It will celebrate, yet again, the best of Welsh entrepreneurship at a time when the economy needs it the most.
Yet, surprisingly, there continues to be some doubts expressed within the Welsh business community as to whether the development of fast growth businesses in Wales should be supported by the business and policy community.
Certainly, such an opinion runs contrary to much of the evidence which demonstrates the critical role of such companies, in terms of employment creation, innovation and exporting performance, to regional and national economies all over the World.
Let us first examine the job creating impact of fast growth firms.
A recent detailed economic analysis of employment change amongst SMEs showed that whilst fast growth companies represented only 6 per cent of all UK firms employing ten or more people, they accounted for more than half the job growth in the UK.
The study, undertaken by academics at Aston and Kingston Universities, demonstrated that 11,530 high growth firms in the UK were responsible for 1.3 million out of the increase in 2.4 million new jobs between 2005 and 2008. Simply put, UK high-growth firms, on average, tripled their employment over a three-year period.
Similar results have been found for other countries. For example, fast growth firms in the United States represented only 3 per cent of all firms but were responsible for 70 per cent of gross job growth.
However, job creation is not the only contribution that fast growth firms make to an economy. Research has also shown that fast growth firms are more innovative, especially in terms of introducing new products to market, are more export orientated and more productive than the vast majority of small businesses. This is not too surprising, as the majority of growth firms tend to combine existing input factors in novel ways which results in an innovation that enables them to outperform the market.
More importantly, such fast growth firms are found across all sectors.
For example, a study from the OECD found that, contrary to the perceptions of many policy makers, only around one third of growth businesses are in high technology sectors. Indeed, high growth firms are as likely to be found in declining sectors such as textiles as they are in biotechnology and IT. Whilst many high growth firms are innovative, this tends to manifest itself in different approaches to marketing, organisation or distribution e.g. WalMart in shopping, Starbucks in food retail and Amazon in book selling.
Other studies have shown that it is not particular sectors that characterise fast growth firms but other, mainly internal organisational characteristics. For example, factors such as the importance of close contact with customers and a commitment to quality of the product or service are critical in achieving a competitive advantage.
As twelve years of the Fast Growth 50 project has demonstrated, many fast growth firms have strong connections with their customers and, as a result, are more responsive to customer requirements within a changing business environment
Of course, given such success, one could argue why such fast growth firms should be supported by government when they would appear to need less than your average business?
Simply put, this is a case of supporting winners, rather than picking winners and the broader social benefits fast growth firms generate for the economy as a whole can, as the research has demonstrated, be significant in terms of jobs and earnings.
Of course, the real question is knowing the sort of support that is needed by such companies.
Research by the Finnish academic Erkko Autio, currently based at Imperial College London, has shed some light on this. By examining different policy mechanisms from across Europe, Erkko concluded that there are a number of criteria that need to be considered before devising policies to support growth firms.
First of all, policies need to involve close collaboration with private-sector service providers to implement sustained and focused development efforts. In particular, programmes to support growth firms should be proactive (i.e. in identifying and inviting prospective growth firms to join the programme), nurture an image of professionalism and involve seasoned managers who have experience in rapid growth themselves.
Growth programmes should also consistently address managerial motivation and skills, focusing on highly customized management development activities that involve experience sharing and apply an interactive approach. Finally, they should link grants and participation to growth aspiration and achievement of milestones and, most importantly, be prepared to accept casualties.
Unfortunately, there have been very few programmes developed in Wales that would meet with the majority of these criteria over the last two decades. This suggests that it is not the principle of providing support to growth firms that is flawed, but the actual practice of implementing such programmes successfully.
Having grown their total turnover by over £300 million in a period of two years, and during the worst recession since the 1920s, the 2010 Wales Fast Growth 50 will demonstrate, yet again, the entrepreneurial potential at the heart of this economy. Surely, such potential should be given every possible support to blossom even further and to create wealth and employment across the economy?
Given this, you have to ask serious questions as to why the Welsh Assembly Government has scrapped its growth programme as a result of the recent Economic Renewal Programme. Surely, now is the time to provide support for those firms that have the greatest potential for employment creation?
Indeed, as the CBI noted back in 2006, government “must ensure that the needs of growing businesses are at the heart of the business support network”.
I couldn’t agree more and if we are to develop a more dynamic and innovative economy, then we must support those dynamic and innovative businesses that have the potential for growth.
