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Government support for high-growth firms is misguided

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In most countries, policies to support high-growth firms are focused on technology businesses and commercialising spin-offs.

But a recent study by?Professor Colin Mason and Dr Ross Brown of Strathclyde Business School suggests that the government is barking up the wrong tree: there is only a handful of high-growth firms in the tech sector and the virtually no university spin-offs.

It also shows that notAll high growth firms begin as conventional startups many have emerged out of existing businesses, notably through management buy-outs and management buy-ins. It is dangerous to adopt policies which pre-judge where high growth firms will emerge,” says Mason.

The pair have suggested five ways in which the government could better support Britain’s “gazelles”:

  1. Make sure eligibility rules for support are flexible. Restricting support to, say, “manufacturing” is unwise because many high-growth firms have “product-as-service” business models in which a package of services is built around a product (consultancy, design and build, installation, maintenance, training, for example).
  2. Find ways to stimulate MBO and MBI activity. There are lots of potential growth businesses imprisoned within large businesses that would flourish if they were independently owned and managed. Mason suggests that some of the public funding that supports startup and early growth firms could be redirected to support small MBO funds.
  3. Re-think the emphasis on university commercialisation initiatives, as high-growth firms rarely have their origins in universities.
  4. The standard business-support tool kit is aimed at fledging firms. It needs to be tailored to high-growth firms which are beyond the startup stage.
  5. Many high-growth firms will end up being acquired by bigger businesses, especially if they have raised venture capital. Policy-makers must make sure that these companies are “anchored” and less amenable to being uprooted and moved elsewhere. More aftercare services are needed for companies that have been acquired.

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