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Business schools and SMEs: Why the government has got it wrong

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David Willetts, minister for universities and science, has recently argued that now every major town and city has its own business school, the UK already has a ready-made network for regional growth and to support SMEs. 

However, he argues, business schools won’t focus on SMEs, being too interested in journal publications for research funding and attracting the attention of large firms with the R&D funding. 

That’s unfair and too much of a generaIisation. It’s more the case that the progress being made by business schools in engaging with SMEs just hasn’t been noticed. 

We know very well that SMEs are where the action is. SMEs hold untapped potential for economic growth in general, and at a time when universities – more than ever – need to demonstrate their contribution to economic development, we have to show we’re working with businesses of all sizes and helping them to get results.

That’s why the latest report to take on the issue of how higher education and business schools should support economic growth, this time from Sir Andrew Witty, is something of a step backwards. 

The main recommendations from the report still focus on the few, picking small business winners and targeting major funds through sector-wide (rather than regional) collaborations. In other words, to create a limited number of enterprises with the potential to be big and to be global. Yes, we need those major success stories, but what about the majority, are they really no-hopers because they stay small or medium-sized?

Business schools do drive regional growth through SMEs. At Lancaster, EU funding to focus on regional growth has led to the evolution of a strong offering and relationships with SMEs. We’ve worked with around 5,000 in the last 15 years, adding an estimated £50m to the economy. The School’s Leading Enterprise and Development (LEAD) programme in particular has demonstrated how business schools input increases productivity and sales.

At the same time, SMEs are increasingly important for business schools, in representing the sharp end of enterprise. That means a need for constant dialogue. 

Having entrepreneurs in residence is a valuable way of encouraging a richer environment where enterprise and real-world SME issues are understood, felt and experienced, and there’s support for more smaller firm teaching in both undergraduate and postgraduate studies. MBAs benefit from a three-part engagement, start-ups, SMEs and large organisations. 

More students now want placements and projects in an SME, because they know they’re more likely to get higher-level roles and opportunities to test themselves, to deliver and show resilience. We have found that more PhD students are being attracted to us because they’re interested in working with smaller firm practitioners.

In order to meet its goals for the economy and to provide effective direction and support, it’s critical that government understands where business schools are on the SME issue, what they’re doing, what’s working and what’s not. What will be important is consistency in policy and continuing funding for work with SMEs. We need each other.

Dr Ellie Hamilton is associate dean for enterprise at Lancaster University Management School.

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