Lis Burnett, Senior Lecturer at the Glamorgan Business School, this week provided evidence to the National Assembly for Wales Enterprise and Learning Committee as part of its inquiry into the future Manufacturing Strategy for Wales.
Lis, who heads the Social Entrepreneurship Hub which resides within the University’s Centre for Enterprise, spoke on behalf of the National Endowment of Science Technology and the Arts (NESTA) – the UK’s leading independent expert on innovation.
Discussing NESTA’s recent publications on growth and innovation Lis drew the committee’s attention to the following key points:
Only six per cent of high-growth UK businesses employing ten or more people generated half of all the new jobs created by existing businesses between 2002 and 2008. High growth firms have a disproportionately big impact on the economy.
These high growth firms are more likely to be innovative. Innovative firms grow twice as fast, both in terms of employment and sales, as those who do not innovate.
This has consequences for economic policy. It suggests that backing excellence and supporting innovation is not ‘elitist,’ but actually the best way of generating employment and opportunity. It suggests supporting high growth firms and those with the potential for high growth could be better value for money than a more general approach to business support.
High growth firms are spread throughout the UK. Wales had the highest share of high growth firms of all UK Government Office Regions at 9.1 per cent in 2002–5 but this proportion dropped to 4.8 per cent in 2005–8. Further research to understand this variation could provide useful understanding of the specific dynamics at work in Wales.
Although young firms are more likely to be high growth, 70% of high growth firms are at least five years old. Merely encouraging start ups is unlikely to lead to dramatic growth if they fail to expand. Wales has successfully nurtured many small firms. There are many subsistence entrepreneurs earning a modest income and employing a limited number of people. But if growth is the desired outcome, entrepreneurship policy should focus on quality not just quantity of start ups.
High growth firms are not just in high tech areas like biotechnology and nanotechnology. Manufacturing is a source of just over one in ten high growth firms, while Business Services and the Wholesale and Retail sector provide almost half the high-growth firms in the UK.
Recovery from recession and forging this growth requires a creative approach from government. It must support new areas of emerging demand like the green economy and healthcare. At the same time, policy cannot afford to be ‘spatially blind’ and ignore the specific constraints and advantages including industrial history. ‘Phoenix industries’ that draw on existing skills bases and infrastructures from declining industries and apply them to areas of new demand present significant opportunities.
These growth areas cut across services and manufacturing sectors. Effective strategies should avoid any artificial divide and focus on the real processes of value creation, innovation and growth.
Innovation should not be thought of as only research and development. A far broader range of processes feed into innovation. NESTA has piloted a new way of measuring innovation that captures the full range of practices and investments involved. The pilot innovation index shows that the UK is more innovative than we thought. Businesses invested £133bn in innovation in 2007.
For more information regarding research undertaken at the Glamorgan Business School please visit our Faculty research web page.
