Using Big Data to analyse the effect of Business Support on SMEs

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Using Big Data to analyse the effect of Business Support on SMEs

A figure showing the estimation strategy used in the study

Saturday 3 December 2016 is Small Business Saturday in the UK. The national campaign is growing every year and in 2015 saw £623m spent at small businesses across the country. In the lead up to this year’s event we’re blogging about other ways that small businesses can receive support and ensure their own success. In the blog post below our Research Fellow Fola Malomo shares the results of a study the Centre has carried out looking at the impact of business support strategies.

How do we get small and medium sized enterprises to grow? This question has bugged policy-wonks recently. Some people suggest that the growth and survival of start-ups is random. However, recent data on companies in the New Anglia area of Norfolk and Suffolk suggests otherwise. In this blog I’ll give you a preview of the results of a study we have carried out.

Small and medium sized enterprises; micro-enterprises; and entrepreneurs are responsible for the majority of employment creation. The impact of SMEs on employment is positively correlated with output per person. In addition, SMEs spur growth by connecting knowledge; product commercialisation; and total factor productivity. However, there is a lack of empirical evidence on the effect of business support services on SME outcomes.

Using Big Data collected from the New Anglia growth hub, the central government and other sources; we analysed the effect of a SME intervention on company growth and profitability. Interventions were via face-to-face business support; telephone helplines; and an online information portal. Results show that the provision of business support services can have a positive effect on sales (turnover) and the size of businesses (number of employees).

Funding for the New Anglia programme came from the respective Greater Norwich and Greater Ipswich City Deals. The former city deal provided: specific enterprise and innovation initiatives for established companies and new SMEs; the provision of housing; transport; and utility services; and a local enterprise partnership skills programme. The latter city deal provided: a youth guarantee; a local responsive skills system; a maximising local employer investment programme; and a business growth service.

Data for this study comes from the growth hub itself; FAME; Companies House; and the Office for National Statistics (ONS). We looked at the following variables for the respective companies: registered number; main activity; business support status; age; sic code; city; county; local authority; postcode; year; turnover; fixed assets; employees; profits; cost of sales; and research and development expenditure.

In order to investigate the effect of growth hub services on company outcomes without biasing the results the study employed propensity-score matching in order to match- like-for-like companies in the sample (Figure 1).

A figure showing the estimation strategy used in the study

Figure 1: Estimation strategy

Results show that SMEs that came into contact with the growth hub have accumulated more net assets (Figure 2) and loans/overdraft since their contact with the hub than firms that did not use the hub. There is evidence that the New Anglia programme has helped increase employment in the short-run. Firms that approached NALEP have more gross profits and more employees.

Graph showing the effect of business support on assets within comapnies

Figure 2: Net assets (‘000 GBP) for Nalep and Non-Nalep companies

These results are important because there is an increasing interest in the effect of intervention on business growth and profitability – when investments like these are made it is important for policy makers to know they are likely to lead to local economic growth. There are a number of global and country-level studies that look at the impact of businesses support services on outcomes. Nevertheless, there is a gap in the literature: no study has posed this question for the New Anglia region using data from Norfolk and Suffolk. The current study by the Business and Local Government Data Research Centre aims to fill this gap by using data from the New Anglia region, as described above, to answer questions about the impact of business support services on outcomes. The full report can now be viewed here on our research output page.

Blog post by Fola Malomo, (Research Fellow at the Business and Local Government Data Research Centre), please email us if you’d like to discuss any of the content of this post or any research projects you are interested in.

Published 1 December 2016