ABSTRACT

The link between business dynamics, in terms of the birth, death, expansion and contraction of firms (in the conventional componentsof-change job accounting framework) and economic well-being at national, regional and local levels, has been widely accepted as important, at least since the publication of Birch’s (1979) original influential study in the United States (Reynolds and Maki 1990). In general, although the details of Birch’s results have been debated, the significant role of new firms in job generation, innovation and economic change has been widely demonstrated (Loveman and Sengenberger 1991; Stanworth and Gray 1991; Storey 1994). However, the simple association of new and small firms with employment generation has recently been subject to increasingly rigorous scrutiny, and the policy options available and appropriate to maximise both the employment impact of the sector (particularly at local and regional levels) and the value for money and effectiveness of public sector support have been the subject of increasing debate. It is our purpose in this chapter to review the current debate on small firms, new firms and growth firms as the basis for reviewing the operation of a policy initiative targeted specifically at supporting the establishment of high-growth potential ventures.