Making Small Firms Work: Policy Dimensions and the Scottish Context

The basic framework of the discussion revolves around two samples of Scottish small firms for the periods 1985-88 and 1994-97. It is shown that both samples were drawn during similar (prosperous) phases of the macroeconomic cycle. Further evidence is advanced which indicates that grant and subsidy regimes have not been major determinants of survival and performance. However, the performance of small firms is shown to be better for the second sample period, compared to the first. If macroeconomic effects are neutral, and grant/subsidy regimes are insignificant, then reasons for performance differences, it is argued, must lie elsewhere. A plausible source of this is the insititutional framework. To this end, the evolution of institutional design for stimulating enterprises is documented and dated, and it is shown that the two sample periods fell within two distinct policy regimes. The first involved sectoral indicative planning, under the umbrella of the Scottish Development Agency (SDA), up until 1988. The second involving decentralised enterprise stimulation, under Scottish Enterprise (SE) from 1988 onwards. It is therefore suggested that at least part of the superior performance of small firms in the second sample period may be attributable to the new institutional framework, especially as modified by The Business Birth Rate Strategy.small firms, enterprise policy, business incubators, Scottish economy