Growth-Oriented Smes in Unfavourable Regional Environments

Assesses thriving SMEs in unfavorable environments to question the assumption that spatial clustering and agglomeration are prerequisites for firm success. Building on findings by Keeble and Bryson (1993) and Vaessen (1993), the study analyzes data on over 2,000 UK SMEs from the Cambridge University Small Business Research Centre (SBRC) database. 'Counterfactual' cases of growth-oriented SMEs in peripheral regions of Britain are compared to three control groups: growth-oriented SMEs in the southeast, slow-growth firms in the periphery, and slow-growth firms in the southeast. Market competition, innovation and R&D, and work force and labor market characteristics are analyzed separately for manufacturing firms and professional and business services firms. According to the findings, significantly more SMEs in Wales, Scotland and northern England achieved rapid growth rates in the 1980s than did southeast firms, despite the more favorable economic conditions in the southeast. This is due, at least in part, to fewer competitors in peripheral regions and a high R&D input-output ratio stemming from medium sized firms. Though skill shortages and labor recruitment difficulties were reported by periphery firms, an overall high number of innovations arose from this area. These results serve to question the regional development theory linking firm success so strongly to environment, which denies the entrepreneur's ability to actively and successfully strategize to overcome environmental constraints. (CJC)