High growth and high technology firms in Scotland

The report looks at the latest Scottish data on high growth firms (HGFs), which have 10 or more employees and have achieved three consecutive years of employment or turnover growth of more than twenty per cent a year. It places HGFs within the context of the overall stock of firms in Scotland which employ more than ten employees and provides an overview of the aggregate stock of HGFs in Scotland. The report examines HGFs in high technology sectors, a key target for many of Scottish Enterprise's interventions. It assesses some of the key growth challenges confronting technology-based firms and considers some of the trigger points or growth catalysts which firms undergo prior to undertaking a period of rapid growth.

The methodology consisted of: an analysis of data held in the Office for National Statistics (ONS) Business Structures Database; a comparison of the ONS data with previous NESTA and Scottish Enterprise research; and an analysis of the literature on technology-based entrepreneurship.

Despite the recent recession, the report finds that Scotland has performed well in comparison with other UK regions, in terms of the overall percentage of HGFs in the Scottish economy. There are around 1,544 HGFs in Scotland (13.5 per cent of the 10 plus business base). Factors contributing to high growth include: management skill sets; industry experience; export orientation; strong sales and marketing focus; and close customer end-user engagement. Firms often achieve high growth following a 'trigger point', such as a take-over, management buy-out, new capital investment or the development of a new product or service. Compared to other UK regions, Scotland performs well in the proportion of its high tech business base which achieves high growth. However, a smaller proportion of Scotland's business base is high tech, resulting in Scotland having a lower proportion of its HGFs that are high tech compared to other UK regions. The report suggests that high technology firms are more likely to achieve high growth status than non-high tech firms, providing justification for Scottish Enterprise's focus on high tech growth sectors, such as life sciences, energy or enabling technologies.

The report recommends that Scottish Enterprise policy should focus on HGFs, owing to the disproportionate impact they have on the economy in terms of employment and wealth creation. The report suggests that further research should focus on: the main reasons behind Scotland having a lower proportion of its business base than other UK regions that is high tech; the main drivers for Scotland's better than average performance (among UK regions) of 'converting' high tech and non-high tech firms into high growth firms; and the extent to which (and how) Scottish Enterprise should focus on increasing the number of high tech businesses, as opposed to converting more of the current high tech business base into HGFs.