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Learning Is Key For Businesses Beyond Start-Up

Research from the Centre for Education Economics highlights the difference the right kind of education and training can make.

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Research from the Centre for Education Economics highlights the difference the right kind of education and training can make.

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Learning Is Key For Businesses Beyond Start-Up

Research from the Centre for Education Economics highlights the difference the right kind of education and training can make.

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It turns out that business owners’ specific areas of qualification strongly predict the later growth of their enterprise, in terms of whether they will go on to employ additional staff – implicitly the right kind of people with the right kind of expertise.

New research from the Centre for Education Economics (CfEE), which includes a new analysis of 10,500 business owners in 21 EU countries, finds that human capital is absolutely crucial for entrepreneurial success in these terms.

This builds significantly on what we already know. That human capital increases high-quality entrepreneurship, and that science, technology, engineering and mathematics (i.e., the STEM subjects) are especially important for ensuring firm success – an effect that appears to operate through better use of management practices.

The new findings highlight the effects domain-specifically in terms of employee numbers. The key finding? – that businesses in which the owner has been trained through programmes in business, social science, and law employ more people – for obvious reasons one of the most important indicators of firm success.

But these findings are not fatalistic. Those entrepreneurs not fortunate enough to have had the benefit of a full-time formal education in any of these areas, can still obtain the necessary skills through relevant adult education and training.

There’s no getting around it. If businesses want to maximise the probability of firm success, their owners must acquire the operational skills of organisation and management, and keep up to date with the latest developments in the fields in which they operate.

So why is it so difficult? Other countries appear to be doing much better at this. CfEE’s report finds that of the 30 OECD countries we have data for, in terms of the share of business owners engaging in job-related adult education and training, the UK comes only 18th.

Only 35% of UK business owners engage in job-related adult education and training - considerably lower than 49% in Germany and 54% in Finland.

The answers appear to lie in a faulty policy framework, and lack of investment. First, there’s been too much of a focus on start-ups, at the expense of business ‘stay-up’.

Future entrepreneurship policy must not merely focus on increasing the rates of entrepreneurship, but also identify and set in motion mechanisms to support business survival.

It’s not one or the other – within a young business, the right training can help entrepreneurs respond to new and different tasks, as strategies and routines have not been set.

Possession of the right skills can also help entrepreneurs and their senior managers to adapt to new and changing situations better. The point is that we need to get past ‘worth a punt’, pump-priming policy and look at whether propositions are viable in the longer-term.

Second, the government must make it easier for small-businesses to invest. It’s the government’s responsibility to incentivise this investment because the returns to employment and improved productivity would help to generate significant public benefit, both economic and social.

Human capital tax reliefs would offer a viable way to do this, so that small-business owners can invest in training programmes focused on improving their businesses.

Finally, government investment should also go into identifying which training approaches are most effective. We know that training in management practices can have real impact for a firm, but we still know relatively little about the relative effectiveness of different training approaches.

To avoid wasteful resource allocation, governments need therefore to capture the effects of different approaches by investing in properly randomised trials of their efficacy.


James Croft is the Director of the Centre for Education Economics (CfEE) - an independent think tank working to improve policy and practice in education through impartial economic research. 

Human capital and business stay-up’ is published by CfEE. The research was commissioned by The Entrepreneurs Network (TEN) and funded by the Association of Business Executives (ABE) to inform its Business Stay-Up campaign. 

Business Stay-Up is a research-led campaign to raise awareness of the pressures and challenges business owners face as they seek to survive and scale, and understand what can be done to increase the probability of success. 

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Learning Is Key For Businesses Beyond Start-Up

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