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Documento 1 de 1 The high technology small firm sector in the UK Autor: Jones-Evans, Dylan; Westhead, Paul. Información de publicación: International Journal of Entrepreneurial Behaviour & Research 2.1 (1996): 15-35.Enlace de documentos de ProQuest Resumen: Jones-Evans and Westhead chart an increase in the total stock of high technology firms over the1987 to 1991 period in the UK, as well as the employment contribution of firms over the same period. They findthat total employment in high technology firms declined over this period. However, the employment contributionof small high technology firms, particularly those engaged in technology-based services activities increased.The employment contribution of this group was unable to offset the major employment losses made by largehigh technology firms and firms engaged in more "conventional" activities in the wider economy. They claim thatpolicy makers should continue to encourage the formation, survival and development of a growing and diversestock of new and small high technology firms in the UK. Texto completo: Dylan Jones-Evans: Michael Smurfit Graduate School of Business, University College, Dublin,Republic of Ireland, and Paul Westhead: Warwick Business School, The University of Warwick, Coventry, UK Introduction In response to an erosion of the UK's manufacturing base and persistently high levels of unemployment,government has sought ways to revive industries and create new jobs. One potential solution emerged whenDavid Birch (1979) in the USA found small firms were contributing some 80 per cent of net job gains. Despiteinitial scepticism aimed at the feasibility of this phenomenon being reproducible (Binks and Jennings, 1986;Storey and Johnson, 1986), empirical studies conducted throughout the 1980s revealed small firms had made aconsiderable contribution to employment creation in the UK (Daly and McCann, 1992). Most notably,researchers examining job creation in the UK over 1979 to 1989 observed the cumulative share of employmentin small firms (with less than 200 employees) had risen to over 50 per cent (Department of Employment, 1992).By 1989, firms with fewer than 20 employees accounted for 35 per cent of all employment outside central andlocal government, compared with only 27 per cent in 1979. As a result of these changes, small firms are nowwidely regarded as a major source of current and future jobs in the UK. The stock of new (and small) firms in the UK experienced rapid growth during the 1980s. The number ofbusinesses registered for value added tax (VAT) rose by 420,000 from the end of 1979 to the end of 1990, anincrease of 33 per cent (Daly et al., 1991). Over this period, the annual new business registration (or "birth") ratefor VAT increased by 15 per cent (as a proportion of the total stock of VAT registered businesses) while theannual de-registration (or "death") rate was only 11 per cent. In addition, during the 1980s, the formation of growing new technology-based firms (NTBFs) was encouraged.NTBFs were seen by governments as a key element in national and local economic development (Malecki,1991) because of their long-term contribution to employment and wealth creation. By enhancing thecompetitiveness of existing small and large firms, NTBFs were also viewed as a major indirect source of newemployment. This paper charts the total stock of high technology units in the UK over the 1987 and 1991 period[1, 2].Theoretical frameworks explaining the growth in new business start-ups are presented to guide the followingdiscussion and the derivation of two hypotheses to be tested in the paper surrounding changes in the stock ofhigh technology units. Moreover, a review of employment change literature allowed two additional hypothesesto be derived with regard to the employment contribution of high technology units. This is followed by apresentation of important definitional issues, including a standard industrial classification (SIC) definition of high

technology industry, and a quantitative definition of a small firm is presented. The data source utilized to test thepresented hypotheses is then discussed. In the following section, the main empirical results of the study arepresented. The final section presents our conclusions and implications for policy makers and future research. Frameworks explaining the growth in business start-ups A variety of frameworks (or theories) have been presented to "explain" the growth in business start-ups in theUK (for a detailed discussion see Keeble, 1990; Keeble and Wever, 1986)[3, 4]. In order to guide the followingdiscussion and the derivation of hypotheses, these frameworks are summarized below. The first twoframeworks - recession-push theory and large firm fragmentation theory - suggest "demand-side" factors in thewider economy encourage business start-ups. These frameworks may be of importance in explaining changesin the stock of high technology units over a recessionary period. However, structural theory suggests "supply-side" factors encourage business start-ups, while the enterprise economy theory also suggests the "supply" ofbusiness start-ups can be encouraged by "policy" factors. The final framework - flexible specialization theory -suggests "demand-side", "supply-side" and "policy" factors interact with one another to encourage businessstart-ups. Recession-push theory A number of NTBFs may have been established by individuals who have been "pushed" into entrepreneurshipbecause of unemployment or the threat of redundancy (Storey, 1982). Supporting this view, Keeble (1994), inhis analysis of survey evidence from founders of NTBFs in the UK, noted that over 40 per cent of founderswhose business was located in an old industrial peripheral region (associated with high levels of unemployment)indicated they had been "pushed" into forming their new venture[5]. However, the relationship between unemployment/redundancy and new business formation remainscontentious. For example, Binks and Jennings (1986) suggest the recession in the late 1970s and early 1980smay have encouraged new business start-ups in a number of other ways, such as through the provision ofcheap second-hand plant and machinery from businesses which had either closed or gone into liquidation.Moreover, by depressing local demand, recession may have led to increased price competition andcompetitiveness, particularly in mature industries. Potential market niches may, therefore, have been opened upby large firms withdrawing from peripheral and possibly less profitable activities, with flexible and specialist newfirms (with lower overhead costs) taking over these vacant market niches. Overall, it can be tentativelysuggested that "recession-push" is a likely determinant of business start-ups over the 1987 to 1991 period. Large firm fragmentation theory Shutt and Whittington (1987) have also argued that the growth in the number of business start-ups duringrecessionary conditions is illusory because many new independent businesses are a direct result of deliberatefragmentation policies taken by large firms under conditions of great demand, innovation uncertainty andincreasing difficulty of control over the labour process. The fragmentation methods chosen within technology-based industries include the decentralization of production to smaller plants (Howells and Green, 1986) whichremain in the ownership of the large firm; a shift in production to small firms from large ones through franchisingand licensing (Dodgson and Rothwell, 1991); and the disintegration of production to independently owned smallfirms through outsourcing, subcontracting and employee buyouts and corporate venturing (Howells, 1987;Jones-Evans and Kirby, 1995). Structural theory Keeble and Wever (1986) argue that the growth in business start-ups is a result of structural changes in thecomposition of the economy and in corporate organizations. In part, the growth in business start-ups is relatedto the" ...emergence of generic technologies, most notably information technology, that are knowledge intensive ratherthan capital and labour intensive and which have opened up new market niches (Rothwell, 1994, p. 12)." This has, therefore, encouraged a growth in the number of firms engaged in microelectronics, computing,

telecommunications and information technology. The decreasing costs of microprocessor technologies hasoffered NTBFs a competitive advantage which enables them to compete with larger organizations. This trendhas occurred in manufacturing industrial sectors (with the introduction of computer-aided design andmanufacture (Kaplinsky, 1983)) as well as in various service sector activities (Green and Howells, 1988; Keebleet al., 1991). The uncertainty engendered by technology-based competition has also created opportunities forsmall innovative firms dependent on fast imitation and improvement rather than traditional research-basedstrategies (Charles, 1987). "Enterprise economy" theory The growth in business start-ups may be, in part, due to more favourable attitudes towards industrial productionand wealth creation (Rothwell, 1994). Government policy in the UK has actively encouraged individuals tobecome self-employed or to start their own business (The Treasury, 1989). Since 1979, successiveConservative Governments have introduced a variety of policy measures to encourage the development of athriving private "enterprise culture". For example, Government has created an environment which hasencouraged financial institutions to provide venture capital to new and small firms. Government has also appreciated that the provision of a positively supportive environment and an appropriatephysical infrastructure (Rothwell, 1994) are crucial for the formation and development of small firms. In order toencourage economic development in deprived and depressed localities, Government has designated a numberof areas in the UK as "enterprise zones". In these "enterprise zones", the formation of new firms has beenencouraged through a variety of financial and non-financial incentives (such as relaxed planning regulations).Further, by establishing science parks (adjacent to major universities), Government, universities, localauthorities and various financial institutions have actively attempted to encourage the formation and growth ofnew knowledge-based firms (Massey et al., 1992; Monck et al., 1988; Westhead and Storey, 1994). Morerecently, a variety of government innovation support schemes such as SMART and SPUR awards have beenintroduced to assist NTBFs[6]. Flexible specialization theory The development of new scaled-down production equipment suited to small-batch production has encouragedbusiness start-ups, with the increasing trend towards flexible specialization (Garnsey et al., 1994; Piore andSabel, 1984), encouraging the creation of specialist new firms in sectors where economies of scale are nolonger relevant or important for competitive advantage (Aydalot and Keeble, 1988; Oakey, 1984). For example,lower barriers-to-entry and the absence of significant economies of scale have led to a dramatic increase in thenumber of new computer service firms in these new market niches. Moreover, Brusco (1982) has suggested that the growth in business start-ups is associated with a rise in realincomes during the past two decades. Rising incomes have led to lifestyle changes and changing consumertastes. The break-up of the mass market has led to increased demand for more varied, short series,customized, better quality and more sophisticated products (Piore and Sable, 1984). As a result, potentialmarket niches have appeared which require short production runs and flexible production processes, whichsmall firms have traditionally exploited to a greater extent than large firms (Bollard, 1983). Hypotheses to be tested These alternative frameworks suggest the total stock of high technology firms should increase over timebecause of an increase in business start-ups[7]. Based on the above discussion the following two hypotheseshave been derived and will be tested. H1a:The total stock of high technology units will have increased over the 1987 to 1991 period. H1b:The total stock of small high technology units (with between one and 99 employees) will have increasedover the 1987 to 1991 period. The employment contribution of high technology firms As indicated above, there has been a growing interest, throughout Europe and the USA, surrounding the role

new and small high technology firms can play in economic development. In particular, a number of studies haveshown new and small high technology firms to be a source of innovation (Acs and Audretsch, 1987; Freeman,1971; Monck et al., 1988). For example, Robson and Townsend (1984) found the small firms' (those with fewerthan 200 employees) share of innovations over the 1945 to 1983 period had increased by over 50 per cent, toaccount for over a quarter of the total number of recorded innovations in the UK[8]. Also, a number of studiesconducted in the USA have noted that a sizeable proportion of fast-growth small firms were engaged in hightechnology industries (Morse, 1976; Rothwell and Zegveld, 1982). More recently, Phillips et al., (1991) found thehigh technology sector was the fastest growing sector in the USA when measured by employment. In addition,these researchers noted that small high technology firms contributed relatively more to the growth of the hightechnology sector than large high technology firms. Not surprisingly, the formation and the employment growthof high technology small firms has attracted considerable research attention, mainly because of their envisagedrole as a leading source of new competitive advantage and more importantly, new employment and wealth. Forexample, Oakey (1991a, p. 129) has appreciated," ...there can be little doubt that high technology small firms are important to future British national industrialemployment growth, both in terms of actual and potential employment they can provide or promise in theaggregate." Supporting this viewpoint, Westhead and Cowling (1995) found the employment growth recorded by a group ofindependent high technology science park and off-park firms located throughout Great Britain over the 1986 to1992 period was markedly higher than that reported in a longitudinal study (using a similar methodology) of arepresentative sample of independent small firms in six geographical areas in England and Scotland over the1985 to 1991 period (Jones, 1991). Westhead and Cowling (1995), however, also noted that new and smallhigh technology firms are not a homogeneous group with equal enthusiasm, inclination or ability to grow. Mostnotably, these researchers found that a small proportion of high technology firms recorded significant levels ofemployment growth[9]. However, there still remains considerable debate surrounding the employment contribution of new and smallhigh technology firms (Oakey, 1991b, 1993; Shearman and Burrell, 1988) to counter rising levels ofunemployment[10]. For example, Oakey (1991b, p. 33) has also warned:" ...the number of firm formations often diverts attention from the generally meagre level of post-formationemployment growth. It is certainly clear that this disappointing level of employment increase from new firms insuch a key high technology sector is unlikely to substantially ease employment problems caused by otherdeclining or employment shedding sectors at national or regional levels." Hypotheses to be tested The "components of job generation" framework has frequently been utilized to unravel the contribution made bysmall firms to employment generation (Birch, 1979; Storey, 1994). Within this framework net job change (whichcan either be positive or negative) is the outcome of gross new jobs created in an economy (for example, newjobs in openings - new independent establishments and branch openings - as well as those created in theexpansion of existing establishments) and the gross jobs which are lost (for example, in closures - independentestablishment closures and branch plant out moves - as well as those lost in the contraction of existingestablishments). Due to data limitations, we are currently unable to chart the "components of job generation" inhigh technology establishments over time in the UK. Nevertheless, the total gross employment contributions ofindependent as well as subsidiary high technology units will be compared over the 1987 to 1991 period. Basedon the above literature review the following hypotheses have been derived and will be tested. H2a:The number of employees employed in the total stock of high technology units will have increased over the1987 to 1991 period. H2b:The number of employees employed in the total stock of small high technology units (with between oneand 99 employees)will have increased over the 1987 to 1991 period.

Definitional issues Defining high technology industry There are a number of conceptual as well as methodological problems in devising an appropriate definition ofhigh technology activities (Aydalot and Keeble, 1988; Goss and Vozikis, 1994). Most of the research examining"technological innovation" has tended to equate the term with "high technology". Not surprisingly, there hasbeen considerable debate surrounding the industries that can be defined as technologically innovative.Nevertheless, Butchart (1987) has identified several standard industrial classification (SIC) sectors (CentralStatistics Office, 1979) with above-average R&D intensity and above-average proportion of scientists,professional engineers and technicians in the labour force. Table I lists the high technology industrieshighlighted by Butchart (1987, p. 87). Inevitably, the Butchart definition has its drawbacks, predominantly because it is based on the SIC which is"product" rather than "process" based. As a result, parts of some industries which qualify overall as hightechnology are decidedly not high technology in focus. At the other extreme, broad industrial categories notclassified by Butchart may contain specific activities which are generally regarded as being high technology(Butchart, 1987). Moreover, the SIC does not fully take into account the variety of firms engaged in thebiotechnology industry, which is widely recognized as an important innovative activity (Oakey et al., 1990).Butchart (1987) suggests this is because biotechnology falls into the class of enabling technologies, withapplications across a broad range of products and processes from traditional industries such as brewing to themore advanced such as the pharmaceutical industry. Despite this, the Butchart (1987) classification of hightechnology industry has been adopted by agencies monitoring the birth, survival, growth and death of hightechnology firms at a national as well as a regional level. For example, Keeble (1994) utilized the Butchartdefinition in his national level study which explored the spatial distribution of NTBFs in the UK. Further, localauthorities in the UK have utilized the Butchart definition at a regional level of analysis (Garnsey et al., 1994).Therefore, the Butchart definition will be utilized in our review of the high technology sector in the UK. Defining a small firm Researchers and policy makers have recognized that a major problem exists in developing an adequatedefinition of a small firm (Bolton, 1971; Stanworth and Gray, 1991). Nevertheless, this study will utilize aquantitative definition adopted in a recent review exploring the state of small- and medium-sized enterprises(SMEs) in the European Community (EC) which defined a small firm as having less than 100 employees(ENSR, 1993)[11]. This is considerably lower than the employment size limit adopted by Bolton (1971) whendefining a small manufacturing firm (i.e. having less than 200 employees). Nevertheless, the ENSR definitionhas been supported and utilized elsewhere[12, 13]. Data collected Data on the absolute number of high technology firm births and deaths in the UK cannot be presented becauseit is not currently published. Nevertheless, to investigate the absolute growth in high technology units in the UK,data from the biennial Census of Employment will be utilized (Jones-Evans and Kirby, 1993). Using the Butchart(1987) definition of high technology industry along with the ENSR (1993) definition of a small firm, data weregathered from the National On Line Manpower Information System (NOMIS) which enabled the number of units(referred to as "firms" in the remainder of this paper) as well as the employment in high technology units to becharted over the 1987 to 1991 period[14, 15]. The data presented relate to changes in the stock of hightechnology firms in the UK in 1987 and 1991. For these two points in time employment totals are presented forthe total high technology firm sector. Results Growth in the stock of high technology firms, 1987-1991 As hypothesized (H1a), over the 1987 to 1991 period the total number of high technology firms increased by12,406 (a 41.3 per cent increase) (Table I). This growth was primarily due to an increase in the number of firms

engaged in services activities[16]. Over this period, the stock of high technology service firms increased by12,090 (a 67.6 per cent increase). A more modest increase in high technology manufacturing firms was alsorecorded (316 additional firms: a 2.6 per cent increase). The growth in the total number of high technology firms was primarily due to a growth in the number of smallfirms (with between one and 99 employees) (Table II). The total stock of small high technology firms increasedfrom 27,792 firms in 1987 to 40,354 in 1991. The increased total stock of small high technology firms by 1991was primarily due to a growth in the number of services (a 71.7 per cent increase) rather than manufacturingfirms (a 4.5 per cent increase). Hypothesis H1b is, therefore, supported. The five sectors recording the largest absolute growth in the stock of small firms were computer services(+11,804 firms), research and development (+357), electronic data processing equipment (+300), aerospaceequipment manufacturing and repairing (+262) and base electrical equipment (+183). Conversely, the fivesectors recording the largest absolute decreases in the stock of small firms were as follows: medical andsurgical equipment and orthopaedic appliances (-244), active components and electronic sub-assemblies (-114), radio and electronic capital goods (-88) and telecommunications (-87). Interestingly, over the 1987 to 1991 period, the total number of large high technology firms (with 100 or moreemployees) actually decreased (109 fewer firms). This was primarily due to a reduction in the stock of largemanufacturing firms (down from 1,362 in 1987 to 1,237 in 1991). Most notably, the two sectors recording thelargest absolute decreases in the total stock of large firms were engaged in active components and electronicsub-assemblies (-56) and research and development (-34). Employment contribution of high technology firms 1987-1991 Contrary to popular perception, high technology employment in the UK over the 1987 to 1991 period actuallydecreased by 56,652 jobs (a 4.7 per cent decrease). Table III shows there was a decrease in total employmentin nearly every sector. The employment growth in the services sectors (+16,001 jobs: a 3.6 per cent increase)could not compensate for the sizeable job losses in the manufacturing sectors (-72,653 jobs: a 9.4 per centdecrease). Consequently, hypothesis H2a cannot be supported. The five sectors recording the largest absolute losses in total employment were active components andelectronic sub-assemblies (-24,035 jobs), research and development (-21,514), radio and electronic capitalgoods (-20,801), aerospace equipment manufacturing and repairing (-10,819) and measuring, checking andprecision instruments and apparatus (-10,308). Conversely, the four sectors recording increased levels ofemployment were computer services (+39,058 jobs), pharmaceutical products (+12,192), medical and surgicalequipment and orthopaedic appliances (+837) and computers other than active components mainly forelectronic equipment (+184). However, as hypothesized (H2b) small high technology firms over this period were important providers ofemployment in nearly all sectors[17]. In marked contrast, large high technology firms (with 100 employees ormore) actually reduced their total employment contribution. In fact, over the period, total employment in smallhigh technology firms increased by 26,766 jobs (an 8.6 per cent increase) (Table IV) while large firms actuallyreduced their total employment contribution by 83,419 jobs (a 9.2 per cent decrease). The growing employment contribution made by the small firm sector was principally due to increasedemployment in small services firms (+23,386 jobs: a 15.7 per cent increase). A more modest increase inemployment was recorded by manufacturing firms (+3,380 jobs: a 2.1 per cent increase). At a finer sectorallevel of analysis, Table IV also indicates there has been considerable variability in recorded absoluteemployment change. Supporting the evidence from Table III, the sector recording the most sizeable increase inabsolute employment change was computer services (+28,643 jobs). Interestingly, the four sectors recordingthe largest absolute employment decreases were telecommunications (-5,292 jobs), active components andelectronic sub-assemblies (-2,670), office machinery (-1,648) and radio and electronic capital goods (-1,390)(Table IV).

However, over this period, a number of large firms reduced their total employment contributions in a variety ofsectors, most notably research and development (-21,549 jobs), active components and electronic sub-assemblies (-21,365) and radio and electronic capital goods (-19,411). In marked contrast, large pharmaceuticalproducts (+12,302 jobs) and computer services (+10,415) firms recorded considerable increases in employmentbut they were unable to offset the employment losses made elsewhere. Conclusions and policy implications Utilizing the Butchart definition, a growth in the total stock of high technology firms was recorded in the UKbetween 1987 and 1991. Further, over this period the relative proportion of high technology firms being smallfirms substantially increased. This growth was principally due to an increase in the stock of small hightechnology services firms. An increase in the stock of computer services firms was expected given theinformation revolution and the subsequent creation of many new market niches. However, the growth in thestock of small aerospace and research and development firms was surprising given the very high capitalintensity normally associated with these industries. The increased number of aerospace firms is, in part,explained by growing overseas demand for the design and engineering skills of firms based in the UK (WesternDevelopment Partnership, 1994). Further, the increased number of research and development firms, in part, is aresult of academics and scientists (some of whom may have been made redundant) identifying new marketniches and commercializing their technical knowledge in new independent ventures (Jones-Evans, 1996). Large firm fragmentation strategies have also played a part in increasing the stock of aerospace and researchand development firms. During this generally recessionary (associated with a reduction in demand forspecialized manufactured products) and "peace dividend" (associated with cutbacks in government defence-related expenditure on aerospace and military electronics) period a number of large firms in 1987 may havecontracted in employment size to become small firms by 1991. On the downside, the reduction in the stock of large high technology firms may have serious implications for thelong-term future of the UK high technology sector (Oakey, 1993). Developed economies need large firms notonly to perform large-scale research and development but also to act as incubators for NTBFs. Consequently, inthe national interest there is a case to provide additional support to large firms in order to encourage theircontinued survival and development. Contrary to expectation, total employment in high technology firms declined over the 1987 to 1991 period. Thisreduction was primarily due to a contraction of employment in large high technology manufacturing firms.However, it is reassuring to note, employment in the pharmaceutical sector (particularly in large firms) increasedover the study period. This rapid employment growth is not surprising. Examination of company R&D statisticsby Company Reporting Limited (1994) has consistently revealed that this sector is one of the most vibrantsectors in the UK economy. Pharmaceutical firms in the UK have significant innovative advantages in worldmarkets and as a result employment growth in this sector is not surprising. A major finding of this research is that small high technology firms have relatively increased their employmentcontribution[18]. However, the employment growth recorded in small high technology firms was unable to offsetthe massive employment losses made by large high technology firms. In addition, the growth in employment insmall high technology firms was unable to offset the job losses made in the wider economy by firms engaged inmore "conventional" industries (Table V). This evidence suggests we should not overestimate the directemployment potential of small high technology firms. Further, the empirical evidence detailed in Table V againconfirms the view that small high technology firms are not the simple and short-term panacea for the industrialills of the UK (Oakey, 1994, p. 2). Nevertheless, given the importance of new technologies both in raising efficiency and improving marketcompetitiveness (Moore, 1994) and the fact that independent high technology firms have lower closure rates(Garnsey and Cannon-Brookes, 1993; Westhead et al., 1995) and faster employment growth rates (Westheadand Cowling, 1995; Westhead and Storey, 1994) than independent firms in more "conventional" sectors, we

believe policy makers should continue to encourage the formation, survival and development of a diverse stockof high technology firms (Goss and Vozikis, 1994; Metcalfe, 1994)[19]. High technology firms can make animportant contribution to wealth creation and as indicated above they have an important direct (and moreimportantly an indirect) contribution to job generation in deprived urban as well as rural localities. The potentialimpact on the UK economy of an ever growing and more diverse stock of high technology firms cannot beignored, but as Table V shows, the number of high technology firms is still relatively small. While not generallyfavouring encouraging start-ups as a policy tool (Reynolds et al., 1994), new and small high technology firmshave a key role to play in direct employment and wealth creation. Further, Oakey (1994) has asserted thatcontinued government support and private sector investment towards high technology firms is crucial because" ...many are in danger before they have been given a realistic opportunity to contribute to national industrialgrowth (p. 5)." Policies to facilitate the establishment of new and small high technology firms are vital (Westhead and Storey,1994). However, any increase in the "quantity" of firms must not take place at the expense of the high "quality"of such firms (Storey and Johnson, 1987), since it is clear that the latter give high technology firms theircompetitive advantage. Additional research needs to be conducted in the UK which explores the demography of high technology firmsas well as their employment contribution beyond the period explored in this paper. Further, data will shortlybecome available which will make it possible to compare the findings of this study with a recovery period in theUK. This current study can also be replicated in a variety of countries as well as different stages of theeconomic cycle. In addition, we believe there is a need for more "quantitative" as well as more "qualitative"research surrounding the formation, survival and development of high technology firms. For example, aconsistent theoretical framework has recently been used in a standardized empirical cross-national study whichcompared the key factors associated with regional variations in total new firm formation rates in seveneconomically advanced countries (Reynolds et al., 1994). A similar methodology should be used to identify thekey factors associated with spatial variations in new high technology firm formation and closure as well asbusiness growth (Davidsson et al., 1994; Keeble and Walker, 1994). This additional careful research will providepolicy-makers with more accurate assessments of the direct and indirect benefits as well as the costs of a policydecision to encourage existing small and large high technology firms to produce and commercialize moretechnologically sophisticated products and services. Notes 1Due to data limitations we are unable to chart changes in the stocks of "independent" (those operating on theirown unconnected with any other business) and "dependent" (for example, subsidiary or associate businesses,branch plants and franchises). It is acknowledged that "independent" and "dependent" units will recordcontrasting levels of "entry" as well as "exit" (Beesley and Hamilton, 1984; Westhead and Storey, 1994).Further, Beesley and Hamilton (1984, p. 219) have asserted, "...the processes leading up to the birth (or death)of a dependent unit are likely to be essentially different from those of an independent business".2. Beesley andHamilton (1984) have suggested new independent establishments threaten industry leaders and they can havean innovative role in encouraging the emergence of entirely new industries. Moreover, during their empiricalstudy of industry turbulence (for example, the flux created in an industry's total composition by flows ofindependent and subsidiary establishment births and deaths) in Scotland during the late 1970s, Beesley andHamilton found extremely turbulent industries (those with high levels of births as well as deaths) had a commonlack of precise definition. Further, "Each is a residual category intended to capture those businesses whoseproducts are such as to defy ready classification into more narrowly-defined MLH industries. It seemed verylikely that these classifications are biased towards products which are entirely novel or unconventional (or both)"(Beesley and Hamilton, 1984, p. 224). 3. A variety of multiple mechanisms encourage business start-ups.However, causal mechanisms are frequently difficult to see. The causes of business start-ups occur in time prior

to the effect and represent some mechanism or process which produces a change. "These occur in a complexnetwork of causal links. Types of causal links include direct, indirect, spurious and conditional, and may alsoinclude reciprocal and feedback processes" (Hage and Meeker, 1988, p. 33). Further, there is still a "...need todistinguish between the theoretical nature of causality and the empirical evidence for it" (Hage and Meeker,1988, p. 198).4. The presentation of theoretical frameworks enables interesting empirical research hypothesesto be derived and tested. This methodology also allows more effective intervention policies to be developed withregard to the high technology business sector. 5. Keeble and Walker (1994) in their regression analysisconcluded rising local unemployment was not a major determinant of spatial variations in new firm formation inthe total economy of the UK over the 1980 to 1990 period. Nevertheless, they did find some support forHamilton's (1989) argument that "recession-push" impacts on new from formation were greatest below a certaincritical unemployment level. 6. The Small Firms Merit Award for Research and Technology (SMART) is anannual two-stage competition supported by the DTI. "This scheme recognises the failure of market forces tosupport high-technology innovation as a result of the potential failure risks associated with innovation. It aims toencourage the formation of scientific and technological firms and help them to grow to a point where they arelikely to attract financial support" (Caird, 1994, p. 58). SMART is open to individuals or firms with fewer than 50employees and aims to stimulate highly innovative but marketable technology. Stage 1 winners are awarded 75per cent of their first year's development costs (up to a maximum of Pounds 45,000). The most promising stage2 winners may be awarded further funding to take their idea closer to the marketplace (Department of Tradeand Industry, 1992). Further, the SPUR (Support for Products Under Research) scheme offers firms with up to500 employees a flat grant of 30 per cent towards the eligible costs of the development of newproducts/processes which involve a significant technological advance for the industry, up to a maximum grant ofPounds 150,000. 7. A growth in the stock of high technology units may not be solely related to an increasedsupply of new businesses. Post-entry policy measures (for example, financial support and opportunities forfinding consultancy and advice) to encourage the survival of existing high technology units (Beesley andHamilton, 1984) can influence the stock of high technology units.8. This research, stored in the innovationdatabase at the Science Policy Research Unit at Sussex University, has identified nearly 4,400 significantinnovations introduced into commercial use in the UK over the 1945 to 1983 period for some 35 industrialsectors, representing at least 50 per cent of UK manufacturing. 9. Drawing on three frameworks (resourceexchange theory, population ecology theory and economic theory) to guide their research, Westhead andCowling (1995) noted that the factors associated with employment growing firms were similar to those recordedin studies of growing firms engaged in "conventional" industrial activities. Further, Westhead and Cowling(1995) in their bivariate and multiple regression analyses found only a small number of "explanatory" variableswere significantly associated with growing independent high-technology firms in Great Britain over the 1986 to1992 period. 10. On the downside, research in this area has generally examined small samples of businesses,and consequently, their results may not be generalizable to the population of high technology firms. Forexample, Shearman and Burrell's study examined seven firms in the medical laser manufacturing industry,while Oakey referred to two samples of studies of 43 biotechnology firms and 87 electronics firms. 11. A moreprecise breakdown of the ENSR definition is as follows: micro-sized enterprises (one to 9 employees), small-sized enterprises (ten to 99 employees); medium-sized enterprises (100 to 499 employees) and large-sizedenterprises (500 or more employees). 12. The definition used by the Small Business Administration (1988) is asfollows: very small firm (under 20 employees), small firm (20 to 99 employees), medium sized firm (100 to 499employees) and large firm (500 or more employees). 13. Brooksbank (1991) defined a small firm as having lessthan 100 employees and a turnover of less than Pounds 2.5 million. 14. A data unit does not readily correspondto the commonly used terms "firm", "company", or "business", as it includes units with employees which roughlycorrespond to workplaces. This is because of the way in which the data are collected - through paypoints in theInland Revenue's PAYE (Pay As You Earn) system, with each PAYE point asked to provide details of the

number of employees in each worksite and its distinct industrial activity. In larger organizations, there could bemore than one paypoint in the organization, and this could affect the data. In smaller companies, it is expectedthat the data unit will be equivalent to the firm and include all the employees working there. It must also benoted that with the gathering of data on the small data unit, the Census of Employment was conducted on asample basis, from 1984 onwards. Although all units with 25 or more employees were polled, a sample of 1 in 5was taken of those units with 24 employees or fewer, with the data obtained from this sample grossed up togive an estimate for total employment. However, the effect of sampling on the overall accuracy of the Census ofEmployment (1989) is very small. Therefore the figures are an estimate, albeit an accurate one, of theemployment in the smaller data units (Jones-Evans and Kirby, 1993, p. 142). 15. The Census of Employmentdatabase has also been criticized because it excludes all the self-employed and firms without employees(Storey, 1994). 16. SIC codes beginning with 2 and 3 are manufacturing firms and those beginning with 7, 8 and9 are services firms. 17. In marked contrast, empirical studies conducted in the USA (Phillips et al., 1991) and F References 1. Acs, Z.J. and Audretsch, D.B. 1987, "Innovation, market and firm size", Review of Economics and Statistics,Vol. 69, pp. 567-75. 2. Aydalot, P. and Keeble, D. (Eds) 1988, Technology Industry and Innovatire Environments: The EuropeanExperience, Routledge, London. 3. Beesley, M.E. and Hamilton, R.T. 1984, "Small firms' seedbed role and the concept of turbulence", Journal ofIndustrial Economics, Vol. 33, pp. 217-31. 4. Binks, M. and Jennings, A. 1986, "New firms as a source of industrial regeneration", in Scott, M., Gibb, A.,Lewis, J. and Faulkner, T. (Eds), Small Firms Growth and Development, Gower, Aldershot, pp. 3- 11. 5. Birch, D.L. 1979, The Job Generation Process. MIT Program on Neighbourhood and Regional Change, MITPress, Cambridge, MA. 6. Bollard, A. 1983, "Technology, economic change and small firms", Lloyds Bank Review, January, pp. 42-56. 7. Bolton, J.E. 1971, Small Firms: Report of the Commission of Inquiry on Small Firms, Cmnd 4811, HMSO,London. 8. Brooksbank, R. 1991, "Defining the small business: a new classification of company size", Entrepreneurship&Regional Development, Vol. 3, pp. 17-34. 9. Brusco, S. 1982, "The Emilian model: productive decentralisation and social integration", Cambridge Journalof Economics, Vol. 6, pp. 167-84. 10. Butchart, R.I. 1987, "A new UK definition of the high technology industries", Economic Trends, February, pp.82-8. 11. Caird, S. 1994, "Sources of technological innovative ideas and their significance for commercial outcomes insmall companies", in Oakey, R. (Ed.), New Technology-based Firms in the 1990s, Paul Chapman PublishingLtd, London, pp. 57-67. 12. Central Statistics Office 1979, Standard Industrial Classification: Revised 1980, HMSO, London. 13. Charles, D.R. 1987, "Technical change and the decentralised corporation in the electronics industry:regional policy implications", in Chapman, K. and Humphrys, G. (Eds), Technical Change and Industrial Policy,Basil Blackwell, Oxford, pp. 176-98. 14. Cohen, W.M. and Klepper, S. 1992, "The tradeoff between firm size and diversity in the pursuit oftechnological progress", Small Business Economics, Vol. 4, pp. 1-14. 15. Company Reporting Limited 1994, UK R&D Scoreboard 1994, Company Reporting Limited, Edinburgh. 16. Daly, M. and McCann, A. 1992, "How many small firms firms?", Employment Gazette, February, pp. 47-51. 17. Daly, M., Campbell, M., Robson, G. and Gallagher, C.C. 1991, "Job creation 1987-1989: the contributions ofsmall and large firms", Employment Gazette, November, pp. 589-96.

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País de publicación: United Kingdom Materia de publicación: Business And Economics--Small Business ISSN: 13552554 Tipo de fuente: Scholarly Journals Idioma de la publicación: English Tipo de documento: Feature ID del documento de ProQuest: 212169897 URL del documento: http://search.proquest.com/docview/212169897?accountid=14777 Copyright: Copyright MCB UP Limited (MCB) 1996 Última actualización: 2010-06-08 Base de datos: ProQuest Entrepreneurship

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