Small firms, innovation and employment creation in Britain and Europe - A question of expectations ...

It is an abiding perception, with considerable currency amongst politicians and policy-makers in London, Brussels and elsewhere, that new and small firms are an important source of innovation, new technology and employment creation, three of the crucial dynamics of economic development, but areas in which the UK and Europe have struggled against world-wide competition. Despite this, relatively little evidence is available on the contribution of new and small firms to these economic phenomena. This paper provides a succinct review of the evidence on the contribution of new and small firms to technological innovation, and the extent of employment creation amongst innovative or technology based new and small firms. Our contention is that expectations of small firms as "atomistic'' innovators and employment creators have become over-inflated, which is important given the amount of attention they have received, and continue to receive, from policy-makers in London, Brussels and elsewhere. (C) 1999 Elsevier Science Ltd. All rights reserved.