The UK’s small and medium-sized enterprises (SMEs) are investing less in the equipment, software, and skills that could lift their productivity—and the Enterprise Research Centre (ERC) wants to find out why. This matters because the UK has a persistent productivity gap between its most efficient “frontier” firms and the rest, alongside a trade deficit and the lingering economic disruption of Brexit. Existing research has focused on whether SMEs can get finance, but less on whether they *choose* to invest in tangible assets (machinery, buildings) and intangible ones (patents, staff training), and how that choice affects local growth. The ERC will also examine how management quality, intellectual property, and publicly funded R&D help small firms grow and export. If successful, the research could reshape how business support policies are designed—for example, shifting government advice from simply offering loans to helping firms build better management teams or navigate the patent system. The centre will also produce short, non-technical briefing notes on topics like quality standards and business resilience, making existing knowledge usable for policymakers and business owners who lack time for academic papers.
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The UK faces significant economic uncertainties. Brexit will bring new challenges and opportunities, alongside the continuing productivity gap and persistent trade deficit. At the same time, global trends related to Industry 4.0 and digitisation are challenging the viability of existing business models, and creating new policy challenges. ERC will help address these challenges through: a programme of robust, policy-related research; synthesis of existing knowledge; and extensive stakeholder engagement. The plans we outline build on an extensive Stakeholder Consultation we conducted in early 2017 with over seventy participants, as well as subsequent discussions with Funders and other potential partners. Research and data development (plans for month 1 to month 20) Over this period our research programme is divided into four themes and eight projects of fixed duration: 1. SME Finance and Investment - SME Finance has been a consistent focus of ERC research since its inception with a focus on discouragement and the impact of financial status on performance. Current concerns focus more strongly on SMEs' willingness to invest in both tangible and intangible assets, and how this might influence firm and local growth in the future. Reflecting these concerns we propose two initial projects in this research theme linking SMEs' tangible and intangible investments to firm-level and place-based growth. 2. Innovation, internationalisation and growth - understanding the barriers and enablers of innovation and its relationship to internationalisation and growth has been central to ERC since its inception. Recent projects have focussed on university-business collaboration, the growth effects of publicly funded R&D and profiling innovation activity across LEPs in England. To date, however, studies of SME innovation and growth in the UK have generally paid relatively little attention to the IP system. We plan two inter-linked projects in this theme which explore the returns to public and privately funded R&D in small firms and explore the contribution of IP to growth and productivity. The latter project will develop new matched data resources. 3. Leadership and management (L&M) teams and SME performance - Concern about the quality of L&M in UK firms has been longstanding, with potential implications for growth and productivity. We propose two studies focussed on how management practices can assist small firms to draw on external resource and knowledge acquisition to boost growth and productivity. The results will have implications both for management training and place-based policies for business development. 4.Diffusion and productivity upgrading - Significant disparities in innovation and productivity exist between the most productive 'frontier firms' and other, more domestically-oriented, 'non-frontier firms', and between micro and larger companies. Projects in this theme focus on calibrating productivity differentials within sectors and localities, exploring their determinants and developing appropriate policy responses. Synthesis: A key learning point from the first two Phases of ERC is the value of synthesis activity alongside new knowledge creation. Curation of existing knowledge to make it accessible is therefore a core theme of our proposals. Our Stakeholder Consultation also suggested the value of short, focussed briefing notes which provide an expert and robust view of a tightly defined topic. Illustrative topics might be "How do quality standards such as ISO 9000 change firms' ability to innovate? or 'What makes a small business resilient?'. SOTA reviews will be 3-4 pages, written in non-technical language, and provide hyperlinks to source material. SOTA Reviews will be commissioned from UK and international academic and policy experts across the social sciences. Provision is made for 20 Reviews in Year 1 with a further 10 in Year 2 and Year 3 of ERC Phase 3. Reviews will be hosted on the ERC website.
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