A Scientific Approach to SME Productivity

SMEs are a vital part of the UK economy, but data show that the share of high-productivity SMEs remains substantially lower in the UK than in other G8 countries. There is growing evidence that a key barrier to SME productivity is the shortage of effective programmes that educate and support promising businesses in their decision making. This project aims to fill in this gap by encouraging SMEs to adopt a set of novel business practices -labelled 'a scientific approach to decision making'- that can improve their ability to rigorously make strategic decisions and thus, their productivity.
This project will be offering a training programme (twenty-four hours of training, split across eight sessions) to two groups of SMEs. One group will only be trained in operational and strategic efficiency. The other group will be also trained in the use a scientific approach in their decision making. The participating SMEs will be monitored over a year to understand whether there are any differences in the performance of the two groups and, in particular, whether firms that received training in the scientific method perform better. This study builds on rigorous evidence produced by two pilot randomised controlled trails (RCTs) conducted with new firms in Italy, which showed that firms in both groups performed better than a randomly selected sample of firms that could not be included in the programme, but that firms in the treatment group performed five times better than those in the control group.
The research team working on this project aims to produce knowledge that will inform future policy development and be relevant for the academic community, by exploring the impact on firm productivity of a novel decision-making approach and by using an innovative methodology (i.e. RCT) that overcomes the limitations of traditional techniques based on surveys and instrumental variables. The project also aims to have an impact on SMEs practices by identifying a set of actionable tools that can translate in tangible results for small businesses. The lessons learnt from the programme could then be applied to improve the quality of business support programmes across the Growth Hub network and for other public and private schemes. The support provided will be co-branded with the London Growth Hub to ensure the programme is included as part of the London Growth Hub's wider offer.