1.1 Policy context
The Scottish Government is committed to increasing business growth in Scotland as part of a broader ambition for the country to rank among the top quartile of OECD nations in terms of productivity, equality, wellbeing and sustainability. This ambition is supported by Scotland CAN DO (launched in 2013), a platform and statement of intent towards becoming a world-leading entrepreneurial and innovative nation, which recognises that “if we are to achieve sustainable economic growth, and create opportunities for everyone in Scotland to flourish, then we must work together to accelerate entrepreneurship and innovation across Scotland”. In addition, the Scottish Government has recently launched a wide-ranging Enterprise and Skills Review, aimed at ensuring Scotland’s public agencies are delivering sufficient enterprise and skills support for the country’s young people, universities, colleges, training providers, businesses and workers.
As is the case across the UK as a whole, Small and Medium Sized Enterprises (SMEs) account for 99% of all businesses in Scotland, and 50% of all private sector employment. However, SMEs in Scotland are less likely than those elsewhere in the UK to scale to over £50m/£100m turnover, and, as such, Scotland produces only half as many scaling starts ups on average.
Current evidence suggests a lack of ambition may be driving this absence of growth amongst Scottish SMEs, as opposed to a lack of potential. For example, data from the Community Innovation Survey showed Scotland is below the EU average with regards to medium-sized enterprises that engage in innovative behaviours. Meanwhile, the Small Business Survey (2016) revealed just under two thirds (63%) of Scottish SMEs planned to grow their sales within the next three years; a lower rate than in Northern Ireland (74%), England (66%) and Wales (64%).
Beneath such national level evidence, research conducted as part of the Scottish Government’s Enterprise and Skills Review workstream highlighted some notable variation in growth trajectories among different SME types and different owner groupings in Scotland; in particular:
- younger firms were more likely to grow than more established ones
- there was a low proportion of migrant entrepreneurs
- entrepreneurs under 30 years old were more likely to be growth orientated that older business owners
- female-led businesses had lower growth expectations than those led by men, but were less likely to experience any shrinkage in revenues.
Tackling these disparities, and the low level of growth among Scotland’s SMEs more generally, requires an in-depth understanding of owners’ motivations and attitudes to growth and growth activities (including innovation, internationalisation and productivity). To deliver this understanding, along with insights on how specific growth behaviours might be encouraged, the Scottish Government commissioned Ipsos MORI to undertake a large scale qualitative research study among a cross-section of SMEs.
1.2 Research aims and objectives
Previous research conducted by the Hunter Centre for Entrepreneurship has identified a number of behaviours that appear to contribute to growth among SMEs; namely, having a business plan; making operational improvements; introducing new business practices; building effective relationships with suppliers; and collaboration with other businesses – for example, in respect of innovation.
The aim of the present research study was to understand why SME owners and potential SME owners in Scotland were either not partaking in such growth-related behaviours, or did not have the ambition or desire to grow their business.
Among the key research questions were:
1. What factors influence why Scottish SMEs do or do not pursue growth, and how do attitudes’ towards pursuing various growth activities develop over time?
2. Have growth aspirations of Scottish SMEs changed over various life stages, and, if so, what is driving this change?
3. Why are Scottish entrepreneurs averse to some growth behaviours? Are there any barriers that are blocking growth aspiration, and do these change over time?
4. How can the government intervene to encourage growth behaviour and aspiration?
1.3 Structure of the report
The following chapter of the report details the methodology used to conduct the research, and address the research questions outlined above. Chapter 3 sets out broad, underlying factors influencing business’ growth-related behaviours (or lack thereof). Chapter 4 sets out the enablers and barriers towards growth experienced by those interviewed, and Chapter 5 describes their future growth ambitions. Chapters 6 and 7 present the main conclusions and recommendations emerging from the research.
Ipsos MORI would like to thank the Scottish Government project team, and, in particular, Stephen Knox, for guidance and assistance in undertaking the research. We would also like to thank the 75 business owners who took part in the research, and the organisations that provided advice and helped with the recruitment of the research participants, including: Business Gateway, Scottish EDGE, Young Enterprise Scotland, the Princes Trust, the Sporting Chance Initiative, the University of Strathclyde, Women’s Enterprise Scotland, Business Women Scotland and the Highlands and Islands Enterprise. Finally, we would like to thank the various stakeholder groups that took part in the workshops.
Dr Sara Davidson, Jane Eunson,
Ciaran Mulholland and Diana Bardsley
Ipsos MORI Scotland