Growth entrepreneur can gain momentum from support euros

Finland needs growth entrepreneurship in order to turn the economy in a positive direction. However, supporting growth entrepreneurship with public funding is often viewed with suspicion as it is difficult to determine the impact of this support. Is the possible growth of participant firms due to the programme itself or the fact that the most promising companies were selected for the programme?

A recently completed study at Aalto University Department of Industrial Engineering and Management shows that growth entrepreneurship policy programmes can produce real added value. The eight-year impact evaluation followed companies that were part of the Tekes Young Innovative Companies (NIY) Programme. According to the study, the growth impact of the NIY Programme corresponded to an increase of some 120% in turnover after controlling for the selection bias.

The result is significant when considering that the analysis did not take NIY participant SuperCell into account. The tax income generated by SuperCell would be enough to cover the costs of the entire programme.

'For the first time, we were able to demonstrate that growth entrepreneurship policy programmes can have real added value. The impact of the NIY Programme was probably enhanced by a concrete hands-on approach and the fact that the support was not automatic but was tied to achieving growth targets set for the company,' states Professor Erkko Autio, who ran the study.

Significant benefit

NIY programme is not low cost policy: each completing company receives €1 million in support. Based on the study, the added value created by the programme covers the costs with room to spare: conservative estimates show that every support euro invested in the programme produced approximately €1.11 in new turnover. This is a trend impact, which means that the participants moved to a higher growth curve than the control group.

The benefit of the programme is significant – but not automatic.

The benefit of the programme is significant – but not automatic.' Although the results are encouraging, this does not mean that added value is created automatically. Discipline is needed in growth entrepreneurship programmes, particularly when deciding whether to allow a company selected for the programme to continue in the programme or not,' emphasises Research Associate Heikki Rannikko.

The study has been accepted for publication in the respected Research Policy journal.

Autio, Erkko & Rannikko, Heikki. 2015. Retaining Winners: Can Policy Boost High-Growth Entrepreneurship?  http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2609502 

Further information:

Research Associate Heikki Rannikko
Aalto University School of Business Small Business Center
heikki.rannikko@aalto.fi
Tel. +358 40 353 8454