resource providers Public Policy advisersFirm 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 IssueExternal Resource providers Public Policy advisersFirm 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

IssueExternal Resource providers Public Policy advisersFirm 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

High-growth enterprise

Local Policies Policies that are designed and delivered by sub- national 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

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

Niels Bosma Erik Stam Utrecht University School of Economics Local Policies for High-Employment Growth Enterprises