Public policy and SME performance: the case of Northern Ireland in the 1990s Available to Purchase

Recent research has demonstrated that small firm performance in Northern Ireland has benefited from the availability of a comprehensive and well‐funded programme of selective financial assistance provided by the Local Enterprise Development Unit (LEDU), the small business agency for the region. Such assistance to small firms was seen to overcome many of the constraints of doing business in a peripheral location such as Northern Ireland. However, one question remains unanswered by that research and that is the precise way in which LEDU financial assistance impacts upon business performance. One interpretation of the research to date could be that the relatively better performance of LEDU‐assisted small firms is due to the fact that they are more likely to be faster growing businesses in the first instance, because either they are self‐selecting in presenting themselves for LEDU assistance or else the LEDU engages in a “creaming” process, which results in the granting of assistance to the more successful firms in Northern Ireland. In order to probe further into the impact of LEDU assistance, it is necessary to examine the differential impact on growth of the wide range of support programmes and initiatives for small firms operated by the small business agency in Northern Ireland. This paper will report the results of the first stage of such an analysis by analysing the business performance of two broad groups of LEDU‐assisted clients who have received different levels of assistance in the 1990s – “Growth” and “Established” clients. The analysis is based on information drawn from a specially created database of approximately 1,600 small firms who were in receipt of LEDU financial assistance in the period 1991‐97. The analysis of the employment and turnover performance of LEDU‐assisted firms revealed that Growth clients grew faster than Established clients in the 1991‐97 period and provides tentative evidence that a more intense and directed package of assistance is clearly associated with faster business growth. The age of Growth firms was much older than Established LEDU clients and, therefore, this differential growth performance cannot be related to a simple life‐cycle explanation. The shift in LEDU policy in the 1990s towards a greater concentration of effort on firms with growth potential would appear to have been successful.