Reluctant borrowers? Examining the demand and supply of finance for high growth SMEs in the UK

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The geography of job creation in high-growth firms : the implications of ‘growing abroad’

The authors wish to thank Scottish Enterprise for funding the research reported in this paper.In recent years there has been an upsurge of interest by policy makers in high growth firms (HGFs). Interest in these dynamic firms has primarily been driven by their prodigious ability to create new employment. Despite this, very little is known about the complex corporate geographies of these firms and their internationalisation processes. Using quantitative and qualitative data, this paper explores this issue by examining Scottish HGFs. HGFs were found to adopt more aggressive forms of international expansion, such as overseas acquisitions, than their non-HGF counterparts. As a result of these complex growth processes, a large proportion of HGF employment growth is generated outside Scotland. The paper concludes that the regional development impact of HGFs for small peripheral economies in the UK is more limited than originally envisaged. The implications of the study for further research and public policy are examined.Publisher PDFPeer reviewe

Entrepreneurial uncertainty during the Covid-19 crisis : mapping the temporal dynamics of entrepreneurial finance

Funding: University of St Andrews.This paper illustrates how chronic uncertainty caused by crisis events affects the availability of entrepreneurial sources of finance for start-ups and small and medium-sized enterprises (SMEs). To explore this line of argument, this paper examines Crunchbase real-time data examining entrepreneurial finance investments in China during unfolding Covid-19 crisis. The paper shows that these equity investments slumped dramatically in the immediate aftermath of the Covid-19 virus, resulting in a year on year decrease of 60% in the total volume of investment raised between quarter 1 in 2019 and quarter 1 in 2020. Importantly, the paper found early-stage seed investments falling the steepest, suggesting nascent start-ups are those most heavily affected by the crisis. While the global financial crisis heavily hit debt markets, the relational nature of equity investments may mean entrepreneurial finance is even more susceptible to major upheaval caused by the Covid-19 crisis. Overall, enterprise policy makers need to become better attuned at monitoring real-time data sources to mitigate chronic entrepreneurial uncertainty via strategic policy responses.PostprintPeer reviewe

Employee voice through open-book accounting : the benefits of informational transparency

This paper explores the concept of open-book accounting. It illustrates the benefits of open-book reporting policies in terms of their potential ability to correct informational asymmetries, and it sets out some ideas for a future research agenda centred around the concept. The discussion is grounded in large part in the experiences of employee-owned businesses because such organisations are at the forefront of informational transparency innovations in social accounting. But the broader principle of sharing organisational information with employees and training them to process financial and strategic information is applicable to any organisation. It is argued that open-book accounting, especially in the context of employee-owned businesses, provides an exciting alternative to mainstream accounting and financial controls and a welcome addition to the social accounting literature.PostprintPeer reviewe

A post-mortem of regional innovation policy failure : Scotland's Intermediate Technology Initiative (ITI)

Brown R., Gregson G. and Mason C. A post-mortem of regional innovation policy failure: Scotland's Intermediate Technology Initiative (ITI), Regional Studies. The Intermediate Technology Initiative (ITI) was one of the most ambitious ‘systemic’ regional innovation policy instruments developed in the UK in recent years. However, little of the ITI's anticipated outputs materialized and the programme was prematurely terminated. This paper examines the reasons for its failure, which largely centred on the programme's inappropriate design. The findings suggest that greater recognition needs to be given to the specificities of local entrepreneurial ecosystems when designing, aligning and executing systemic innovation policy instruments. It is argued that paying greater attention to policy failures could potentially help innovation scholars better understand how innovation systems function.PostprintPeer reviewe

Capturing conversations in entrepreneurial ecosystems

This paper examines a novel and innovative methodological approach and dataset for measuring the complex relational dynamics underpinning entrepreneurial ecosystems (EEs). Existing measurement techniques have largely failed to yield sufficiently nuanced data or insights to inform robust policy recommendations within this research field. To rectify this situation, this paper sets out a novel approach to assessing the relational connectivity within EEs by capturing entrepreneurial "conversations". Drawing on real-time data extracted from an event-based social media platform, in combination with social network analysis and qualitative interview data, we provide an in-depth assessment of the relational connections within the city of Edinburgh at three analytical levels. Overall, the paper demonstrates that the analysis of conversations and conversational spaces is an important mechanism for exploring and mapping the relational connectivity within EEs. As well as producing novel empirical insights, this approach provides policy makers with vital strategic policy intelligence to help better inform public policy frameworks and associated interventions.PostprintPeer reviewe

Mission impossible? Entrepreneurial universities and peripheral regional innovation systems

As part of their “third mission” to commercialise research and cultivate growth in local economies, universities have been accorded a central role in regional innovation systems. This paper takes issue with this policy emphasis. It presents empirical evidence suggesting the entrepreneurial spillovers from universities have been greatly exaggerated, especially in some peripheral regions. The explanation offered for this poor performance hinges on the substantive disconnect between universities and their surrounding local entrepreneurial and innovation ecosystems. Despite their marginal economic contribution, the paper claims that “policy entrepreneurs” play a powerful role in cumulatively reinforcing the dominant role of universities through a process of “institutional capture”, the outcome of which results in a form of “policy lock-in”. The implications of these findings for public policy are outlined.PostprintPeer reviewe

Working the crowd : improvisational entrepreneurship and equity crowdfunding in nascent entrepreneurial ventures

Equity crowdfunding has rapidly established itself as an important part of the funding landscape for nascent entrepreneurial ventures. To date, however, little is known about the nature of the demand for equity crowdfunding or its impact on recipient firms. This paper draws on an interview-based study of entrepreneurs in 42 equity crowdfunded start-ups in the UK. The study found strong demand for this funding from these experimental and improvisational entrepreneurs within innovative, consumer-focused, early stage firms. Many entrepreneurs were classic “discouraged borrowers” attracted by the ability to obtain finance quickly with relatively little diminution of their equity or autonomy. In terms of impact, equity crowdfunding seems to confer important intangible benefits to investee companies which amount to more than money. Given their strongly improvisational nature, the concept of entrepreneurial bricolage seems a suitable theoretical lens explicating the behavioural aspects of the entrepreneurs examined.PostprintPeer reviewe

Entrepreneurial acquisitions, open innovation and UK high growth SMEs

This paper examines the dynamics of entrepreneurial acquisitions undertaken by UK high growth small and medium enterprises (SMEs). While entrepreneurial acquisitions are increasingly deployed by SMEs, little is known about their antecedents, motivational drivers and organisational outcomes. Drawing on detailed case study evidence from Scotland, the key factor found to be driving these acquisitions was the desire to augment and exploit technological complementarities between the acquiring and acquired firms. Acquisition can therefore be conceptualised as an advanced stage of the outside-in ‘open innovation’ strategies proactively used within these innovative SMEs. Firms executing this strategy typically have an acute propensity for risk, a desire for close customer engagement, effective business models and strong external orientation. The work suggests that greater attention should be paid within M&A theory to the dynamics of these kind of smaller scale entrepreneurial acquisitions.PostprintPeer reviewe

Innovation, SMEs and the liability of distance : the demand and supply of bank funding in UK peripheral regions

This paper considers geographical variations in the demand and supply of bank finance for innovative firms in the UK. It uses a detailed survey on the finances of almost 40,000 UK Small and Medium Sized Enterprises for 2011–2013 to investigate both the extent and type of applications for bank finance by innovative firms in peripheral regions, whether funders accept their applications and whether acceptance rates reflect objective criteria, such as credit scores, or their location. The paper finds evidence of higher demand for bank finance for innovative firms in peripheral areas, but that these firms are more likely to be discouraged from applying. However, there is strong evidence that innovative firms in peripheral regions are more likely to have their applications for finance rejected, even when controlling for factors such as credit score. The findings suggest that geography matters in the financing of innovative firms and firms in peripheral areas may suffer a “liability of distance” which potentially reinforces regional disparities. The implications of these findings for public policy are outlined.PostprintPeer reviewe