Entrepreneurship policies should be less focused on university programs and cutting red tape, according to an evaluation of programs to support high-growth firms in nine countries. In an interesting report from several years ago, researchers from Finland explored policies designed to support high-growth firms in nine countries – Australia, Brazil, Finland, Hong Kong, Hungary, Italy, the Netherlands, Spain and the UK. A summary of some of their key findings is below.
Most policies focus on increasing the quantity rather than quality of new firms. Traditional economic development policies are aimed at “providing a little help for everyone.” Governments can better support job creation by being more selective, and devoting more resources to firms with high-growth potential.
It is rare for recent graduates to start high growth firms. In spite of this, many governments attempt to support high-growth firms by supporting universities and their graduates. Instead, governments should consider promoting spin-offs of ideas, capital, and talent from existing companies. The typical high-growth entrepreneurs is employed and between 35 and 44 years old. Although the authors found no initiatives targeting them, spin-offs from existing companies, led by this target demographic, could become high growth sources of jobs and revenues.
Policies that focus on easing burdens specifically for small businesses can have unintended consequences and inhibit growth. For example, if policymakers reduce administrative burdens only for firms with fewer than 50 employees, this may reduce the incentive for small businesses to grow beyond 49 employees. This may not stop entrepreneurs who aspire to build truly large companies, but it will do little to encourage their expansion.
If you would like to read more about this study, please download the entire report here.
Contributed by Coby Joseph.