Enterprise and Small Business Principles

Possibilities for targeting

This discussion has shown that there are usually rather narrow possibilities for policies that target small business. Despite this, there has been a strong tendency that seeks to target. For example, a number of initiatives target growth businesses, distinguishing them from those which cannot or are unwilling to grow (which are usually termed ‘lifestyle’ businesses). The focus on growth companies is, for example, strongly built into most DTI objectives. The usual means of targeting policy is to target those busi­nesses which either:

■ will benefit to the greatest extent from assistance (a ‘need’ measure), or

■ will yield the greatest policy benefit (‘leverage’ or ‘value for money’ measures), and

■ avoid as far as possible displacement and non-additionality effects (‘additionality’ measures).

The potential benefits of targeting of policy are obvious: it can reduce the range of expenditure, it may focus resources where they are ‘needed’ and it is easier to market.

A focus on growth businesses, for example, yields a target market of approximately

200.0 businesses (taking the definitions of growth businesses of 10-200 employees used by the DTI (1992)). A focus on exporting business yields a target market of about

100.0 businesses (Institute of Export, 1995; quoted in Bank of England, 1996). A focus on innovation or high-technology businesses is a more fuzzy concept but yields a target of perhaps 100,000 businesses. If it is possible to distinguish SMEs within these groups, the proportion will be even smaller (Smallbone, 1997). Targeting is thus very attractive as a public policy approach, whether viewed from a perspective of ‘need’, ‘leverage’ or avoidance of non-additionality.

But there are great dangers in attempting to target the market in this way which derive from the variety within the target market, however far it is narrowed. First, the starting point for any change in business activity, as we have argued, must be the entre­preneur’s own marginal appraisal of costs and benefits of the change, judged by the characteristics of its supply, customer and trading environment, and its internal capacit­ies and structures. Any decisions have to be market-driven in the two senses: that only the business itself can make the decisions and it must judge its decisions on the criteria of its own capacity to continue to meet its customer’s needs. Any policy targeting can, therefore, be only of the crudest kind in the sense of identifying a target for possible take-up rather than identifying a specific group where all will need to respond. In addi­tion the target group is not stable. Those businesses that are growth, export or innova­tion businesses in one period may not have the same characteristics in another period. Although we know that there is a strong correlation of each of these business charac­teristics over time (i. e. growth businesses tends to continue to be growth businesses and are also often the innovators and exporters), there is no prior set of conditions that strongly allows identification of the upward performers. Hence it is not possible to define a stable or exclusive group as potential targets for government action.

There is also a rather strange conflict in-built into a government policy that seeks to give greater support to these businesses that are already growing and hence are suc­cessful. There are also particular dangers in trying to distinguish between growth and lifestyle businesses. Any good business is good business! Maintaining a business is a competitive world in itself and major success and the lifestyle business of today may well be the growth business of tomorrow. The managerial gateway to access policy benefits must, therefore, be a flexible one, both for entry and exit. This in turn has implications for management and design of policy contact networks, databases and marketing. But the safest policy of all is not to target, and leave open the choice of policy supports used to those best able to assess them - the small business itself.