The Problem: The Facts Do Not Fit the Theory

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Chapter 2 presented a summary of the rationale for, and the methods employed by, many government enterprise policies and showed that there is a lot in common between the methods employed by different governments. Chapter 3 then showed that in the main those policies are at least consistent with current theories and models of the influences on enterprise. But do those models work, is the policy ‘based’ on them effective, and are the facts of enterprise promotion consistent with the theory?

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Aston Business School Research Papers are published by the Institute to bring the results of research in progress to a wider audience and to facilitate discussion. They will normally be published in a revised form subsequently and the agreement of the authors should be obtained before referring to its contents in other published works.
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Despite the rapid growth of the small and medium-sized enterprise sector since the 1970s, rates of entrepreneurial activity in the UK remain moderate by international standards. Since its arrival in 1997 the Labour government in the UK has taken steps to tackle barriers to entrepreneurship by addressing economic, political, legal, and cultural issues. Through a review of key literature and policy documents, we seek to shed light on how the Labour government has shaped its entrepreneurship and enterprise-development policy agenda. It is found that, although there has been limited improvement in closing the enterprise gap, the Labour government does appear to have put in place a number of measures that are aimed at harnessing the long-term drivers of future enterprise, particularly catalysing the required cultural changes through the education system. It is suggested that enterprise policy making is diverse and has shifted away from small-business policy into a broader interpretation of entrepreneurship, although there inevitably continues to be significant overlap across the two areas. Furthermore, it is argued that enterprise initiatives are leading to the government taking quite radical routes in shaping its policies, becoming a bigger risk taker, and operating in a quasiprivate sector role. It is concluded that the increasing sophistication and specificity of policy instruments means that further research is required to understand how policies interact with each other.
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The present paper provides a theoretical framework of the relationship between the rate of entrepreneurship and national economic performance. The first part deals with some aspects of the recent economics literature on the relation between entrepreneurship and small business on the one hand, and economic growth on the other. In particular, it gives a summary of some work of the EIM/CASBEC research group in The Netherlands. In the second part, a framework is presented linking entrepreneurship and growth to different levels of aggregation. The last part of the paper illustrates the framework with some historical case studies. The present paper supplements Wennekers, Uhlaner and Thurik (2002) and is concerned with the causes of the rate of entrepreneurship.
Economics for Business and Management by Alec Chrystal and Richard Lipsey is a concise introductory economics textbook which has been carefully crafted to meet the needs of business studies and management students. Developed using the authors' highly successful Introduction to Positive Economics as a starting point, the authors have carefully selected essential material, added new coverage, and taken the opportunity to make the text even clearer. The text draws upon Alec Chrystal's extensive experience of teaching economics to management students at City University Business School, London. With the intended readership in mind, the greater part of the text focuses upon microeconomics, including the theory of the firm, consumers and markets, market structures, and the economics of business organizations. Business and management students will also find the text's coverage of the economics of employment and investment particularly helpful. The macroeconomics included has also been chosen to be of maximum benefit to management students, focusing on business cycles and the macroeconomic factors which affect firms (such as inflation and employment), and the balance of payments and exchange rates. Economics for Business and Management includes case studies and case examples which are essential for understanding the business context of economics. Other learning aids include chapter introductions, chapter summaries, topics for review, and end of chapter questions.
PROFESSORJAMES CURRAN IS EMERITUS professor at Kingston University, England, and was formerly director of its Small Business Research Centre. Since 1980 the United Kingdom small business population has increased greatly. Small businesses have also acquired a key role in UK economic policies paralleled by a huge development in support structures to promote them. Despite broad rhetorical claims that policies and support help develop a strong enterprise culture and promote UK economic prosperity, the precise outcomes of these policies have been difficult to pin down. As policies developed over the twenty years, the evaluation of their achievements has also proved difficult because of methodological problems. This paper examines the problems of evaluating small business policies and support and draws out some key implications for their future in the UK It concludes that even allowing for the problems of evaluation, one of the best and clearest supported findings is of poor take-up of the support offered. In other words, although small businesses have become much more important in the UK economy, it is unlikely that this has been due to state intervention. Because of the well-entrenched unanimity on the value of small business support in the UK, little attention has been given to whether the support represents good value for public money. Small and medium-sized businesses now account for well over half of business turnover and jobs in the UK. Not only can there be doubts about whether the policies and support are cost effective but more importantly, the question can be asked whether such policies are needed at all any more.
This article examines regional differences in recent business formation activity in the United Kingdom over the period 1994–2001. It considers the extent to which regional differences can be accounted for by (i) variations in industrial structure, with some regions having a greater or lesser share of sectors where the formation rate tends to be high; and (ii) variations across regions in the formation rate in the same sector. The article shows wide variations across regions and over time in the relative importance of these two factors. The article explores some policy implications of this decomposition.
Whereas initially physical capital and later, knowledge capital were viewed as crucial for growth, more recently a very different factor, entrepreneurship capital, has emerged as a driving force of economic growth. In this paper, we define a region's capacity to create new firms start-ups as the region's entrepreneurship capital. We then investigate the local embeddedness of this variable and which variables have an impact on this variable. Using data for Germany, we find that knowledge-based entrepreneurship capital is driven by local levels of knowledge creation and the acceptance of new ideas, indicating that local knowledge flows play an important role. Low-tech entrepreneurship capital is rather increased by regional unemployment and driven by direct incentives such as subsidies. All three measures are locally clustered, indicating that indeed, entrepreneurship capital is a phenomenon that is driven by local culture, and is therefore locally bounded.
This introductory, non-technical, article offers a reflective overview of what Economics adds to our understanding of entrepreneurship. It is designed primarily to showcase to young entrepreneurship scholars several interesting research questions and a toolbox of methods to answer them. First, I will illustrate the kinds of questions that can be posed and answered using Economics. Then I will present and discuss a selective list of "canonical" theoretical and empirical models that form the intellectual bedrock of the Economics of Entrepreneurship. After that, I present and discuss some well-established theoretical contributions and empirical findings that have been generated by the approach. I conclude by discussing aspects of "What we don't know" and should. This part of the article identifies several ideal future trends in research that build on and complement the foundations of entrepreneurship that are delineated in the main body of the article.
Small business support is an important element of industrial development policy in both Northern Ireland and the Republic of Ireland. This paper examines the effect of grant support on small business performance from 1991–94. Around 50% of small businesses in Northern Ireland and 30% of small businesses in the Republic of Ireland received financial support over this period. In Northern Ireland, three clusters of assisted companies were identified who received support for marketing, training and capital investments. In the Republic of Ireland, two assisted clusters of firms were identified who received marketing and training grants. In each case, firms in the assisted clusters grew faster, tended to be more profitable, were more active in terms of sales and market development and adopted more ambitious strategic directions than those in the non‐assisted clusters. Selection models are used to explore whether these differences are due to differences in the characteristics of the assisted and non‐assisted groups or can be directly attributed to the effect of government financial support. In the Republic of Ireland there is no evidence of any effective targeting of assistance at better performing firms. In Northern Ireland, there is some evidence that assistance was targeted at firms with higher productivity growth. Grant aid had no effect on either the turnover growth or profitability of small businesses in either area. It did, however, boost employment growth. This is good‐news for job creation but has potentially worrying implications for firms’ longer‐term competitive position through its negative effect on productivity.
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