Wednesday, August 15, 2012
FOCUSING ON GROWTH COMPANIES FOR ECONOMIC PROSPERITY
To be published in a special supplement in the Western Mail on September 19th, the list will show, yet again, that Wales has a number of excellent entrepreneurial and innovative businesses that have considerable potential to achieve further growth.
Indeed, the data on the fifty firms featured will show a record increase in turnover during the period 2009 and 2011, demonstrating that even within difficult economic times, Welsh business can be competitive in an increasingly turbulent global environment.
Thanks to their wealth and employment creating potential, such high impact firms are now becoming the focus of policymakers around the World. Indeed, whilst entrepreneurship remains a key goal for developing local economies, there is an appreciation that as many firms will never grow beyond providing a local service, there needs to be increasing focus on those businesses that have the potential to grow further and create jobs.
Not every business wants to grow - recent research by Gallup in the USA found that 75 per cent of small business owners in the USA did not want their companies to grow, preferring to remain small. Whilst these companies are important to their local economies, they should not be confused with the other 25 per cent that want to expand to create companies that are of real added value to the regional and national economy. In fact, national and regional governments around the World are now realising that focusing on high growth businesses, or the so-called gazelles, can give them more “bang for their bucks” in ensuring that public sector business support is targeted towards those that can create jobs in the economy.
The “Growing State Economies” report from the National Governors Association representing the fifty individual states in the USA, and which I have been discussing for the last three weeks, is unequivocal in its support for such businesses. Its author, Governor Heinemann of Nebraska, emphasised that high growth businesses are the primary source of job creation, prosperity, and economic competitiveness, and that public policy should be focused on growing them into large employers. But it is not only in the USA where there is an increasing policy focus on growth firms.
Across the border, their Canadian neighbours have finally appreciated that its economy is failing to develop enough gazelle firms, despite leading world-class research and development at universities, a highly educated population, and a favourable business climate. The proposed solution is to create a comprehensive “National Strategy for High-Growth Entrepreneurship” to address the key impediments to the success of high growth Canadian firms, ensuring that key actors such as national and provincial governments, the private sector and universities all take some responsibility for implementing such a plan.
Across the Atlantic, European nations have also been focusing on how to develop the conditions for further growth.
In Sweden, one of the few EU countries to avoid a major recession, they have created an Agency for Growth Policy Analysis. This is charged by the Swedish Government to shed light on the areas most significant to growth, strengthen Swedish competitiveness and create the conditions for more jobs and growing companies throughout the country.
Its Nordic cousin Finland has also recently announced that it will be focusing its government services on targeting growing firms, with the aim of becoming a European centre for growth companies in technology sectors. These include the “Funding of Young Innovative Growth Companies” initiative, which can provide financial support of up to one million euros per enterprise. It has also developed the ‘Vigo Accelerators” initiative, which uses selected independent companies, run by internationally proven entrepreneurs and executives, to help the best and the brightest start-ups to grow faster, smarter, and safer into the global market. The mentor entrepreneurs also co-invest in the companies they support.
In South Korea, there has been a policy focus on transforming traditional companies to high-growth firms, mainly through a Global Stars programme in which 100 SMEs are selected for a comprehensive support package in terms of technology, financing, and exporting. A similar programme has been set up in Singapore which assists promising local businesses with funding, management development, technology and innovation enhancement, and internationalisation.
Therefore, with governments across the world developing new co-ordinated approaches to ensuring that those companies with potential are given every opportunity to grow, there are certainly lessons to be learnt in terms of policy development by both the UK and Welsh Governments.
Certainly, if Wales is to emerge from the current economic downturn, then it will only do so by maximising the potential of its business community, particularly those who want to grow and create wealth and employment.