Only a few enterprises growth quickly enough to make a significant contribution to job creation. Fortunately, policymakers are beginning to pay attention to the unique needs of these elite companies.
Two recent papers work to illustrate the best ways for policymakers to support fast-growing businesses. The first, conducted by European Union (EU), discusses policies to support high-growth innovative enterprises (HGIEs). The second was conducted by professors from the University of Strathclyde and focuses on policies that support scaleup firms.
The EU defines HGIEs as firms with 10 or more employees and an average employee growth of more than 10% per year for over 3 years. The EU’s data shows that these types of firms because they have significantly greater contributions to job growth than average companies. Interestingly, analysis shows that HGIEs are younger than most firms, though they are rarely start-ups.
According to the EU study, HGIEs viewed access to finance as one of the largest barriers to a firm’s growth. The study also noted that the best way to support HGIEs is through a combination of specialist coaching, access to finance packages, and core skill packages. Since HGIEs fall into a variety of industries, each solution must be tailored to each firm’s needs.
The second study focused on policies tailored to meet the needs of scaleup companies, which are defined as firms with 20% or more average annual growth over a three-year period. According to the authors, when targeting high-growth firms through support programs, governments should be:
- More Selective. Significant support currently goes to firms with little growth ambition or potential.
- More Comprehensive. The quality of the support is more important than the quantity of firms the program supports.
- More Focused on Existing Firms. Those with a track record of growth are more likely to continue to succeed.
Once the correct target firms are identified, governments should consider incentivizing high-growth rates by awarding grants when companies reach growth milestones. The authors also state that policymakers should also create initiatives that support collaboration between companies and potential customers, as many high-growth firms are “highly customer focused.”
Contributed by Haley Goodman and Caroline Pringle.