Which has the Greatest Economic Impact? The Novel or the Incumbent SMEs

Abstract

The last decade has seen business creation become one of the main objectives of business support policy. However, once created, new SMEs and their entrepreneurs are often left on their own outside the focus of both policy-makers and business researchers. Based on the Schumpeterian thesis of creative destruction or Kirzner’s opportunity identification, new firms are the ones identified as responsible for nnovation and progress. However, organizational learning and human resource theory applied to the entrepreneur and his/her firm would lead us to believe that the nascent entrepreneurial venture may not be best suited at the time of creation to make its greatest contribution to economic development. The objective of the proposed research dissertation is to determine whether it is the novel or incumbent SMEs that make the greatest contribution to economic development (in terms of product, process and strategic innovation as well as employment and international expansion). In order to perform this analysis, individual cross sectional data from GEMsurveys from 2007 to 2011 have been used to build a pseudo-panel dataset where sample cohort means are treated as observations. Implications derived from the results of this research serve to redirect economic policy attention and better distribute the current support policies and programs to include post start-up stages of entrepreneurial ventures.