ABSTRACT
This chapter considers whether new firms have any special role to play in a local economic development strategy. The chapter is in three sections. The first draws on the theoretical economics literature to consider whether new firms have a special contribution to make to economic development, and whether in principle new firms require special help from government. The conclusion is that the literature provides little firm guidance. Accordingly, the second section discusses an approach which side-steps many of the conventional problems and uncertainties, and which has been used by one development agency, Forth Valley Enterprise, in deciding how large a role to ascribe to the encouragement of new firm formation in its local economic development strategy. The third section looks at that example in detail, while the final section draws some conclusions about the approach and the case for generalising either the methodology or the policy conclusions to other local economies.
