David J. North

The characteristics and strategies of high growth SMEs

Based on an empirical investigation of the development of a group of manufacturing SMEs comparing the characteristics and strategies of firms achieving high growth between 1979‐90 with the weaker performing companies. Shows that high growth can be achieved by firms with a variety of size, sector and age characteristics; such firms are distinguished more by the strategies and actions of managers than by their profile characteristics. The clearest differences between fast growth firms and other firms are with respect to their approach to product and market development. While high growth firms were above average investors they were not production‐led; instead they were characterized by an ability to make changes in production to complement an active market development strategy. To grow successfully over ten years, firms also needed to develop their internal organizational structure in ways that enabled the leader of the firm to delegate responsibility for operational tasks to become more focused on strategic...

The use of external assistance by mature SMEs in the UK: some policy implications

This paper is concerned with the use of external assistance by small and medium-sized enterprises and with the role of the public and private sectors in small business support. The paper focuses on ‘mature’ firms rather than new firms and the results from an empirical study of firms drawn from three different areas in the UK are used as a basis for assessing the adequacy of existing support for this type of firm. The survey covered the use of external assistance from a range of sources including banks, accountants and consultants as well as public sector agencies. The final part of the paper considers the priorities for improving the effectiveness of support for established SMEs with the aim of mobilizing more of the growth potential of the sector. These include the identification of particular target groups, recognition of the value of sector-based support and improvements in the delivery of consultancy.

Developing entrepreneurship and enterprise in Europe's peripheral rural areas: Some issues facing policy-makers

Abstract This paper is concerned with the various policies which encourage rural entrepreneurship and support for rural enterprise in the 10 case study areas covered by the FERP (The Future of Europes Rural Peripheries) project. After introducing a typology of existing policies, the paper addresses some lessons drawn from the experiences of existing policies before discussing the kinds of policies needed to stimulate potential sources of entrepreneurship and overcome the barriers to enterprise development. The paper concludes by arguing for a more strategic and coordinated approach towards building the entrepreneurial capacity of peripheral rural areas, based on a clearer vision of the role that enterprise can play in future rural development.

Innovative activity in SMEs and rural economic development: some evidence from England

Recent writings on the factors influencing the competitiveness of regional and local economies have emphasized the importance of innovation in SMEs. This paper discusses the findings of a study of the innovation process in a sample of SMEs located in rural environments. Adopting a broad, evolutionary view of the innovation process, the study highlights important sectoral variations using a multidimensional index of innovation. The way in which innovation is achieved is found to be shaped by various aspects of the rural environment, but relatively few firms are constrained by their rural location. Nor does the lack of local networking opportunities appear to hold back innovation in the more active SMEs. In conclusion, the most innovative firms are shown to make an important contribution to rural economies in terms of external income generation and employment generation.

Small business development in remote rural areas: The example of mature manufacturing firms in Northern England

Abstract There is a growing interest in the potential contribution of small and medium sized enterprises (SMEs) to rural economic development, as reflected in the Rural Development Commissions strategy for the 1990s. Using some evidence on the development of mature manufacturing SMEs in remoter rural areas during the 1980s and comparing them with similar urban based firms, the paper shows that whilst there was little difference between the rural and urban SMEs in terms of their growth performance when measured by sales turnover, the rural firms generated significantly more jobs. This indicates a different relationship between SME growth and employment generation in different geographical environments. SMEs in remote rural areas are shown to pursue rather different development paths than their urban counterparts resulting from the way in which they adjust to the opportunities and constraints afforded by their local operating environments. The main section of the paper focuses on three particular kinds of adaptation: (i) to local market conditions, and in particular on the ability of SMEs to make the transition into national and international markets; (ii) to local labour market conditions, including various qualitative characteristics of rural labour such as skill levels and functional flexibility; and (iii) to the lack of an industrial milieu, especially the limited opportunities for externalising production. The paper concludes by raising some concerns about the longer term competitiveness of SMEs in remote rural areas including low levels of labour productivity, technological backwardness and skill levels within the workforce.

Adapting to peripherality: a study of small rural manufacturing firms in northern England

Using empirical data drawn from two studies of manufacturing SMEs in ‘remote’ rural areas in northern England, the paper examines some of the ways in which firms have adapted to the characteristics of their local external environment over a 16-year period. The evidence presented suggests that in both the 1980s and 1990s successful adaptation to local conditions in peripheral rural regions included: proactive product and market development to overcome the limited size and scope of local markets; a labour-intensive development path to exploit the potential advantages of remote rural labour markets; and a relatively low level of subcontracting-out of production activities. The study also shows that whilst the recession of the early 1990s had an impact on the annual profitability and sales growth performance of rural manufacturing SMEs, its impact on their survivability was less than might be expected.

Targeting Established SMEs: Does Their Age Matter?

DAVID SMALLBONE IS THE HEAD OF THE Centre for Enterprise and Economic Development Research and David North is Reader in Local Economy at Middlesex University, United Kingdom. This paper is concerned with established small and medium-sized enterprises. It considers the question of whether a firms age should be a key criterion in any future targeting of business support. Using evidence from a recent study of the survival and growth of a panel of manufacturing SMEs in the UK in the 1980s, two main arguments for focusing support on younger firms are considered: first, that their prospects for employment generation are better than that of older firms, and second, that they may need particular help in order to evolve successfully into more mature businesses. The empirical evidence presented shows that while younger firms may have a higher propensity to generate jobs than older SMEs, this is to some extent offset by their lower survival chances. Since some mature firms also demonstrate a potential to generate jobs, the authors conclude that it would be a mistake to target policy support exclusively on younger firms. It is growth potential not age per se that matters from the point of view of an SMEs employment generating potential so that policy should seek to encourage and support growing firms at different stages of their development. However, within the context of such a policy, one particular target group for policy support are those young firms which are growing strongly but which have weaknesses which may threaten their longer-term development (such as a shortage of development finance). Nevertheless, while some young growing firms may need particular kinds of support this should be offered within the context of policies designed to encourage and support growing businesses at different stages of development.

Policy support for small firms in rural areas: the English experience

This paper is concerned with small business development in rural areas and the policy approaches currently being used to support them. The key question underlying the paper is the extent to which small businesses located in rural areas have distinctive support needs, associated with the characteristics of rural businesses themselves or their owners, and/or the characteristics of the external operating environment for business in rural areas. A related question concerns the possible influence of enterprise characteristics and the characteristics of rural areas on how the business support needs of rural businesses are best addressed. The study comprised a desk-based review of existing literature relevant to the support needs of rural enterprises and/or the means of addressing them. It also included primary research on policy initiatives and programmes concerned with enterprise development in rural areas. Telephone interviews were conducted in 2001 with representatives of Business Links with catchments that included rural areas, as well as other key agencies (for example, the Countryside Agency). In addition, twenty-four case studies were completed of rural policy initiatives, based on face-to-face interviews. Following a brief review of key literature, an overview of the policies currently being operated by Business Link is described, based on the survey. This is followed by an identification of good-practice principles of rural business support, based on an analysis of the case-study support initiatives. The paper concludes by identifying the implications of the analysis for future enterprise support policy.

Funding the growth of UK technology-based small firms since the financial crash: are there breakages in the finance escalator?

This paper presents recent research assessing the impact of the financial crisis on young and established technology-based small firms (TBSFs) and considers whether their ability to contribute to economic growth is being affected by ongoing problems in obtaining external finance. It reports on original findings from a survey of 100 TBSFs undertaken in late 2010 as well as 20 in-depth interviews with a range of finance providers. The surviving TBSFs exhibited considerable demand for external finance since 2007, particularly for working capital and early stage R&D, sought mainly from banks, but also with younger TBSFs seeking business angel finance and innovation grants and more mature TBSFs seeking venture capital finance. However, both debt and equity finance have become harder to access for TBSFs, particularly for early stage funding and for more R&D intensive firms, hampering their growth potential. Where external finance has been available, the terms and conditions set by providers were often unacceptable to business owners. The paper concludes that the smooth operation of the finance escalator has proved difficult to achieve under recent financial conditions and identifies a number of breakpoints relating to TBSFs which government policy needs to address.

Innovation and New Technology in Rural Small and Medium-Sized Enterprises: Some Policy Issues

The authors are concerned with innovation in rural small and medium-sized enterprises (SMEs), their support needs, and the types of policies required to encourage and support innovation; the authors draw on a national study of innovation and the use of new technology in rural firms. Their aims are to present recent evidence of the nature and extent of innovative activity in rural SMEs; to identify barriers to innovation in rural SMEs, together with any weaknesses with respect to their innovative performance that may affect their future competitiveness; and to contribute to the development of a policy agenda designed to support and strengthen the innovative performance of rural SMEs. Using a broadly based definition of innovation (including product, process, marketing, and new-market development) the authors demonstrate considerable sectoral variations in the nature and extent of innovative activity in rural SMEs. This is explained in terms of sectoral differences in the ways in which SMEs seek competitiveness and of the role of innovation in this process. Nevertheless, the authors demonstrate a strong correlation between the level of innovation shown by firms and their performance, in terms both of sales and of employment growth. With the exception of marketing and new-market development, only a minority of managers perceived their rural environment to be a constraint on their ability to innovate, although more detailed analysis showed SMEs in the more technology-based sectors to be disadvantaged in a number of respects. Support needs are identified in relation to marketing, the use of the Internet, process innovation, and access to specialised training. Emphasising the distinctive characteristics of the rural environment, the authors describe a policy agenda for the encouragement and support of innovation in rural SMEs which includes a recognition of the so-called ‘rural premium’.