Policies for scaling up technology-based firms

Journal article, 2024

This study focuses on the scale up issue, which is crucial for numerous countries. The reason for policies in firms that want and have the opportunity to scale up their business is that these firms have a large potential to create job opportunities and economic development compared to investment in startups without any growth ambitions. The overall objective is therefore to study policies to facilitate technology-based firms' scaling up. As a consequence of earlier research on high-growth firms, little attention has been paid to surviving and stable firms that may want to scale up. This study design comprises three main empirical areas: financial support, framwork conditions and innovation systems. The first contribution of this study is that it is an empirical description of policies at the country level to support technology-based firms. According to the literature, focusing on a specific industry is unnecessary because high-growth firms are in all industries. Another result is that scaling up firms can be identified by internal drivers, which is difficult for policymakers to identify. However, it is expedient to target specific technology-industry sectors and analyse and evaluate them. Innovation and entrepreneurial ecosystems, which are important for technology-based firms’ sustainability and growth, is often cut across different industries and there may be support for different types of firms (high-growth and surviving/stable firms and different industrial sectors). Researchers have reached a consensus that high growers contribute to the society; however, few empirical examples express the significant effects of high-growth firms on a macroeconomic level. Taxation, labour laws, and other regulations are essential; however, researchers do not agree how this should be implemented.  Although policies aim to increase the proportion of high-growth firms, research literature indicates uncertainty about whether these firms contribute to overall industrial and economic growth. The difficulties primarily stem from the challenge of predicting the firms that will grow, the ambiguity surrounding what constitutes high growth, and the complex relationships between firm capabilities, growth, and macroeconomic benefits. One issue is that some high-growth innovative firms are "one-hit wonders," making it challenging for decision-makers to formulate appropriate policies for sustainable and long-term economic development. Some researchers argue that because of the significant role that high-growth innovative firms play, entrepreneurial policies should focus on firms with the highest growth potential. Others contend that it might be economically advantageous to support groups of firms that grow slowly or not at all. Several main conclusions can be drawn from this study and several opportunities for future improvements are identified. The study develops a conceptual model for evaluation of policies to promote technology-based firms. The model consists of three dimensions: perspectives/actors, analysis, and evaluation. The results in this study provide insights into (i) how policymakers can better examine crucial links between the scaleup populations and demand side policies and (ii) how policymakers can better comprehend the linkages between the three dimensions to evaluate policies.