An investigation of inefficiencies in enterprise supports: A study of the Irish enterprise support system

Since the 1990s Irish Government enterprise policy has recognised the contribution of indigenous Small and Medium Enterprises (SMEs) to economic growth and also the need to address the challenges that such enterprises face. Such policies have resulted in the creation of agencies tasked with providing both financial and soft support to SMEs. This thesis evaluated aspects of the effectiveness of financial support issued by agencies Enterprise Ireland (EI) and The City and County Enterprise Boards (CEBs) during a recessionary period for Ireland between 2008 and 2011.\ud To date evaluation of enterprise supports has frequently concerned measuring additionality. However, previous evaluations have also revealed a number of inefficiencies associated with such supports. The principal inefficiency is deadweight, which is defined as activity that would have occurred regardless of support being provided. However there are other inefficiencies which have been discovered, ranging from substitution of private finance with public funds by SMEs to selection bias by government agencies. In previous research these concepts have largely been explored in isolation. However, this thesis presents a more holistic view and develops a novel framework to explain the potential relationships between these different concepts, for their simultaneous measurement.\ud The research was carried out over three stages using a mixed methodology. Firstly a survey was conducted on a sample of supported and unsupported enterprises. Semi-structured interviews were carried out with a sub-sample of the survey respondents to garner their responses with further detail. Finally, interviews were carried out with EI and CEB representatives.\ud The findings suggest that deadweight is present in the Irish enterprise support system, but is less prolific than outlined by previous research. However, the occurrence of deadweight negatively affects performance metrics of agency activities, such as cost per job measures. The findings also suggest that deadweight is perpetuated by selection biases on the part of support agencies and the enterprise’s potential to substitute private finance with public funds. However, evidence of additionality has the potential to mitigate for some of these inefficiencies.\ud This thesis has made a number of contributions. Firstly, it has developed a greater understanding of the concept of deadweight through the development and testing of a unique theoretical framework. Secondly, this research has developed a methodology based on best practice evaluation approaches, which have not been used previously in the evaluation of deadweight. Finally, this research has contributed to the enterprise policy and state support debate in what was a particularly difficult era in Ireland’s economic history