With a seemingly growing number of inspiring innovations on the cusp of revolutionising our world, politicians could, perhaps, be forgiven for focusing their policy interventions exclusively on high-tech sectors. However, a new report from the Institute for Government’s Giles Wilkes suggests that this would be a mistake.
In his analysis of the UK’s flagging productivity since the 2008 financial crisis, the former adviser to Theresa May and Vince Cable argues that no one sector is to blame for the decline. As Wilkes explains in this handy Tweet thread, if we had kept to the trend of 1998-2008 GDP growth, the economy in 2018 would have been £300bn+ larger. He concludes that entrepreneurs across all sectors need the right policies to thrive if in the next decade we will once again feel like things can only get better.
Politicians reading his report may need to extend their thinking around innovation to sectors not always associated with it, such as hospitality and retail. Wilkes recommends a whole gamut of different policy levers to pull, from upgrading management practices, stimulating the adoption of technology, making sure the population is skilled, improving infrastructure, and ensuring businesses have ready access to finance. Of course, this isn’t just a role for the government, and they are already doing a lot of this, but we and other organisations aren’t short of good ideas of how these things can be done better.
Wilkes finds that many so-called lower-value sectors have eked out impressive productivity gains over recent years, and makes a convincing case that policy makers shouldn’t regard high-employment sectors as fundamentally a drag on growth. Off the back of this report, entrepreneurs in less sexy sectors should take the opportunity to be even more vocal about what they need to help them grow. Along these lines, it’s important that organisations like ours resist the temptation to just focus on high value sectors in our efforts to impact policy.
Decent exposure
In a compelling article, Matt Clancy tears through the academic literature on the impact that exposure to entrepreneurs has on encouraging entrepreneurship.
Study after study shows a positive link. Whether it’s scientists collaborating with peers who have a history of commercialisation, people working with former entrepreneurs, or even living in entrepreneurial neighborhoods, the vast majority of evidence suggests that entrepreneurship is like a bug, jumping from person to person.
Clancy presents evidence to show that this looks like a causal relationship – it’s not just entrepreneurs being drawn to each other. But he also cites an important paper that contradicts the other papers’ findings. Josh Lerner and Ulrike Malmendier used a natural experiment from Harvard Business School (HBS) to show that exposure to experienced and successful former entrepreneurs is doing the opposite, putting peers off starting businesses. Clancy thinks, however, that they might be preventing inexperienced students from pursuing business ideas that would be doomed to fail. After all, about half of HBS graduates do still eventually go on to start one or more businesses in the first 15 years after graduating.
It seems pretty clear that the passion for entrepreneurship can be shared, though we should also care about the message and therefore the messenger. Clancy, who last year wrote our report on Remote Work, will follow up on this in his next article. You can subscribe to his excellent Substack here so you don’t miss out.
Sign up to future Friday newsletters here.