chapter  3
29 Pages

The performance of innovative small firms

A regional issue
WithIan J. Smith, Bruce Tether, Alfred Thwaites, Joe Townsend, Pooran Wynarczyk

This chapter presents a research to provide some evidence of the characteristics, survival and performance of innovative small firms in the United Kingdom, and briefly explores inter-regional variations in their activities. Pioneering research by Solow suggested that national economic growth could not be satisfactorily explained in terms of the traditional inputs of labour and capital alone; he attributed the balance of unexplained growth to technical changes or advances in knowledge. At the local level, local authorities have also become involved in the stimulation of innovative small firms by a variety of means, including support for technology audits and establishing innovation centres. In the 1980s small firms have been seen as a vehicle for individual expression and as a valuable and flexible response mechanism to rapidly changing economic conditions. Financial performance provides a measure of the gross earning capability of small firms before allowance is made for differences in the methods and costs of financing.