UK economic growth has been weak since the financial crisis, with output still below its pre-crisis peak. Despite signs of a recovery in recent months, there is nonetheless still a risk of permanent loss of productive capacity, limiting the UK’s future prosperity. This creates a strong rationale for looking afresh at the drivers of long-term productivity growth and innovation.
As a vital driver of new innovation and productivity growth, entrepreneurship could have a major role in revitalising the UK economy. There are a plethora of different Government schemes designed to incentivise start-ups and entrepreneurs, including funding schemes, tax reliefs, advice and mentoring. But research suggests that different types of entrepreneurship contribute differently to economic growth, employment and innovation. This means that we can maximise the economic benefits of entrepreneurship policy by focusing on encouraging the types of entrepreneurship that deliver the greatest economic benefits.
This paper sets out a framework for analysing the benefits of different types of entrepreneurship, based on existing research and evidence. It goes on to show how the UK performs compared to other countries, and concludes by looking at where we should focus efforts to encourage more of the kind of entrepreneurship that is good for growth.
This paper forms a part of an ongoing programme of work on entrepreneurship. It is informed by a series of roundtable discussions involving experts in the fields of business and enterprise held at the SMF in 2012, and by a background briefing compiled for those discussions by the authors.