Geoff Whittam

Competition and Cooperation in the Small Firm Sector

This paper examines the nature of economies of scale in the small-firm sector and aims to provide new insight into the economic efficiency of small-firm industrial districts. The theoretical analysis identifies the role played by collective external economies of scale that are realized through cooperation over input activities. Using game theory, it is shown that cooperation can emerge both as a result of rational profit maximizing behavior and as a result of institutional and cultural environments that encourage cooperation and trust. The implications for industrial policy are discussed in the concluding section. Copyright 1997 by Scottish Economic Society.

Towards a model of the business angel investment process

Abstract This paper examines the process that business angels undertake when they invest in new and small businesses. Existing research has generally taken a disaggregated approach and focused on individual stages of the investment process. Based on the empirical evidence gathered from 30 interviews with business angels this paper presents an overarching model of the angel investment process. Underlying factors that generate and sustain the investment process are also identified. A comparison is made between the investment processes in the informal and formal venture capital markets, finding that the emphasis on softer factors differentiates the former from the latter. The paper not only contributes to the existing literature but also provides policy makers, entrepreneurs and prospective angels with a greater understanding of the factors which underpin and sustain the angel investment process.

The operation of the informal venture capital market in Scotland

This paper addresses the lack of knowledge about business angels based in Scotland. An understanding of the informal investment market is important given that Scotland has recently achieved devolved powers and business start-ups are a priority of the Scottish Executive. Based upon 140 replies to a survey questionnaire, investment-active angels are profiled in terms of business background and experience, motivation and investing criteria, behaviour and outcomes. Of particular note is the finding that the majority of angels based in Scotland lack experience of small businesses and it is argued that this cannot be helpful in securing deals with entrepreneurs. The paper addresses how entrepreneurs can target angels, the lack of ‘investable’ entrepreneurs, the role of experienced angels, how nascent angels can be encouraged to make their first investment, tax breaks and the search behaviour of angels. Finally, a typology of angels, based on the number of investments made by an individual, is set out.

New venture support: an analysis of mentoring support for new and early stage entrepreneurs

There has been little research on the processes of providing support to new firm entrepreneurs, and little evaluation of the provision of support to existing small firm entrepreneurs through advice, counselling or consultancy. Despite this lack of research, support for new firm entrepreneurs has been largely withdrawn in England and Wales with the focus of support, through Personal Business Advisers (PBAs), targeted at existing small firm entrepreneurs who employ more than 20 people and have the potential for growth. There are theoretical arguments that suggest support for new start entrepreneurs should be provided on a mentoring basis. If this is provided selectively, then this should have an impact on the management ability and confidence of such new firm starts. This paper reports the results of interviews with new firm entrepreneurs engaged in such a mentoring relationship. The research, undertaken in Scotland, suggests that such a relationship is beneficial. Given the high failure rates of new firm formation, such support could have wider application and benefits. It is suggested that, for certain regions, provision of new firm support can yield positive and worthwhile returns to public sector investment, particularly in a region such as the West of Scotland, characterised by a need to diversify its economy and raise the formation rate of new start small firms and entrepreneurs.

Ethnic Minority Businesses in Scotland and the Role of Social Capital

This article reports findings from a scoping study, commissioned by the Scottish Executive, on ethnic minority businesses (EMBs) and their distinctive importance in Scotland. The study combines quantitative and qualitative analysis and builds upon previous research undertaken in the UK and Scotland to investigate the changing importance of known issues with EMBs for Scotland. The role and importance of social capital for EMBs in Scotland has not been explored in previous research, although because of strong informal networks, it has been feasible to assume that its role is beneficial. In this article, we examine the role of social capital and demonstrate that its role is more complex and diverse.

The pecking order hypothesis: does it apply to start‐up firms?

Purpose – The purpose of this research is to explore whether the “pecking order hypothesis” (POH) applies to the capital finance preferences of start‐up businesses.Design/methodology/approach – In‐depth interviews with 20 Scotland‐based entrepreneurs were conducted in order to reveal the subtleties of the capital finance preferences which applied to a sample of start‐up firms. To ensure reliability and validity, data was analysed using a systematic schema.Findings – Consistent with the POH we found that entrepreneurs in start‐ups turn to internal sources first, that is, their own funds. In contradiction to the POH, however, evidence in this paper finds that where external funds are required, the main source is equity rather than debt. In the majority of cases, in depth interviews show that a bridged pecking order applies in that the businesses move from self‐funding to external equity in preference to, or instead of bank finance. Two reasons for this pattern can be established. First, entrepreneurs consid...

The measurement of social capital in the entrepreneurial context

Purpose - Whilst all models of the entrepreneurial process identify the role of networking as important at both the start-up and developmental stage of a business latterly these models have expanded the notion of networking and embraced the concept of social capital. However, much of the literature on measuring social capital has focussed on the quantity of social capital within a given geographical space. This paper seeks to expand this research by examining the depth and richness of social capital for new venture creation and thereby identifying the impact of social capital in new venture creation. Design/methodology/approach - Current research has tended to be quantitative, for example the World Values Survey. However, 2001 there is a need to explore the value of social capital in the entrepreneurial process. This paper presents a critical review of the existing literature on measuring social capital in the entrepreneurial process. It is anticipated that the research will reveal rich, contextual information which will identify the need to investigate social capital from a qualitative perspective. Findings - The papers examination of the social capital literature thus far, although not exhaustive, has noted the emergence of several common themes that associate the issues of measurement with lack of empirical consensus on an accepted definition of social capital. Practical implications - Policy makers charged with developing an entrepreneurial culture and the establishment of new ventures, might wish to look at encouraging both nascent and existing entrepreneurs to exploit their formal and informal network relationships, seeking the development of organisations and institutions that will assist in building social capital. Originality/value - This paper contributes to the existing literature in emphasising the necessity of understanding the “measurement” of intangible factors in understanding social capital in the entrepreneurial process.

Business angel syndicates: an exploratory study of gatekeepers

The objective of this paper is to examine the role of the individuals who control access to and manage much of the day-to-day operation of informal investment syndicates. We give these people the name business angel gatekeepers. Guided by an analytical framework developed from the research and development literature, empirical findings are presented from a series of in-depth interviews with a representative sample of Scotland-based gatekeepers. The paper proposes a definition of the term ‘business angel gatekeeper’, identifies the function and roles of gatekeepers and examines the skills required to perform the role. The paper concludes by considering the implications for stakeholders in the business angel market.

Women's enterprise: a critical examination of national policies

Against a background of perceptions of womens low participation in entrepreneurship in the United Kingdom, this paper critically reviews recent policy developments in the provision of public sector support for women in enterprise. The available statistical evidence for womens participation in business ownership in the United Kingdom is reviewed against comparative data from the USA that is promoted by the UK government as a potential benchmark. We argue that programming and resource-issue problems are evidenced in new policies that are a direct consequence of lack of data. Next, policy is tested against various paradigmatic stances in womens enterprise support, and problematic areas in poverty alleviation, social inclusion, advocacy, access to finance, and gender mainstreaming are discussed. Selected literature that addresses barriers identified to womens enterprise is reviewed, and issues of confidence, risk, motivation to business start-up, and childcare are discussed in terms of programming. We conclude that, although the Department of Trade and Industry/Small Business Service Strategic Framework for Womens Enterprise in England is flawed, the framework has assembled a broad church of opinions and approaches to womens enterprise support in a democratic, participative, and cross-cutting fashion.

Racism: A barrier to entry? Experiences of small ethnic minority retail businesses

The participation of ethnic minorities in self-employment has been a phenomenon of the British labour market for many decades. One area in which there has been a preponderance of ethnic minority groups, especially those of South Asian origin, has been the independent retail sector, where many set up what became commonly known as ‘corner shops’. This sector has experienced radical change in the last decade, which has posed a real threat to the livelihood of business owners, leading to a decline in the number and profitability of shops. Many of those which have survived have to face one of society’s social ills, racism. This study, based on semi-structured interviews, attempts to establish the degree of racial discrimination experienced by owners of small retail businesses in Glasgow, with a working hypothesis that racism in all its forms will not be conducive to encouraging potential entrepreneurs from ethnic minority backgrounds to establish new businesses, and hence racism is a barrier to entry.