Modelling the Effects of Public Support to Small Firms in the UK - Paradise Gained?

Modelling the Effects of Public Support to Small Firms in the UK - paradise Gained?

ABSTRACT

This paper describes the methodology employed in a tracker study of businesses that
received advice and consultancy from the Business Link network in 1996. The
purpose of the study was to assess the impact of Business Link support on
productivity compared to a matched comparison group.

Using data from the specially constructed Business Link Impact Indicators Database
for the period 1994-2000 together with a survey of assisted firms and non-assisted
firms , and adopting an econometric approach designed to make allowance for both
'assistance' and 'selection' effects, this study concludes that:

• First, we find no evidence that in 1996 BL assistance was being targeted
effectively at faster growing firms.

• Second, we find some, albeit tentative evidence, that BL assistance in 1996
was having a positive effect on productivity growth.

• Third, we identify a positive but statistically insignificant effect of BL
assistance on turnover and employment growth.

• Fourth, our analysis has highlighted a number of other factors which
contribute to productivity, turnover and employment growth. The range of
these factors - embracing market conditions, business strategy, the
characteristics of the owner-manager and the firm itself - emphasise the
complexity of the process of business growth and the consequent difficulties
in both modelling and assisting the process.

Stephen Roper and Mark Hart

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