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Table 1 Some previous literature on public policy to support HGEs References Perspective Main recommendations Smallbone U.K. HGEs. Develop regional models to encourage et al. (2002) widespread participation by private sector organizations; boost access to ﬁnance for HGEs; integrate universities into regional ecosystems; ensure that support programs are tuned to the needs of the target group. Shane (2009) Most SMEs and startups are of a low Focus on supporting high-growth quality. entrepreneurship, not generic entrepreneurship. Reduce the incentives for low-quality entrepreneurs to start businesses (i.e., aim for a lower quantity of startups with a higher average quality). Financial incentives for small ﬁrms to undertake R&D (e.g., R&D tax credits). Mason and Public policy for HGEs. Most HGE support focuses on innovation and access to ﬁnance. However, Brown (2013) many HGEs are outside of high-tech sectors. Policy should provide support for internationalization and developing sales/marketing skills. OECD Examining 13 initiatives to support Business expansion requires external ﬁnance as well as improved manage- (2013) HGEs, six of which are detailed (Denmark, Scotland, Netherlands, Flanders, ment practices and skills. HGE pro- Germany, and Australia). grams should have quantitative objectives to facilitate ex-post evaluation. There are concerns that HGE policies tend to concentrate around richer regions. Roper and Discussing cases in OECD (2013). Five cross-cutting themes: Firm selec- Hart (2013) tion; timing of support; business and leadership development; peer group or shared learning; and evaluation. Stam and Local policies for HGEs. Education policy should stimulate Bosma entrepreneurial ambitions; labor markets should be ﬂexible. (2015) Acs et al. There are too many low-quality entre- Decoupling provision of healthcare (2016) preneurs; policy should focus with employment (U.S.), greater on HGEs. STEM education to boost innovative entrepreneurship; facilitate the hiring of skilled immigrants. Brown and Targeted support for HGEs, growth Offering substantial resources to earlystage ﬁrms could have detrimental Mawson accelerators. (2016) unintended consequences, because of a dependency culture and because growth-oriented ﬁrms need mentoring and management development. HGEs come from all sectors. (continued) Policy Instruments for High-Growth Enterprises

281Table 1 (continued) References Perspective Main recommendations Elert et al. Institutional reform for innovation and Taxation (simplicity, and tax neutrality (2017) entrepreneurship in Europe. across owner categories); pension funds should invest in entrepreneurial ﬁrms; portable pension plans; liberalization to empower private production of healthcare and schooling; second chances for bankrupt entrepreneurs; U.S.-style university system; need for trust, cooperation, and interpersonal exchange. HGEs are more often ﬁnancially Ferrando Financing of HGEs. constrained. Focus on type of ﬁnancet al. (2019) ing needed and improving the framework conditions for innovation and skills development. HGEs would beneﬁt from equity markets and private equity funds. Grover Relatively large emphasis on develop- HGE policy options for emerging economies. ABC approach: Allocative Goswami ing countries. efﬁciency, encouraging business-toet al. (2019) business spillovers, and strengthening ﬁrm capabilities. Audretsch Introduction to a special issue on There may be a role for policy at each et al. (2020) innovative startups. Analysis of stage of the process framework for 39 policies for innovative innovative startups: (1) the antecedents entrepreneurship. of the creation of innovative startups; (2) their founding characteristics; (3) their behavior; and ﬁnally (4) the outputs and impacts generated. Demographics, ﬁnancing, and policy Flachenecker R&D grants, especially for young ﬁrms. R&D grants should be linked to et al. (2020) measures for European HGEs. milestones and combined with coaching. Tax credit measures for scale-up companies. Equity ﬁnancing instruments, loan guarantee instruments. Reypens et al. European HGEs. Encourage corporate startup collabo- (2020) ration to boost private investments; expand the government’s toolbox to engage with startups through innovative procurement and co-development; promote enterprise education. Bradley et al. Introduction to a special issue HGE policies can sometimes have unintended consequences, and doing (2021) on HGEs. less is an option that policymakers should not overlook. This chapter Discussion of HGE policy successes Principles of critical listening to and failures. stakeholders, identifying key decision points, getting the incentives right (up or out), and the need for coordinated policy.

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(compared to U.S. startups) attract 54% less private funding 9 years after foundation (Reypens et al., 2020). Therefore, there is scope in Europe to improve the variety and also the intensity of activity of the various actors in the ecosystem for ﬁnancing HGEs, perhaps seeking to strengthen in particular the larger later-stage “scale-up” funding rounds as opposed to the smaller early-stage “start-up” funding rounds (Duruﬂé et al., 2017). Innovation According to the Schumpeterian storyline, HGEs are revolutionary movements that begin with a moment resembling spiritual enlightenment, as an entrepreneur suddenly perceives an opportunity to improve the existing economic order, and then brings this innovative idea forward, through a charismatic social movement that gains momentum and eventually replaces the existing socioeconomic order (Nightingale, 2015). In reality, however, most opportunities beheld by entrepreneurs turn out to be mistakes, and many HGEs are not very innovative. Many HGEs are found outside of high-tech sectors, and in fact HGEs are overall less common in R & D-intensive sectors, which are often dominated by large capitalintensive ﬁrms (Daunfeldt et al., 2016) although HGEs seem to be more common in knowledge-intensive service industries in which human capital features prominently (Daunfeldt et al., 2016; Ferrando et al., 2019). However, HGEs in sectors that are traditionally considered to be low-tech or medium-tech could thrive through innovative activities such as developing new products and applying high-tech routines and logistics in their sectors (e.g., Walmart in retail, Ikea in furniture, Starbucks in coffee). Therefore, authors such as Mason and Brown (2013) suggest that HGE policies should avoid focusing too much on high-tech sectors.

That said, there is a special interest in HGEs that are innovative, because HGEs play a unique role in bringing forward innovations that could beneﬁt the economy and lead to widespread productivity growth. HGEs represent one of the ways for countries to quickly develop large-scale capabilities and production capacity in an emerging technological area of strategic importance, such as IT, Artiﬁcial Intelligence (AI), biotechnology, and autonomous cars. Reypens et al. (2020) ﬁnd that many European high-growth startups are new-to-the-world innovators, with many adopting innovative technologies (e.g., big data, artiﬁcial intelligence) into their businesses. They also ﬁnd that a large share of high-growth startups expect to increase their demand for high-skilled workers and are expected to prioritize growth over short-term proﬁts. Several HGE support initiatives focus speciﬁcally on hightech HGEs (e.g., Germany’s High-Tech Startup Fund, and Sweden’s National Incubator Program for supporting university spinouts; OECD, 2013).

Innovation policy has a number of instruments that, while not targeted exclusively at HGEs, could provide assistance to HGEs. R & D tax credits are considered to be effective tools for innovation policy (Bloom et al., 2019), although R & D tax credits are more appropriate for mature incumbents than HGEs, because of the delays in receiving the funds (Brown et al., 2017). In the case of HGEs, R & D grants (rather than tax credits) could be more appropriate, whereby the funds are received by ﬁrms in advance rather than afterwards. R & D grants could be Policy Instruments for High-Growth Enterprises

283especially effective if their disbursement is conditional on passing certain project milestones (Flachenecker et al., 2020, p. 48).

Another group of policy instruments relates to the protection of intellectual property rights (IPR), such as the strength of IPR protection, regulations for patents (including expedited patenting, Kuhn & Teodorescu, 2021), technology licensing, technology standards, and so on. Brown et al. (2017) observe that countries with stronger Intellectual Property (IP) protections have higher R & D levels in high-tech industries (whereas the effects of R & D tax credits are mainly conﬁned to mature rather than high-tech industries). There is empirical evidence that higher taxes reduce the quantity and quality of innovations through reduction of R & D investments and patenting (Mukherjee et al., 2017; Akcigit et al., 2022).

Another area for policy intervention relates to science policy and universities. One potential source of high-tech or knowledge-intensive potential HGEs could be academic entrepreneurship (university spinoffs), although the incentives for faculty to leave their stable university jobs depend on whether they possess the IPR over their inventions. Hvide and Jones (2018) show that the abolition of the “professor’s privilege” in Norway (such that university researchers no longer have full rights over their IP) led to a 50% decline in both entrepreneurship and patenting rates by university researchers after the reform. In contrast, the lifting of a ban on businesses run by professors at national universities in Japan is considered to be a success story in terms of high-tech entrepreneurship (OECD, 2019, p. 67).

Business incubators may play a role in HGE policy, although the number of HGEs emerging from business incubators and science parks is generally rather modest, perhaps because many high-tech science-based ventures ﬁnd their growth constrained by factors such as severe technical and commercial difﬁculties, lack of educated consumers, and a shortage of high-skilled employees. Lukeš et al. (2019) observed that incubator tenancy had a negligible effect on startup job creation, which casts doubt on the effectiveness of public spending on business incubators. Arauzo- Carod et al. (2018) found that being located in a science and technology park is risky in the sense that it is associated with higher growth for HGEs, but that it is associated with accelerated decline for ﬁrms in the lowest growth quantiles. Pena (2004) observes that while some ﬁrms in business incubators manage to grow, nevertheless the existence of new ﬁrms being supported in business incubation centers may cause the exit of more efﬁcient incumbent ﬁrms not receiving such policy support, hence leading to negative externalities for non-recipients. Skills and Capabilities Education and skills may also be areas worth considering for HGE policy. At a basic level, a better-educated workforce can be expected to have better skills and capabilities for founding ﬁrms that become global leaders. In particular, investments in the STEM (Science, Technology, Engineering, and Medicine) sector could be especially worthy of interest from the perspective of HGE policy (Acs et al., 2016). HGEs often report that a constraint on their growth is the availability of a skilled labor force (Ferrando et al., 2019; Reypens et al., 2020).

Besides investment in a country’s education sector, the skills and capabilities of entrepreneurs and the workforce could be enhanced in many areas through A. Coad et al.

284mentoring. Mentoring relates to various domains: entrepreneurial skills, management skills, ﬁnancial skills (e.g., regarding how to access external ﬁnancing), sales/ marketing capabilities, technical assistance regarding planning and implementing investment projects, and so on. González-Uribe and Reyes (2021) present evidence from a causal framework to show that mentors with high business and industry experience can boost the sales growth of mentored startups. Another strategy for boosting entrepreneurial skills could be peer learning that takes place at organized networking events. Cai and Szeidl (2018) present causal evidence that such peer learning boosts ﬁrm performance. A problem for HGE policy, however, is that there are no direct policy levers that can boost skills: “no one is in charge of the ecosystem’s skill structure, which limits what can be achieved through top-down reform” (Elert et al., 2017, p. ix). Furthermore, local and national governments should not try to provide training and mentoring if there are already such solutions being provided by the private sector or by the existing entrepreneurial ecosystem.

A “soft instrument” (Borrás & Edquist, 2013) of HGE policy could be to try to inﬂuence the informal institutions and public attitudes (Elert et al., 2017; Bradley et al., 2021) in a way that encourages entrepreneurship, in the hope that public attitudes consider self-employment to be an attractive lifestyle, which may potentially lead to the emergence of HGEs. This policy is rather indirect and difﬁcult to evaluate, therefore it should probably not receive large dedicated budgets, although appropriate support and lessons, as well as giving successful entrepreneurs awards and visibility on platforms, could help to gently reorient popular views in a favorable direction. Labor Market Regulation Labor market regulation can inﬂuence HGEs in a variety of ways, many of which are discussed in Elert et al. (2017). First, Employment Protection Legislation (EPL, i.e., the rules concerning hiring and ﬁring) can reduce the dynamism of labor markets if employers are reluctant to hire new employees (because of the liabilities that this entails), and if employees become accustomed to staying with their existing employers. Second, labor market regulations that start to apply after certain size thresholds (e.g., 50+ employees in the case of France, see Garicano et al., 2016) could cause ﬁrms to remain at a small size just beneath the threshold and thus deter HGEs. Third, no-compete agreements could reduce the mobility of employees (especially in high-tech/knowledge-intensive sectors), which could lead to short-term gains from lower leakages of proprietary knowledge on the part of employers, although it also leads to less dynamic labor markets, a possible misallocation of labor (if employees cannot move to exploit new opportunities), and also perhaps a smaller number of corporate spinoffs. It has been claimed that Silicon Valley’s emergence was greatly facilitated by the fact that no-compete agreements are not enforced in California, leading to a vibrant and dynamic labor market (Fallick et al., 2006). Fourth, active labor market policies sometimes provide considerable support to individuals seeking to escape unemployment by becoming an entrepreneur (e.g., Caliendo et al., 2020). However, such entrepreneurs rarely set up HGEs, and it is possible that over-entry of low-quality entrepreneurs crowds out other more promising ventures and causes negative Policy Instruments for High-Growth Enterprises

285externalities for other entrepreneurs, for example by lowering the average quality of ﬁrms in credit markets (De Meza, 2002). Indeed, across countries, there seems to be a “quantity versus quality” type of negative relationship overall between the selfemployment rate and various indicators of entrepreneurial performance (Henrekson & Sanandaji, 2014). Various Other Areas Relating to HGE Policy Immigration policy is related to the emergence of HGEs (Audretsch et al., 2020), in line with conjectures that individuals who leave their homeland to pursue new opportunities abroad may be more entrepreneurial. Acs et al. (2016) highlight that immigration policy is one of the most important areas for boosting high-quality entrepreneurship.

Tax policy can be relevant for HGE policy because taxes affect the incentives for entrepreneurial and economic choices (Elert et al., 2017). Tax incentives to support HGEs can be broad-based or targeted. An example of the latter is a Romanian initiative that introduced a targeted tax policy initiative to develop capabilities in the IT industry. Employees involved in software programming in Romania were exempt from salary tax. This helped grow a dynamic cluster that included dynamic entrepreneurial ﬁrms. Since 2017, the exemption from salary tax was also introduced for R & D employees in Romanian entities (Sincu, 2017).

International trade policy can play a role in supporting HGEs as they plan to grow in new export markets. Indeed, most countries allocate public funds to export promotion (Munch & Schaur, 2018), resulting in many policies to provide export assistance to potential HGEs (Srhoj et al., 2020). HGEs that grow through internationalization may be more competitive (higher productivity, world-class capabilities) and also they do not threaten to displace the economic activity of local ﬁrms. There is evidence that HGEs are more internationalized, regardless of whether they export or invest directly in foreign markets, as ﬁrms growing rapidly will have more incentives to go abroad (Teruel et al., 2021). Moreover, internationalized companies with new digital technologies may have more capacity to become HGEs. This can be explained by the fact that new digital technologies can generate not only entry opportunities (such as online sales) but also internal capabilities that strengthen ﬁrms’ international positioning in competitive international markets (Teruel et al., 2021). Besides growth through exports, HGEs may arise through integrating imports into their production processes (Cruz et al., 2021).

Bankruptcy law could also play a role for HGE policy, according to various scholars (e.g., Elert et al., 2017). There is a danger that capable entrepreneurs may be harshly punished for engaging in what may initially seem like high-risk, high-return entrepreneurial opportunities that are worthwhile bets, but what eventually turn out to be (unlucky) failures. However, there is also a danger that an excessively lenient bankruptcy law could lead to negligence and fraud by entrepreneurs who have little incentive to avoid bankruptcy (Elert et al., 2017). Discussions of bankruptcy law relate to the issue of whether entrepreneurs can learn from failure to become high achievers after a previous bankruptcy. The evidence on this matter, however, often suggests that previously failed entrepreneurs do not learn from their experience in A. Coad et al.

286terms of having superior performance with their subsequent venture (Rocha et al., 2015; Nielsen & Sarasvathy, 2016; Gottschalk et al., 2017).

Antitrust policy can support HGEs, by ruling against anticompetitive takeovers and enhancing overall competition, thus lowering the barriers to entry and growth of HGEs. Government administrative ofﬁces could also support HGEs by helping to reduce, wherever possible, the burden of submitting ofﬁcial paperwork. This does not necessarily mean that SMEs and HGEs should give less information on their operations, but that they can do so in a more efﬁcient way (e.g., by secure internet or email or by post rather than appearing in person).

Finally, it is worth mentioning that HGE policy is not only the domain of national policy, but is also inﬂuenced by local and regional economic policy (Stam & Bosma, 2015). Within countries, there are considerable disparities across regions in terms of HGE shares, which can be explained in terms of regional concentrations of speciﬁc industries often referred to as clusters and competence blocs. Given that some regions have higher shares of HGEs than others, therefore, HGE policy implemented at a local or regional level could be more effective than HGE policy at the national level (Stam & Bosma, 2015). Reﬂections on the Many Areas Relating to HGE Policy Our overview of HGE policy instruments has connected to a variety of areas (education policy, innovation policy, immigration policy, labor market policy, etc.), such that “the interventions required are likely not to sound like entrepreneurship policy” (Acs et al., 2016, p. 49). Another consideration is that many of the policy instruments in the preceding subsections vary from micro-level (e.g., training and mentoring individual entrepreneurs) to macro-level (e.g., reforming national institutions such as tax rates and labor market regulations) (Bradley et al., 2021). Furthermore, the various policy instruments relate to different areas of the economy and society, and are implemented by different government departments and actors (Lundström et al., 2014), with potentially differing considerations, priorities, and trade-offs in mind (Bradley et al., 2021). Effective HGE policy will recognize this complexity.

In sum, there are many areas relevant for HGE policy. As such, various authors have recommended a systemic approach to HGE policy, such that problems affecting HGEs (e.g., access to ﬁnance, availability of skilled labor, access to international markets) should not be tackled in isolation, but embedded in a systemic policy framework (Veugelers et al., 2018). Some good news regarding the effectiveness of HGE policy is that European high-growth startups are more likely than their low-growth counterparts to make use of several forms of public support, and in particular seem to beneﬁt from startup grants/investments (Reypens et al., 2020). This is good news because it suggests that policy support to HGEs might be taken up effectively by HGEs.

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Best Practices and Areas for Improvement

This section presents some cases of successful HGE policies and contrasts them with less successful HGE policies.

3.1 HGE Policy Instruments that Have Been Successful

Policymakers around the world dream of being able to recreate a Silicon Valley in their countries. An important factor behind the rise of Silicon Valley is the fact that no-compete agreements are not enforced in the state of California,6 although they are enforced all over the rest of the United States (Gilson, 1999, 2003; Fallick et al., 2006). As a consequence, disgruntled workers (perhaps high-ability workers who disagreed with their superiors) who left their employers elsewhere in the United States were unable to continue their careers in their home states, but could move to California instead, where no-compete agreements were not enforced.7 California therefore beneﬁtted from a large inﬂow of highly skilled human capital, and furthermore ﬁrms in California were able to beneﬁt from a dynamic labor market whereby promising employees were reallocated to top ﬁrms. The emergence of Silicon Valley was not due to deliberate government planning (Gilson, 2003), but was largely due to institutional rules (nullifying no-compete agreements) that essentially prevented ﬁrms from acting in their short-term interests (Fallick et al., 2006). This also underscores the broad web of institutions and rules that may support the emergence of high-growth entrepreneurship, because the link between no-compete agreements and high-growth entrepreneurship is not especially obvious or direct.

On the European level, several products are offered by the European Investment Fund (EIF) and the European Investment Bank (EIB). The EIF provides risk capital for innovative SMEs in their early stages and expansion phase. It mainly provides ﬁnancing by partnering with national institutions, through advising, sponsoring, or managing a number of equity Funds-of-Funds and guarantee/debt funds.8 Thirdparty investors include national and regional governments as well as private strategic

6No-compete agreements, also known as covenants not to compete, refer here to clauses in employment contracts that ﬁrms use to prevent individuals from working for a competitor, with the purpose of protecting their trade secrets, and guarding against knowledge spillovers to rivals. 7California is even known to invalidate no-compete agreements in employment contracts that