Marc Cowling

Family Firm Research: The Need for a Methodological Rethink:

The scale of family company activity in the United Kingdom was measured with regard to several family firm definitions. This study confirms that family companies are a numerically important group of businesses. Policy makers and practitioners must, however, be aware that the scale of family firm activity in any developed economy is highly sensitive to the family firm definition selected. Within a bivariate as well as multivariate statistical framework, marked demographic differences were identified between family and non-family companies with regard to several family firm definitions. We suggest that bivariate studies comparing the management practices and performance of family and non-family firms may have identified ‘demographic sample’ differences rather than ‘real’ differences. Implications for future research exploring the management and performance of family and non-family firms are discussed.

Performance contrasts between family and non‐family unquoted companies in the UK

Explores whether there are any significant performance and ambitions differences between independent family and non‐family unquoted companies in the UK. To detect “real” performance and ambitions differences, rather than demographic “sample” differences between family and non‐family companies, a “matched” sample methodology has been utilized. Concludes that there are strong similarities between the two groups of companies in terms of “hard” objective performance and ambition indicators. Such differences as do occur are reflected in the finding that family companies are markedly more likely to stress non‐financial objectives than non‐family companies. Discusses implications for future research exploring the characteristics and performance of family and non‐family companies.

Employment Change in Independent Owner-Managed High-Technology Firms in Great Britain

There is a growing volume of literature that points to the potential for small technology-based firms to achieve substantial employment growth. As a direct consequence of such work this sector of any economy has attracted increasing attention from national and local Governments concerned with finding ways of revitalising economically deprived localities and creating employment opportunities. This paper provides up-to-date empirical evidence surrounding the ability of small high-technology firms to create additional jobs in Great Britain. In addition, key founder and business characteristics are isolated which are significantly associated with employment change in growing high-technology firms over the 1986 to 1992 period. With respect to factors influencing these high levels of employment growth, a high firm size (in 1986) was found to act positively on employment growth, as was a graduate level education for the key founder. On the finance side firms which had access to and used a multiplicity of sources of start-up finance tended to grow faster. Futher, on the basis of our results we would suggest (and recommend) a Government policy which at the firm level actively encourages high-technology firm start-ups (who record higher rates of survival than firms in more ‘conventional’ sectors) as well as providing support for existing high-technology firms who have already demonstrated the inclination and ability to grow in employment size.

The Evolution of U.K. Self-Employment: A Study of Government Policy and the Role of the Macroeconomy

This paper reports the findings of a time-series analysis exploring the fundamental determinants of the substantial rise in UK self-employment over the period 1972-92. The key findings are that the self-employed/wage employed income differential has a high and positive effect upon the proportion of the workforce in self-employment, supporting alternative wage theories of labor market status, as does housing wealth, supporting credit rationing theories. Perhaps the most interesting feature concerns the relationship between unemployment and self-employment. On this the authors find that it is the duration structure of unemployment that matters not simply the stock of unemployed people. This evidence may imply that self-employment is a last resort for certain individuals marginalized in the employed sector and facing lengthy spells of unemployment. Copyright 1997 by Blackwell Publishers Ltd and The Victoria University of Manchester

Bank lending decisions and small firms: does size matter?

Uses survey data to examine the nature of bank lending decisions at the local branch and regional office level. In doing so considers which firm and loan characteristics explicitly affect the nature of the lending contract. The results show the smallest firms, whose lending decisions are made at local branches, face slightly higher borrowing costs, yet this is offset by the reduced likelihood of collateral being requested. Further, suggests that the high degree of control aversion exhibited by such firms acts in a detrimental way by negating many of the obvious benefits of a localized banking relationship. On interest rate margins, presents clear evidence supporting credibility and legitimacy theories, with legal status and a lengthy track record reducing margins significantly. Regarding security levels, the results suggest that local branch banks have particularly short‐term lending horizons. The penalty in terms of collateral requirements on medium‐ to long‐term loans appear quite severe. This issue needs to be addressed to ensure that small firms in the UK receive the lower cost, longer‐term finance that would facilitate the structural growth of this sector.

The Evolution Of Firm Size and Employment Share Distribution in Japanese and UK Manufacturing: A Study of Small Business Presence

This paper traces the changing contribution of small firms to manufacturing in Japan and the UK between 1972 and 1992. It shows that there are significant and important differences between the two countries, although in both cases small firms provided an increasing share of the total stock of firms over the period. In the UK however small firms also increased their employment share, primarily at the expense of large firms whilst in Japan their share remained constant. On of the most striking differences is the fact that in the UK only the very smallest micro businesses achieved a net increase in numbers, whereas in Japan all sizes of firm recorded an increase in numbers, albeit at declining rates by firm size.

Factors influencing take-up rates on the Loan Guarantee Scheme

This paper uses time-series analysis to model explicitly the take-up rate of the UK Governments Loan Guarantee Scheme over the 1980s. In doing so we consider the rationale for the scheme in the context of empirical and theoretical research into the financing of small businesses and in particular the nature of the small firm/bank relationship. To begin we discuss the history and evolution of the scheme from its inception in 1981. A theoretical model is then outlined in which LGS funds are used to maximise the utility of capital constrained entrepreneurs.Using this framework we find that the UK Government can do much to influence the levels of both take-ups and failures of firms on the scheme by directly altering the parameters. The schemes apparent success as a [relatively] cost-effective job generation package suggests more could be done to extend the scheme to aid more start-up firms and those existing firms wishing to expand.

Regional Determinants of Small Firm Loans Under the U.K. Loan Guarantee Scheme

The Loan Guarantee Scheme was initiated in 1981 in order to alleviate a perceived constraint in the ability of small firms to secure bank finance due to a lack of collateral. This paper shows that a national small firms support scheme has, at the point of delivery, had quite different coverage across regions. Briefly, the initial evidence suggests that the Northern regions of England have been the major net beneficiaries of the scheme, primarily at the expense of Northern Ireland and Scotland. Further analysis identified house prices as the single most important determinant of loan size, acting via a collateral effect. On loan numbers and value, fixed regional effects were dominant particularly in the South East and North West.

Small firms and bank relationships: a study of cultural differences between English and Scottish banks

Small firms are reliant upon high street banks for the vast majority of their external borrowing. However, despite the dramatic increase in numbers of small firms over the 1980s, and the subsequent rise in bank lending to this sector, the relationship has been far from ideal. This paper investigates whether Scottish and English banks have different lending cultures. In doing so we provide some empirical evidence in support of the findings of Stiglitz and Weiss, that adjusting interest rate margins and/or collateral ratios did not reduce the problem of adverse selection. We tentatively conclude that Scottish banks appear to be more responsive, knowledgeable and sympathetic towards their small firm customers than English banks.

Transaction Structure in Japanese Small Business Sector

An attempt has been made to examine some aspects of transaction structure of the small business sector in Japanese manufacturing. It has been found that there are some interesting findings in the industrial organization of the sector (1) In the transactions of intermediate goods with manufacturing, small businesses have more frequent transactions with other small businesses than with large firms. On the other hand, large firms have more transactions with each other than with small businesses; (2) The transactions between SMEs and large firms, and between SMEs themselves vary from industry to industry, depending on production/demand structure of an industry and product structure of its SMEs sector; (3) In engineering, such as electrical machinery and transport equipment, the intra-industry transactions from small businesses to large firms are great, suggesting a larger extent of subcontracting relationships. Also, textiles, clothing, and printing and publishing also have higher subcontracting transactions.The relationships are different between the two groups.