Journal of Small Business and Enterprise Development

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ISSN 1462-6004

Volume 14 Number 2 2007

Journal of

Small Business and Enterprise Development Entrepreneurship education and training: an international perspective

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Journal of Small Business and Enterprise Development

ISSN 1462-6004 Volume 14 Number 2 2007

Entrepreneurship education and training: an international perspective Editor Dr Harry Matlay

CONTENTS

Access this journal online _______________________________ 163 Editorial advisory board _________________________________ 164 Introduction _______________________________________________ 165 An examination of entrepreneurship education in the United States George Solomon ________________________________________________

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Enterprise for all? The fragility of enterprise provision across England’s HEIs Paul Hannon ___________________________________________________

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New graduate employment within SMEs: still in the dark? Rick Holden, Stephanie Jameson and Andreas Walmsley ________________

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Creating the reasonable adventurer: the co-evolution of student and learning environment Colin Jones ____________________________________________________

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CONTENTS continued

The role of gender in US microenterprise business plan development Ronald G. Cook, Paul Belliveau and Christine Lentz____________________

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Entrepreneurship education in the UK: a longitudinal perspective Harry Matlay and Charlotte Carey _________________________________

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Collaborative business relationships: helping firms to acquire skills and economies to prosper Nitha Palakshappa and Mary Ellen Gordon __________________________

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Vocational training: trust, talk and knowledge transfer in small businesses Allan Butler, Matt Reed and Phil Le Grice ___________________________

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Small business owners: too busy to train? Elizabeth Walker, Janice Redmond, Beverley Webster and Megan Le Clus _________________________________________________

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Human resource management in growing small firms Rowena Barrett and Susan Mayson ________________________________

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Training commitment and performance in manufacturing SMEs: incidence, intensity and approaches Dilani Jayawarna, Allan Macpherson and Alison Wilson ________________

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Using training and development to affect job satisfaction within franchising Stephen Choo and Christine Bowley_________________________________

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EDITORIAL ADVISORY BOARD

Professor Zoltan Acs Merrick School of Business, University of Baltimore, Baltimore, USA

Professor Richard Lancioni Department of Marketing, Temple University, Philadelphia, USA

Professor Abdullah Al-Owaihan College of Administrative Science, Kuwait University, State of Kuwait

Professor Bob Mahabir Department of Business Management, University of Transkei, South Africa

Professor Sharon Alvarez Fisher College of Business, The Ohio State University, Columbus, USA

Professor Gerard McElwee Lincoln Business School, University of Lincoln, UK

Professor Graham Beaver University of Brighton Business School, Brighton, UK Professor Jim Bell Magee College, University of Ulster, UK Professor Ian Chaston Plymouth Business School, University of Plymouth, UK Professor Elizabeth Chell Manchester Science Enterprise Centre, UMIST, UK Professor Francis Chittenden Executive Development Centre, Manchester Business School, UK Professor Ronald G. Cook Rider University, USA Professor Leo Paul Dana World Association for SMEs, Christchurch, New Zealand Professor David Deakins Paisley Enterprise Centre, University of Paisley, UK Dr Linda Edelman Bentley College, Waltham, MA, USA Professor Hamid Etemad Faculty of Management, McGill University, Canada Professor Hermann Frank Department of Small Business Management, Vienna University of Economics & Business Administration, Austria Professor Allan Gibb, OBE Small Business Research Centre, University of Durham, UK Professor David Goss Department of Business & Management, University of Portsmouth Business School, Portsmouth, UK Professor Colin Gray Centre for Innovation, Knowledge and Enterprise, Open University Business School, Milton Keynes, UK Professor Robert Hisrich Thunderbird, The Garvin School of International Management, Arizona, USA Dr Benson Honig Graduate School of Business, University of Haifa, Israel Professor Robin Jarvis The Association of Chartered Certified Accountants, London, UK Professor Paul Joyce Nottingham Business School, The Nottingham Trent University, UK Professor William Keogh School of Management, Heriot-Watt University, Edinburgh, UK

Journal of Small Business and Professor David Kirby Enterprise Development University of Surrey, Guildford, UK Vol. 14 No. 2, 2007 p. 164 # Emerald Group Publishing Limited 1462-6004

Dr Pauric McGowan School of Management, University of Ulster, Northern Ireland Dr Claire Massey New Zealand Centre for SME Research, Massey University, Wellington, New Zealand Professor Marcel Meler Ekonomski Fakultet U Osijeku, Josip Juraj Strossayer University, Osijek, Croatia Professor Antti Paasio Business Research and Development Centre, Turku School of Economics and Business Administration, Turku, Finland Professor David Rae Lincoln Business School, University of Lincoln, Lincoln, UK Professor Ashok Ranchhod Southampton Business School, Southampton Institute of Higher Education, UK Professor Bob Ritchie Lancashire Business School, University of Central Lancashire, UK Professor David Smallbone Centre for Enterprise and Economic Development Research, Middlesex University Business School, London, UK Professor George Solomon Centre for Family Enterprise, The George Washington University, USA Professor Khaled Soufani Department of Finance, John Moulson School of Business, Concordia University, Montreal, Canada Professor John Stanworth University of Westminster Business School, London, UK Lois Stevenson ¨ rebro, Swedish Foundation for Small Business Research (FSF), O Sweden Professor David Storey Warwick Business School, University of Warwick, UK Professor Pe´ter Szirmai National Association of Employers and Entrepreneurs, Budapest University of Economic Sciences, Hungary Dr Rhodri Thomas Centre for the Study of Small Tourism and Hospitality Firms, Leeds Metropolitan University, Leeds, UK Professor Roy Thurik Faculty of Economics, Erasmus University, Rotterdam, The Netherlands Professor Paul Westhead Institute for Enterprise and Innovation, Nottingham University Business School, Nottingham, UK Professor Adrian Woods Department of Management Studies, Brunel University, UK

Introduction Entrepreneurship education and training: an international perspective Entrepreneurship education and training, as a field of academic and practitioner research, continues to grow in terms of relevance and topicality. Interestingly, it was not so long ago that researchers and policy makers relegated vocational education and training, together with related human resource aspects of entrepreneurship and small business development, to marginal or “back of the book” positions. Such neglect was evidenced by a marked paucity of dedicated research, specialist publications and peer refereed dissemination. In recent years, however, issues relating to education, training and the development of entrepreneurs and/or their workforce have climbed steadily toward the top of government agenda and currently represent a high priority imperative for government policy throughout the industrially developed and developing world. Conceptual and contextual difficulties tend to follow in the wake of rapid expansion and this area of academic endeavour is not an exception. In order to consolidate conceptual and contextual growth in this area of entrepreneurship research there is an urgent need for empirically rigorous articles to counterbalance the mass of variable quality publications that have flooded the market place in recent years. Individually and cumulatively, the 12 contributions included in this special issue are indicative of the richness and variety of subtopics that represent entrepreneurship education and training in contemporary thinking. This is the third special issue that we published on this topic since I took over as Editor in 2001, and we will continue to facilitate the dissemination of high quality contributions in this important aspect of entrepreneurship research. In the first article, George Solomon provides an analytical overview of the state of entrepreneurship education in the United States, for the 2004 to 2005 period. The author found that in some areas of entrepreneurship education the use of technology has increased dramatically. Traditional teaching methods are still popular and continue to require that students create business plans. Importantly, however, educators in the US are increasingly using guest speakers and class discussions in order to illustrate the applied aspects of entrepreneurship. In the second contribution, Paul Hannon presents the findings of a comprehensive study of entrepreneurship education provision in England’s 131 Higher Education Institutions (HEIs). This study highlights both the scale and scope of dedicated entrepreneurship education in England. Importantly, the emergent results provide an empirically rigorous base for supporting the further development of entrepreneurship education provision and offer much needed opportunities for benchmarking and the exchange of good practice and related knowledge and experience. In the next paper Holden, Jameson and Walmsley revisit pertinent issues relating to the relationship between supply and demand in the Small and Medium Enterprise (SME) graduate labour market in the UK. The authors acknowledge that progress has been made in recent years, but conclude that serious deficiencies still remain in relation to the quality of information on the SME graduate labour market as well as the utilization of graduates in this important sector of the UK economy. In a related contribution, Colin Jones addresses the issue of how graduate

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skills can be developed in order to satisfy the needs of Small and Medium Enterprises (SMEs) operating in Australia. The author argues that without the development of a student-centred learning environment, most graduate employees will not acquire the specific skills required by Australian SMEs. He concludes that a failure to consider relevant knowledge and skills as equal drivers of curriculum design can only result in relegating skills development to a secondary learning outcome position. The fifth article considers the role that gender plays in a micro enterprise program that focused upon the development of quality business plans. Cook, Belliveau and Lentz found that women and men achieved similar program completion rates and overall business plan scores. Interestingly, it emerged that women scored significantly higher on the presentation of their business plans. Furthermore, the level of formal education a participant had upon entering the program mattered for women but proved not significant for men. In the sixth article, Matlay and Carey used longitudinal case studies to analyse the development and implementation of various approaches to entrepreneurship education in a sample of 40 new and established universities in the UK. The authors found that, over a ten year period (1995-2004), conceptual and contextual as well as design and delivery factors impacted significantly upon entrepreneurship education courses developed in these HEIs. Importantly, all the respondents claimed to have provided at least some entrepreneurship education courses. In the next article, Palakshappa and Gordon evaluate the impact that collaborative business relationships could have upon skills acquisition in small firms in New Zealand. Emergent results show that many small firms that are involved in business alliances are neither realising the intended benefits of collaboration nor are using these to develop new skills and competencies. In the next paper, Butler, Reed and Le Grice focus on how knowledge is disseminated in personal business networks and the way that this is used in small land-based businesses in the UK. The authors conclude that, with the pre-dominance of strong ties and low flows of information, rural businesses are unlikely to change either as quickly or as easily as similarly sized firms in other, less traditional industrial sectors. In the ninth article of this special issue Walker, Redmond, Webster and Le Clus examine the relationship between small business owners and their uptake of Vocational Education and Training (VET) in Australia. The authors found that small business owners are mostly interested in training opportunities that are directly applicable to the specific needs of their businesses. The VET delivery, however, should be carefully structured in terms of location, timing and length of session. In the following paper, Barrett and Mayson explore the intersection between entrepreneurship and Human Resource Management (HRM) in a sample of 600 Australian small firms. It emerges that growing small firms are more likely than their stagnant counterparts to have formal HRM practices. As small firms make up the majority of the Australian business population, the authors suggest that size is directly related to the formalisation of HRM policies. Training commitment and performance in UK manufacturing SMEs is the focus of the eleventh article. Jayawarna, Macpherson and Wilson focus upon management development activities and their impact on performance in a sample of 198 manufacturing SMEs in the UK. Their results indicate that formal training is likely to contribute more significantly to performance than informal provision. In the final article, Choo and Bowley investigate the influence of training and development on employee job satisfaction at one of Australia’s fastest

growing franchises. The authors conclude that the effectiveness and efficacy of relevant training programmes is largely dependent upon its quality, course design and employees’ learning experiences. In turn, employee satisfaction was found to be influenced by work environment, company values and job responsibilities. It has become customary to thank all the contributors, referees, advisors and commentators involved in the development and completion of a special issue, for all their hard work and commitment. Many thanks are also due to the staff at Emerald Publishing Group for all the hard work that takes place behind the scenes, and in particular to Martyn Lawrence who was at the receiving end of emails, electronic files and JAR forms. There is a lot of effort, expertise and times invested in publishing a special issue comprising twelve articles – both before and after these are submitted to the publishers. Similarly, there is a great deal of anticipation involved in waiting for, as well as satisfaction when, the complementary issues arrive. I wish to extend my gratitude to all those who have made possible the publication of this issue and sincerely hope that you will enjoy reading it as much as I will! Harry Matlay

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George Solomon The George Washington University, Washington, DC, USA Abstract Purpose – This paper seeks to provide an analytical overview of the current state of entrepreneurship education in the USA for the years 2004-2005. Design/methodology/approach – The author performed an extensive review of the literature in entrepreneurship education and enhanced the review by conducting a national survey of two and four-year colleges and universities. This survey was the sixth since 1979 conducted by the author to examine trends and the “current state of entrepreneurship education.” Findings – The 2004-2005 survey indicates that the trends, especially in the use of technology initially examined in prior national studies of entrepreneurship, have continued in a similar direction and in some areas, for example, the use of technology has increased dramatically. Also, new findings confirm that the traditional teaching method of requiring students to create a business plan is still used and is popular. Finally, the data show that entrepreneurship educators are increasingly using guest speakers and class discussions more frequently than the traditional approach of class lectures. Research limitations/implications – The national survey resulted in 270 schools responding. The survey findings cannot be generalized to all schools in the USA, although there are no other samples of this size. The evaluation and interpretation of some of the findings represent the author’s own perceptions and experiences, and should, therefore, be viewed with caution. Originality/value – Provides an evaluation of the state-of-the-art of entrepreneurship education in the USA. Keywords Entrepreneurialism, Education, Surveys, Business schools, United States of America Paper type Viewpoint

Journal of Small Business and Enterprise Development Vol. 14 No. 2, 2007 pp. 168-182 q Emerald Group Publishing Limited 1462-6004 DOI 10.1108/14626000710746637

Scholars and researchers in entrepreneurship education in the United States have reported that small business management and entrepreneurship courses at both the two- and four-year college and university levels have grown in both the number and diversity of course offerings from 1990-2005. This expansion of educational offerings has been fueled in part by dissatisfaction with the traditional Fortune 500 focus of business education voiced by students and accreditation bodies (Solomon and Fernald, 1991). The dilemma is not that demand is high but that the pedagogy selected meets the new innovative and creative mindset of students. Plaschka and Welsch (1990) recommend an increased focus on entrepreneurial education and more reality and experientially-based pedagogies such as those recommended by Porter and McKibbin (1988). The challenge to educators will be to craft courses, programs and major fields of study that meet the rigors of academia while keeping a reality-based focus and entrepreneurial climate in the learning experience environment. Entrepreneurship is an ongoing process that requires a myriad talents, skills and knowledge leading to unique pedagogies capable of stimulating and imparting knowledge simultaneously.

Introduction The past 15 years (1990-2005) have ushered an enormous growth in the number of small business management and entrepreneurship courses offered at both the two- and four-year college and university levels in the United States. This expansion of educational offerings has been partly fueled by dissatisfaction with the traditional Fortune 500 focus on business education voiced by students and accreditation bodies (Solomon and Fernald, 1991). The dilemma is not that demand is high but that the pedagogy selected must meet the innovative and creative mindset of entrepreneurial-oriented students. Plaschka and Welsch (1990) recommend an increased focus on entrepreneurial education and more reality and experientially-based pedagogies such as those suggested by Porter and McKibbin (1988). If entrepreneurship education is to produce entrepreneurial founders capable of generating real enterprise growth and wealth, the challenge to educators will be to craft courses, programs and major fields of study that meet the rigors of academia while keeping a reality-based focus and entrepreneurial climate in the learning experience environment. This paper reports on selected data from the results of the 2004-2005 George Washington University/Kauffman Center for Entrepreneurial Leadership nationwide survey on entrepreneurship education. The entrepreneurial experience can be characterized as being chaotic and ill-defined, and our entrepreneurship education pedagogies should reflect this characterization. In addition, we often make the assumption that it is relatively easy for entrepreneurship students to develop new ideas for their business start-ups. Quite a number of researchers have written about entrepreneurial competencies; however, the competencies that are required for new business start-ups are often addressed by educators in an ad-hoc manner. There is little consensus on just what exactly entrepreneurship students should be taught. For entrepreneurship educators, the challenge is to provide the subject matter, resources and experiences that will prepare entrepreneurship students to cope with the myriad of expectations and demands they will face as they start their new ventures. Entrepreneurship education As we delve into the literature on entrepreneurship education, it would be helpful to define what we mean by “entrepreneurship education.” Shepherd and Douglas (1997) propose this definition: The essence of entrepreneurship is the ability to envision and chart a course for a new business venture by combining information from the functional disciplines and from the external environment in the context of the extraordinary uncertainty and ambiguity which faces a new business venture. It manifests itself in creative strategies, innovative tactics, uncanny perception of trends and market mood changes, courageous leadership when the way forward is not obvious and so on. What we teach in our entrepreneurship classes should serve to instill and enhance these abilities.

Historical perspective Entrepreneurship education has experienced remarkable growth in the past 50 years (1955-2005) from a single course offering to a diverse range of educational opportunities available at more than 1,500 colleges and universities around the world

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(Charney and Libecap, 2000). The early prediction that “ . . . the number of course offerings should increase at an expanding rate over the next few years” (Vesper, 1985) held true. In 1985, 253 colleges or universities offered courses in small business management or entrepreneurship, and in 1993, 441 entrepreneurship courses were available to interested students (Gartner and Vesper, 1994). Fourteen years later, Foote (1999) reported student enrollment in entrepreneurship classes at five top American business schools increased 92 percent from 1996 to 1999 (from a total of 3,078 to 5,913), and the number of entrepreneurship classes offered increased 74 percent. A recent estimate suggests that entrepreneurship and small business education may now be offered in as many as 1,200 post secondary institutions in the United States alone (Solomon et al., 2002) with educational experiences ranging from traditional course work to integrative curricula that includes marketing, finance, new product development and technology (Charney and Libecap, 2000). Differentiating entrepreneurship education from business education Small business management and entrepreneurship courses have experienced remarkable growth in the last several decades, there is general consensus that the field is far from maturity (Robinson and Hayes, 1991). Nevertheless, we have seen an increase in entrepreneurship education programs and research will likely continue as the field matures. Wortman (as cited in Plaschka and Welsch, 1990) through causal research summarized the 1980s in entrepreneurship, and the state of entrepreneurship today seems just as apt: . A positive movement toward a commonly accepted definition of entrepreneurship and the definition of the field of entrepreneurship. . A division of entrepreneurship into individual (or independent) entrepreneurship and corporate entrepreneurship (intrapreneurship). . A movement toward more sophisticated research designs, research methods and statistical techniques. . A shift toward larger research designs, research methods and statistical techniques. . A slight movement away from exploratory research toward causal research. As the field evolves, discussion continues regarding course content, the use of technology-driven pedagogy and effectiveness measures. Early discussions focused on the need for entrepreneurship education and questioned whether entrepreneurship courses were not simply traditional management courses with a new label (King, 2001). While there is general agreement that the core management courses offered in traditional business programs is essential for success in any business career (Block and Stumpf, 1992), there are fundamental differences between business principles applied to new ventures and those applied to large corporations (Davis et al., 1985). A core objective of entrepreneurship education that differentiates it from typical business education is the challenge “to generate more quickly a greater variety of different ideas for how to exploit a business opportunity, and the ability to project a more extensive sequence of actions for entering business” (Vesper and McMullan, 1988). Business entry is a fundamentally different activity than managing a business (Gartner and Vesper, 1994); entrepreneurial education must address the equivocal

nature of business entry (Gartner et al., 1992). To this end, entrepreneurial education must include skill-building courses in negotiation, leadership, new product development, creative thinking and exposure to technological innovation (McMullan and Long, 1987; Vesper and McMullan, 1988). Other areas identified as important for entrepreneurial education include awareness of entrepreneurial career options (Hills, 1988; Donckels, 1991); sources of venture capital (Vesper and McMullan, 1988; Zeithaml and Rice, 1987); idea protection (Vesper and McMullan, 1988); ambiguity tolerance (Ronstadt, 1987); the characteristics that define the entrepreneurial personality (Hills, 1988; Scott and Twomey, 1998; Hood and Young, 1993) and the challenges associated with each stage of venture development (McMullan and Long, 1987; Plaschka and Welsch, 1990). The integrated nature, specific skills and business life cycle issues inherent in new ventures differentiate entrepreneurship and therefore entrepreneurial education from a traditional business education. An additional comparison, within the context of entrepreneurial education, can be made between small business management courses and entrepreneurship courses – a distinction not always addressed in the literature (Zeithaml and Rice, 1987). Can entrepreneurship be taught? Research and practical issues of entrepreneurial enquiry found in the literature, range across its definition and its distinction from “normal” business activity. Similarly, research into the teaching of entrepreneurship provides a broad framework of differences and similarities in perception of the ability to “teach” entrepreneurial behaviors and the manner in which this is best achieved. These issues underlie the question “can entrepreneurship be taught?” and underpin the debate furthered in the current study on entrepreneurial education. How is entrepreneurship currently being taught? And fundamental issue which is whether entrepreneurship can be taught at all is the fundamental issues of debate. Charharbaghi and Willis (as cited in Adcroft et al., 2004) are skeptical and argue that “entrepreneurs cannot be manufactured; only recognized.” Adcroft et al. (2004) go on to argue that management education can contribute to the provision of technical skills of entrepreneurs, but what it cannot contribute to is the “geographic chronology” – the element of serendipity – that is central to entrepreneurial events. Curran and Stanworth (1989) suggest that teaching entrepreneurship may not be cost-effective. They are not certain of the attributes and behaviors that characterize an entrepreneur, plus the evidence that entrepreneurs may be “antipathetic towards education in most forms, all tell against entrepreneurial education being resource-effective” (p. 11). Garavan and O’Cinneide (1994) partially agree with these doubts when they state: “One has to ask – what can be taught that is specific to entrepreneurship per se? There is no body of well researched and developed knowledge which might form the basis of such programs, a fact which has been consistently emphasized in the literature” (p. 6). On the other hand, after a review of empirical studies, Gorman et al. (1997) report that there is support that entrepreneurship can be taught, or at least encouraged, by entrepreneurship education. Anselm (1993) also suggests that entrepreneurship can be learned. According to her, individuals may indeed be born with propensities toward entrepreneurship, but the level of entrepreneurship activity will be higher if entry-level

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entrepreneurial skills are taught. Kuratko (2003) put it even more succinctly: “The question of whether entrepreneurship can be taught is obsolete!” (p. 8). The lack of rigorous research on the topic of entrepreneurship education has more than a few writers concerned. For example, Brockhaus (1993), notes that few “have done empirical research and very few have compared a group that is receiving the entrepreneurship education to another similarly matched group that is not receiving the education” (p. 12). Much of the research has “tended to be fragmented and with an explanatory, descriptive orientation” (Garavan and O’Cinneide, 1994, p. 7). Unfortunately, as reported by Gorman et al. (1997), “there is little uniformity in the programs offered, especially if one considers the relative similarity of other business programs” (p. 61), a topic to be explored in the next sections. Education methodologies Course content Despite continuing argument that entrepreneurship cannot be taught (Fiet, 2001a, Fiet, 2001b, and Busenitz et al., 2003) and (Block and Stumpf, 1992, Katz, 2003, Meyer, 2001 and Solomon et al., 2002) entrepreneurship can be taught, many global institutions are teaching entrepreneurship courses and programs. Across the US two and four year colleges and universities present a number of courses aimed at providing entrepreneurial skills and encouraging entrepreneurial behavior. There is however little uniformity within these groups or among the international institutions incorporated in this study (Gorman et al., 1997). This may be a function of an emerging field with a limited, but growing, body of knowledge. As researchers and scholars develop frameworks and sets of hypotheses for the study of emerging business successes and failures, the content of courses will evolve based on what is needed and can be taught for successful development (Block and Stumpf, 1992). According to Ronstadt (1990), the program focus of “the old school” was on action, the business plan and exposure to experienced visitors who inspired students through stories and practical advice. This era of entrepreneurship education was “one venture” centered and was essentially based on the premise that entrepreneurial success was a function of the “right human traits and characteristics.” The new school, while still action oriented, builds and relies on some level of personal, technical or industry experience. It requires critical thinking and ethical assessment and is based on the premise that successful entrepreneurial activities are a function of human, venture and environmental conditions. This newer form of entrepreneurship education also focuses on entrepreneurship as a career process composed of multiple new ventures and the essential skills of networking or “entrepreneurial know-who” (Ronstadt, 1990). Another view from McMullan et al. (1985) calls for courses to be structured around a series of strategic development challenges including opportunity identification and feasibility analysis; new venture planning, financing and operating; new market development and expansion strategies; and institutionalizing innovation. Real-time entrepreneurial activities include “projecting new technological developments, strategically planning, assisting in attracting necessary resources and arranging for joint ventures” (Vesper and McMullan, 1988, p. 10). Ideally, students should create multiple venture plans, practice identification of opportunities and have extensive exposure to entrepreneur role models. Student interaction with these role models may occur in several important ways including having entrepreneurs serve as coaches and

mentors (Hills and Welsch, 1986; Mitchell and Chesteen, 1995); classroom speakers (Hills, 1988); and interview subjects (Hills, 1988; Solomon et al., 1994; Truell et al., 1998). Effective entrepreneurial education requires students to have substantial hands-on experience working with community ventures so that they can learn to add value to real ventures and thus be prepared to add value to their own ventures (McMullan and Long, 1987).

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Pedagogy In addition to course content, educators are challenged with designing effective learning opportunities for entrepreneurship students. Sexton and Bowman (1984) suggested that programs for entrepreneurship students should emphasize individual activities over group activities, be relatively unstructured and present problems that require a “novel solution under conditions of ambiguity and risk” (p. 12). Students must be prepared to thrive in the “unstructured and uncertain nature of entrepreneurial environments” (Ronstadt, 1990, p.72). Offering students opportunities to “experience” entrepreneurship and small business management is a theme among many entrepreneurial education programs. The most common elements in entrepreneurship courses continue to be venture plan writing, case studies, readings and lectures by guest speakers and faculty (Vesper, 1985; Klatt, 1988; Kent, 1990; Gartner and Vesper, 1994). The typical elements of small business management courses include class work, tests and a major project which is usually a consulting project (Carroll, 1993). Project based, experiential learning is widespread in entrepreneurial education and may take myriad forms such as the development of business plans (Hills, 1988; Vesper and McMullan, 1988; Gartner and Vesper, 1994; Gorman et al., 1997); student business start-ups (Hills, 1988; Truell et al., 1998); consultation with practicing entrepreneurs (Klatt, 1988; Solomon et al., 1994); computer simulations (Brawer, 1997); and behavioral simulations (Stumpf et al., 1991). Other popular activities include interviews with entrepreneurs (Solomon et al., 1994), environmental scans (Solomon et al., 1994), “live” cases (Gartner and Vesper, 1994), field trips and the use of video and films (Klatt, 1988). Student entrepreneurship clubs are also widespread (Gartner and Vesper, 1994). Anticipated changes in course pedagogy include a greater use of various types of cases, increased international considerations, a more intense focus on strategy formation and implementation and an increase in the use of technology for various purposes (Ahiarah, 1989). Computer simulations provide entrepreneurial students “with multiple experiences of simulated new venture decision making” (Van Clouse, 1990). The use of computer simulations described by Brewer et al. (1993) affords students realistic entrepreneurship experiences that develop skills in complex decision-making and offer instant feedback. Pedagogy is also changing based on a broadening market interest in entrepreneurial education. New interdisciplinary programs use faculty teams to develop programs for non-business students, and there is a growing trend in courses specifically designed for art, engineering and science students. Non-business students may require basic technology laboratories that focus on internet-based feasibility research, developing effective audio visual pitch presentations and creating professionally-formatted business plans. In addition to courses focused on preparing the future entrepreneur and small business manager, instructional methodologies should also be developed for

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those who manage entrepreneurs in organizations; potential resource people (accountants, lawyers, consultants, etc.) used by entrepreneurs; and top managers who must provide vision and leadership for corporations which must innovate in order to survive (Block and Stumpf, 1992). Pedagogy: teaching for competencies Competency can be defined as an underlying characteristic of a person which results in effective and/or superior performance in a job (Boyatzis, Spencer & Spencer, as cited in Bird, 2002). As in previous sections, there is little agreement in the field about the competencies or capabilities that are most valuable for aspiring entrepreneurs to learn. Entrepreneurial educators teach for competencies; their syllabi reflect their beliefs and academic disciplines. Fiet (2001a), for example, examined the syllabi of 18 entrepreneurship courses and found they covered 116 different topics; however, topics do not always reflect competencies (e.g. family business). Plaschka and Welsch (1990) note that many programs are evolving on a trial and error or as needed basis, depending on the types of entrepreneurial projects currently undertaken in the program and on the feedback of students experiencing deficiencies, gaps and difficulties in their courses. Overall “essence” of entrepreneurship education Entrepreneurship education programs exist most generally within established university business schools, and this presents a paradox that helps to explain the above-mentioned lack of uniformity in curriculum and pedagogies. Traditional business programs have come under increased criticism for failing to be relevant to the needs of today’s changing business environment. One common criticism is that business education has become too functionally oriented – that it does not stress the cross-functional complexity of business problems. Other criticism focuses on the “lack of creativity and individual thinking required at both undergraduate and graduate levels” (Solomon et al., 1994). Sexton and Bowman (1984) note that most business school courses are highly structured and do not often pose problems which require novel solutions. Even entrepreneurship courses fall into a left-brain-oriented trap. Bird (2002) describes many core entrepreneurship courses as those that:Require students to write and present a business plan and often students (in teams limited to fellow classmates who may not be rationally chosen as partners) choose the business concepts to pursue . . . .Problems are presented and time frames for solving them given. There is often the illusion or reality of right answers” (p. 210). It is also quite common for entrepreneurship classroom situations to focus heavily on theory – either management theory being adjusted to give advice for entrepreneurship and small business – or entrepreneurship theory explaining the emergence of entrepreneurs and their personal traits. Others echo this concern by noting that entrepreneurship programs often educate “about” entrepreneurship rather than educate “for” entrepreneurship (2003; Kirby, 2003). The essence of entrepreneurship education, then, must reflect reality. Garavan and O’Cinneide (1994) suggest that the best methods suited to an entrepreneurial learning style are active-applied and active- experimentation, and these also include concrete experience, reflective observation and abstract conceptualization (Davies & Gibb, as cited in (Garavan and O’Cinneide, 1994). In short, “educational

programs and systems should be geared toward creativity, multidisciplinary and process-oriented approaches and theory-based practical applications. What is needed is a more proactive, problem-solving and flexible approach rather than the rigid, passive-reactive concept and theory-emphasized functional approach” (Plaschka and Welsch, 1990, p. 62). Methodology Researchers at The George Washington University developed a mail survey to examine the current state of entrepreneurial education in the United States and internationally and to evaluate the extent and breadth of entrepreneurial education methods and course offerings during the 2004-2005 academic year. The study also sought to examine pedagogical developments and trends, as well as any relations between and among students, course offerings and teaching pedagogy. Finally, the study sought to examine what innovative and creative teaching pedagogies were being introduced into the classroom such as use of Internet and educational technologies. The content of the survey is organized as follows: . identify institutional academic entities – two-year community and junior colleges, four-year colleges and universities and international universities and colleges which were offering small business and entrepreneurial educational programs; . explore teaching pedagogies employed both inside and outside of the class setting; and . identify the traditional and non-traditional pedagogies employed given the non-traditional foci of the field. Over 4,000 questionnaires were initially mailed to two- and four-year colleges and universities both in the United States and internationally. After a month, a follow-up postcard was sent including an incentive offer to stimulate response rate. Ultimately, 279 qualified responses were received both through the mail and online submissions. In order to conduct meaningful data analysis, the data were analyzed using the Statistical Package for the Social Sciences Personal Computer Plus software (SPSS PC þ ). Data regarding type of institution were recoded and broken into three discrete groupings (two-year community and junior colleges, four-year colleges and universities and international universities and colleges). The questions regarding trends in entrepreneurial education were coded using the multiple response technique of SPSS PC þ . An analysis of the survey data follows. Analysis An analysis of the data was conducted to examine the following questions presented in the National Entrepreneurship Survey conducted by researchers at The George Washington University: . What courses were offered and were most popular by two- and four-year colleges and universities in the 2004-2005 academic years? . What type and level of frequency in teaching methods in entrepreneurship courses/curriculum did two- and four-year colleges and universities offer?

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Did the instructors develop their own sets of readings and text materials or did they use already- developed ones? Which periodicals (if any) were used in the entrepreneurship classes (required or recommended)? Did two- and four-year colleges and universities require their students to complete web-assignments on the web? Did two- and four-year colleges and universities offer entrepreneurship course(s) on the web? Did two- and four-year colleges and universities offer information on the web regarding entrepreneurship, new venture creation and small business to both students and entrepreneurs? Did two- and four-year colleges and universities offer management and technical assistance for students and entrepreneurs?

Findings For Figure 1 (Question 1), the data indicates which courses were offered and were most popular by two- and four-year colleges and universities. They include: (1) Entrepreneurship; (2) Small Business Management; (3) New Venture Creation; (4) Technology/Innovation; (5) Venture Capital; (6) Small Business Consulting; (7) Small Business Strategy Seminar; (8) Franchising; (7) New Product Development; (9) Entrepreneurship Marketing; (10) Small Business Finance; and (11) Creativity. The results in Figure 1 indicate that the most popular course offered by two- and four-year colleges and universities in the 2004-2005 academic year was Entrepreneurship (53 percent), followed by Small Business Management (36 percent), and then by New Venture Creation (30 percent).

Figure 1. 2004-2005 academic year: types of courses offered

For Figure 2 (Question 2), the data indicate what type and level of frequency in teaching methods in entrepreneurship courses/curriculum two- and four-year colleges and universities offer. They include: (1) Case Studies; (2) Creation of Business Plans; (3) Lectures by business owners; (4) Discussions; (5) Computer Simulations; (6) Guest Speakers; (7) Small Business Institute (SBI); (8) Research Projects; (7) Feasibility Studies; (9) Internships; (10) On-site visits with small business owner/new venture; and (11) In class exercises. The results in Figure 2 indicate that the most popular type of teaching method in entrepreneurship courses/curriculum offered by two- and four-year colleges and universities was Creation of Business Plans (44 percent very frequent), followed by Class Discussion (43 percent very frequent), and then by Guest Speakers (28 percent very frequent). Also, in regard to Question 3 (mentioned above), the data indicates that 60 percent of the instructors developed their own sets of readings and text materials. For Figure 3 (Question 4), the data indicates which periodicals (if any) were used in the entrepreneurship classes (required or recommended) and which ones were most popular.They include: (1) Business Week; (2) Entrepreneur; (3) Fast Company; (4) Fortune; (5) Fortune Small Business; (6) Inc.; and (7) The Wall Street Journal. The results for Figure 3 indicate that the most popular periodicals (if any) that were used in the entrepreneurship classes (required or recommended) by two- and four-year colleges and universities were Entrepreneur magazine (36 percent), followed by The Wall Street Journal (28 percent), and then by Business Week (24 percent) and Inc. magazine (24 percent). Figure 4 provides a slew of answers that dealt with the following questions: (1) Did two- and four-year colleges and universities require their students to complete web-assignments on the web (question 5)?

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Figure 2. 2004-2005 academic year: most popular teaching methods

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Figure 3. Periodical(s) used in class

Figure 4. Technology pedagogy

(2) Did two- and four-year colleges and universities offer entrepreneurship course(s) on the web (question 6)? (3) Did two- and four-year colleges and universities offer information on the web regarding entrepreneurship, new venture creation and small business to both students and entrepreneurs (question 7)? (4) Did two- and four-year colleges and universities offer management and technical assistance on-line for students and entrepreneurs (question 8)? The data in Figure 4 indicate the following: . 50 percent of two- and four-year colleges and universities require their students to complete web-assignments on the web (question 5); . 41 percent of two- and four-year colleges and universities offer entrepreneurship course(s) on the web (question 6); . 49 percent of two- and four-year colleges and universities offer information on the web regarding entrepreneurship, new venture creation and small business to both students and entrepreneurs (question 7); and

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49 percent of two- and four-year colleges and universities offer management and technical assistance on-line for students and entrepreneurs (question 8).

Concluding remarks The 2004-2005 survey indicates that the trends discovered in the surveys conducted from 1977-2000 national surveys of entrepreneurship have continued in a similar path, and in some areas, such as the use of technology, have increased dramatically. We have noted that the traditional teaching method of requiring students to create business plans still exists as a foundation for teaching the nuts and bolts of entrepreneurship and small business management. Yet, the data also shows that educational institutions are moving towards a more knowledge sharing ecology where class discussions and guest speakers are becoming more popular. The use of periodicals and magazines such as The Wall Street Journal, Entrepreneur magazine and Business Week have continued to supplement the information base for both entrepreneurship educators and students alike. We believe these periodicals and magazines reflect the latest news and trends in the market. This allows both educators and students to apply the theories presented in class with real life examples that reflect the pulse of the market. Overall, the 2004-2005 National Survey of Entrepreneurship Education did not yield any unanticipated results. The data though has confirmed our surprising findings in the 2000 survey that showed the dramatic rise of the use technology and the shift in focus from lecture base teaching methods to a more collaborative knowledge sharing one. We can conclude and say that the data shows that entrepreneurial education is in full steam and it has just picked up even more steam with the utilization of the Internet. Another major consideration to be taken from this study is the role of technology in entrepreneurship and small business education. At least 50 percent of the colleges and universities that responded to our survey indicated that they are using the Internet as part of their teachings either through online courses or simply posting information on the web for students and entrepreneurs to read. The Internet is playing a major role in allowing this new type of education to take place, and it will continue to grow. The issue we believe is no longer if the colleges and universities are offering online courses and information but rather the quality of the material being presented. We believe that there is a need to pay more attention to the quality of material being presented (the content) on the Internet rather than how it is presented. Therefore, we call for a stronger focus on quality rather than quantity and style. References Adcroft, A., Willis, R. and Dhaliwal, S. (2004), “Missing the point? Management education and entrepreneurship”, Management Decision, Vol. 42 Nos 3/4, pp. 521-30. Ahiarah, S. (1989), “Strategic management and entrepreneurship courses at the undergraduate level: can one inform the other?”, Proceedings of the 1989 Small Business Institute Director’s Association National Conference, Arlington, VA, Vol. 1989, pp. 60-6. Anselm, M. (1993), “Entrepreneurship education in the community college”, Proceedings of the 38th International Council for Small Business (ICSB), Las Vegas, NV, pp. 177-92. Bird, B.J. (2002), “Learning entrepreneurship competencies: the self-directed learning approach”, International Journal of Entrepreneurship Education, Vol. 1 No. 2, pp. 203-27.

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Block, Z. and Stumpf, S.A. (1992), “Entrepreneurship education research: experience and challenge”, in Sexton, D.L. and Kasarda, J.D. (Eds), The State of the Art of Entrepreneurship, PWS-Kent Publishing, Boston, MA, pp. 17-45. Brawer, F.B. (1997), “Simulation as a vehicle in entrepreneurship education”, ERIC Digest, Nos 97-1, ED 433 468. Brewer, B., Anyansi-Archibong, C. and Ugboro, I.O. (1993), “Using computer simulation technology in entrepreneurship and small business education”, Proceedings of the International Council for Small Business, Las Vegas, NV, pp. 217-29. Brockhaus, R. (1993), “Entrepreneurship education: a research agenda”, in Hoy, F., Monroy, T.G. and Reichert, J. (Eds), The Art & Science of Entrepreneurship Education,Vol. 1, Monroy Educational Systems, Berea, CA. Busenitz, L., West, G.P.I., Shephard, D.A., Nelson, T., Chandler, G.N. and Zacharahis, A. (2003), “Entrepreneurship in emergence: fourteen years of entrepreneurship research in management journals”, Journal of Management, Vol. 29 No. 3, pp. 285-308. Carroll, J.J. (1993), “Course and curriculum design in developing and changing nations: problems following the US model”, Proceedings of the International Council for Small Business, Las Vegas, NV, pp. 254-63. Charney, A. and Libecap, G. (2000), Impact of Entrepreneurship Education, Insights: A Kauffman Research Series, Kauffman Center for Entrepreneurial Leadership, Kansas City, MO. Curran, J. and Stanworth, J. (1989), “Education and training for enterprise: problems of classification, evaluation, policy and research”, International Small Business Journal, Vol. 7, pp. 11-22. Davis, C., Hills, G.E. and LaForge, R.W. (1985), “The marketing/small enterprise paradox: a research agenda”, International Small Business Journal, Vol. 3, pp. 31-42. Donckels, R. (1991), “Education and entrepreneurship experiences from secondary and university education in Belgium”, Journal of Small Business and Entrepreneurship, Vol. 9 No. 1, pp. 35-42. Fiet, J.O. (2001a), “The theoretical side of teaching entrepreneurship”, Journal of Business Venturing, Vol. 16 No. 1, pp. 1-24. Fiet, J.O. (2001b), “The pedagogical side of entrepreneurship theory”, Journal of Business Venturing, Vol. 16 No. 2, pp. 101-17. Foote, D. (1999), “Show us the money!”, Newsweek, April 19, pp. 43-4. Garavan, T.N. and O’Cinneide, B. (1994), “Entrepreneurship education and training programmes: a review and evaluation – part 1”, Journal of European Industrial Training, Vol. 18 No. 8, pp. 3-12. Gartner, W.B. and Vesper, K.H. (1994), “Executive forum: experiments in entrepreneurship education: successes and failures”, Journal of Business Venturing, Vol. 9, pp. 179-87. Gartner, W.B., Bird, B.J. and Starr, J.A. (1992), “Acting as if: differentiating entrepreneurial from organizational behavior”, Entrepreneurship Theory and Practice, Vol. 16 No. 3, pp. 13-32. Gorman, G., Hanlon, D. and King, W. (1997), “Some research perspectives on entrepreneurship education, enterprise education, and education for small business management: a ten-year literature review”, International Small Business Journal, April/June, pp. 56-77. Hills, G.E. (1988), “Variations in university entrepreneurship education: an empirical study of an evolving field”, Journal of Business Venturing, Vol. 3, pp. 109-22. Hills, G.E. and Welsch, H.P. (1986), “Entrepreneurship behavioral intentions and student independence characteristics and experiences”, in Ronstadt, R., Hornaday, J.A., Peterson, R.

and Vesper, K.H. (Eds), Frontiers of Entrepreneurship Research, Babson College, Wellesley, MA, pp. 73-186. Hood, J.N. and Young, J.E. (1993), “Entrepreneurship’s requisite areas of development: a survey of top executives in successful entrepreneurial firms”, Journal of Business Venturing, Vol. 8, pp. 115-35. Katz, J.A. (2003), “The chronology and intellectual trajectory of American entrepreneurship education”, Journal of Business Venturing, Vol. 18 No. 2, pp. 283-300. Kent, C.A. (1990), “Entrepreneurship education at the collegiate level: a synopsis and evaluation”, in Kent, C.A. (Ed.), Entrepreneurship Education, Quorum Books, New York, NY. King, S.W. (2001), “Entrepreneurship education: what the customer values”, Proceedings of the 46th International Council for Small Business, Taipei, Tiawan, pp. 123-37. Kirby, D.A. (2003), “Entrepreneurship education: can business schools meet the challenge?”, paper presented at the Internationalizing Entrepreneurship Education and Training Conference, Grenoble, September 7-10. Klatt, L.A. (1988), “A study of small business/entrepreneurial education in colleges and universities”, The Journal of Private Enterprise, Vol. 4, Fall, pp. 103-8. Kuratko, D.F. (2003), “Coleman white paper: entrepreneurship education – emerging trends and challenges for the 21st century”, Proceedings of the 17th United States Association of Small Business & Entrepreneurship Conference, Hilto Head Island, January, pp. 3-20. McMullan, W.E. and Long, W.A. (1987), “Entrepreneurship education in the nineties”, Journal of Business Venturing, Vol. 2 No. 3, pp. 261-75. McMullan, W.E., Long, W.A. and Wilson, A. (1985), “MBA concentration on entrepreneurship”, Journal of Small Business and Entrepreneurship, Vol. 3 No. 1, pp. 18-22. Meyer, G.D. (2001), “Major unresolved issues and opportunities in entrepreneurship education”, Coleman white paper, USASBE National Conference, Orlando, FL, February. Mitchell, R.K. and Chesteen, S.A. (1995), “Enhancing entrepreneurial expertise: experiential pedagogy and the new venture expert script”, Simulation and Gaming, Vol. 26 No. 3, pp. 288-306. Plaschka, G.R. and Welsch, H.P. (1990), “Emerging structures in entrepreneurship education: curricula designs and strategies”, Entrepreneurship Theory and Practice, Vol. 14 No. 3, pp. 55-71. Porter, L.W. and McKibbin, L.E. (1988), Management Education: Drift or Thrust into the 21st Century?, McGraw-Hill, New York, NY. Robinson, P. and Hayes, M. (1991), “Entrepreneurship education in America’s major universities”, Entrepreneurship Theory and Practice, Vol. 15 No. 3, pp. 41-52. Ronstadt, R. (1987), “The educated entrepreneurs: a new era of entrepreneurial education is beginning”, American Journal of Small Business, Vol. 11 No. 4, pp. 37-53. Ronstadt, R. (1990), “The educated entrepreneurs: a new era of entrepreneurial education evolves”, in Kent, C.A. (Ed.), Entrepreneurship Education, Quorum Books, New York, NY, pp. 69-88. Scott, M.G. and Twomey, D.F. (1998), “The long term supply of entrepreneurs: students’ career aspirations in relation to entrepreneurship”, Journal of Small Business Management, Vol. 26 No. 4, pp. 5-13. Sexton, D.L. and Bowman, N.B. (1984), “Entrepreneurship education: suggestions for increasing effectiveness”, Journal of Small Business Management, Vol. 22 No. 4, pp. 18-25.

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Shepherd, D.A. and Douglas, E.J. (1997), “Is management education developing, or killing, the entrepreneurial spirit?”, paper presented at the 42nd International Council for Small Business Conference, San Francisco, CA, June. Solomon, G.T. and Fernald, L.W. Jr (1991), “Trends in small business management and entrepreneurship education in the United States”, Entrepreneurship Theory and Practice, Vol. 15 No. 3, pp. 25-40. Solomon, G.T., Duffy, S. and Tarabishy, A. (2002), “The state of entrepreneurship education in the United States: a nationwide survey and analysis”, International Journal of Entrepreneurship Education, Vol. 1 No. 1, pp. 65-86. Solomon, G.T., Weaver, K.M. and Fernald, L.W. Jr (1994), “Pedagogical methods of teaching entrepreneurship: an historical perspective”, Gaming and Simulation, Vol. 25 No. 3, pp. 67-79. Stumpf, S., Dunbar, L. and Mullen, T.P. (1991), “Simulations in entrepreneurship education: oxymoron or untapped opportunity?”, Frontiers of Entrepreneurship Research, Babson College, Wellesley, MA. Truell, A.D., Webster, L. and Davidson, C. (1998), “Fostering entrepreneurial spirit: integrating the business community into the classroom”, Business Education Forum, Vol. 53 No. 2, pp. 28-9, 40. Van Clouse, G.H. (1990), “A controlled experiment relating entrepreneurial education to students’ start-up decisions”, Journal of Small Business Management, Vol. 28 No. 2, pp. 45-53. Vesper, K.H. (1985), Entrepreneurship Education, Babson College, Wellesley, MA. Vesper, K.H. and McMullan, W.E. (1988), “Entrepreneurship: today courses, tomorrow degrees?”, Entrepreneurship Theory and Practice, Vol. 13 No. 1, pp. 7-13. Zeithaml, C.P. and Rice, G.H. (1987), “Entrepreneurship/small business education in American universities”, Journal of Small Business Management, Vol. 25 No. 1, pp. 44-50. Further reading Clark, B.W., Davis, C.H. and Harnish, V.C. (1984), “Do courses in entrepreneurship aid in new venture creation?”, Journal of Small Business Management, Vol. 2, pp. 26-31. Solomon, G.T. (1988), “Small business management and entrepreneurial education in America: a national survey overview”, Journal of Private Enterprise, November, pp. 109-18. Solomon, G.T. and Fernald, L.W. Jr (1993), “Assessing the need for small business management/entrepreneurship courses at the university level”, Proceedings of the 17th National Small Business Consulting Conference-Small Business Institute Directors Association, pp. 102-7. Corresponding author George Solomon can be contacted at: [email protected]

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Enterprise for all? The fragility of enterprise provision across England’s HEIs Paul Hannon

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National Council for Graduate Entrepreneurship, Birmingham, UK Abstract Purpose – The aim of this paper is to present the findings of a comprehensive study of enterprise and entrepreneurship education provision in England’s 131 Higher Education Institutions (HEIs). The paper is based upon the National Council for Graduate Entrepreneurship (NCGE) mapping study of formal and informal activity conducted in 2006. Design/methodology/approach – All HEIs in England were invited to complete an online institutional mapping template seeking data on enterprise and entrepreneurship accredited programmes/modules, non-accredited enterprise and entrepreneurship provision and other institutional characteristics that support enterprise and entrepreneurship development. The research team maintained regular contact with all HEIs to maximise participation and to provide support where requested. A number of institutional visits were made by the research team both to introduce the study and to assist data entry where there was limited resource. The approach led to the collection of a unique and robust data set. Findings – The results illuminate the scale and scope of dedicated provision for enterprise and entrepreneurship across the HE sector in England. Of all institutions, 94 per cent participated, ensuring that these results are analogous to a census report. The results further highlight the penetration of the student population and in particular the nature of their engagement. Originality/value – This is the first time such an approach has been taken in England and the results are illuminating for academics, policy-makers (particularly regional development agencies) and enterprise educators. The data provide an evidence base for supporting further development needs across the HE sector and offer opportunities for benchmarking and the exchange of practice, knowledge and experience. Keywords Entrepreneurialism, Universities, Students, Higher education, England Paper type Case study

Introduction The UK Government’s Dearing Committee Report recommendation proposed in 1997 that, in the UK, “higher education institutions . . . . consider the scope for encouraging entrepreneurship through innovative approaches to programme design and through specialist postgraduate programmes” (Recommendation 40, NCIHE, 1997). This policy report, and further government reports on competitiveness and small business (DTI, 1998), increased Government emphasis on initiatives that focused on the teaching and learning of enterprise and entrepreneurship in universities and colleges, and also by introducing enterprise across the compulsory education system at primary and secondary levels (Davies, 2002). The Department of Trade and Industry’s Science Enterprise Challenge Fund in 1999 provided universities with funding for entrepreneurship education for science and engineering students (as well as for other knowledge transfer activities). This policy initiative was further reinforced by the Lambert Review (2003) which noted the

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importance of entrepreneurial skills especially for science and technology students (Lambert, 2003). Overall the UK government is broadly supporting the embedding of enterprise and entrepreneurship capacities across education and through society more generally in response to the pressures arising from the phenomenon of globalisation (Gibb and Hannon, 2007). This effort, through a number of Government Departments – the DTI’s Office of Science and Technology and Small Business Service; Department of Culture, Media and Sport; Department of Education and Skills – is seeking to affect approaches, behaviours and practices toward science, engineering and technology education, the creative disciplines and the more traditional start-up business focus of business and management faculties. This is echoing a wider European emphasis on “fostering entrepreneurial mindsets” as embedded in European Commission policy and projects (EU, 2000; 2002; 2004a; 2004b). A clear illustration of the importance given to entrepreneurship in education at member state level and an example of cross-Ministerial strategic planning is the Norwegian Government (Ministry of Education and Research, 2006). All three key Ministries for Education, Trade and Local Government have produced a joint policy for embedding entrepreneurship across the whole Norwegian education system, including clear goals and measures. This includes higher education and the need for teacher training. Clearly, over the past decade the UK government has done much to try to shape the way that the HE sector serves the wider aims of society. Many publicly funded initiatives have been targeted on processes for the commercialisation of institutional intellectual property (for example through the Office of Science and Innovation, previously the Office of Science and Technology[1], and through Knowledge Transfer Partnerships[2] – previously, Teaching Company Schemes). Some funds aim to encourage wider engagement of the HE sector with the stakeholder community, in particular with regional and local development agencies and local business. There have also been substantial efforts to support development of entrepreneurship education for graduates through various national government initiatives (e.g. DfES, 2003; DTI, 1998; DTI, 2000) including Higher Education Innovation Funds in 2001, 2004 and 2006/7[3], Science Enterprise Challenge in 1999 and 2001[4], the creation of Higher Education Academy Subject Centres in 2004, previously the Learning and Teaching Subject Network[5] and more recently, specific Centres for Excellence in Teaching and Learning in 2005 and funded for five years[6]. There are growing calls for entrepreneurship education in the disciplines that comprise the creative industries (DCMS, 2006). To promote graduate entrepreneurship across the board, the National Council for Graduate Entrepreneurship (NCGE) was established in 2004 with funding from the Small Business Service and Department for Education and Skills. In a broader context, government support for the Enterprise Insight coalition campaign aims to positively influence the aspirations and attitudes of youth towards an enterprising spirit and the development of more enterprising attributes. Those engaged within the UK HE sector will have observed the significant growth in the provision of support for enterprise and entrepreneurship development within HEIs during the past decade, far exceeding the rate of growth in previous decades and mirroring, although in a delayed fashion, the patterns of growth reported in US HEIs (Hannon et al., 2006; Hannon, 2007).

This growth, unlike within the structured environment of compulsory education with its national curriculum framework, is driven by individual institutions and collections of institutions, or more precisely by passionate champions of enterprise and entrepreneurship at all levels within these HEIs. Fuelled by increasing access to government funding activity the levels of activity have increased as demonstrated through specific institutional cases and through reporting mechanisms for monitoring fund disbursements. During this period the creation, development, exchange and transfer of institutional knowledge, practice and experience has led to the introduction of new, or the re-vitalisation of existing, provision to support a latent and emerging demand – from faculty, students, employers and external agencies – for enterprise and entrepreneurship education and learning (Hannon, 2007). Entrepreneurship in higher education is competing for funds against other demands. Significant pressures exist in the current climate on student recruitment, retention, widening participation, employability and impact and all within an increasingly competitive global education environment. Government departments are also competing for funds to drive forward a diversity of policy needs. Entrepreneurship in general and entrepreneurship education specifically competes for these funds and resources at institutional, regional and national levels. In the current economic climate it is uncertain how and from where this agenda will continue to be supported. In the UK, unlike the US, there is a high dependency upon public resources at the European, state and sub-regional levels. The issue of funding was raised in the DfES commissioned report of entrepreneurship education in the England undertaken by Levie (LBS, 1999). This is then not a new challenge. Clearly, knowing what progress has been made in influencing the entrepreneurship agenda within HE is crucial in providing a robust evidence base. This informs and supports future policy decisions about continued investment in this growing phenomenon and develops understanding of the potential for this to deliver expected and desired returns. Within the scope of this paper it will not be possible to address the broad issues raised in this introduction. At the state level it is important to understand the scale and scope of current provision and support; how it is changing and developing; what the increased activity is delivering, or is aiming to deliver, in terms of entrepreneurial outcomes; how this contributes to the policy objectives through which investments have been made; and within the growing and emerging wealth of knowledge, experience and practice what is good, better or best practice and how do we know. The newly formed National Council for Graduate Entrepreneurship (NCGE), a UK government backed body aiming to shape the environment for graduate entrepreneurship, is active in tackling these challenges (visit: www.ncge.org.uk). One critical factor in understanding nationally and regionally what needs to be done to move forward is firstly to know the current position. The aim of this paper therefore is to present the findings of the current support for enterprise development in England’s 131 Higher Education Institutions (HEIs). The paper is based upon the NCGE mapping study of formal and informal activity conducted in 2006. This paper shows the differences in enterprise education and non-accredited entrepreneurship support. The mapping exercise gives NCGE, Regional Development

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Agencies (RDAs) and HM Treasury a clear and accurate picture of current primary activity. Therefore, this is of value to HEIs and enterprise educators who will benefit through enhanced understanding and insight and a comprehensive evidence base. This introductory section has provided the rationale for the paper. Section 2 provides a background to the paper through reference to other relevant studies; Section 3 outlines the approach adopted; Sections 4 and 5 present the study findings with respect to accredited and non-accredited provision; Section 6 draws main conclusions; and Section 7 discusses key implications and next steps.

Background There has been a manifold increase in demand for graduate entrepreneurship courses in the US and UK. In the US, 16 business schools provided such courses in 1970 compared to over 400 in 1995 (ISBE, 2004). Indeed, Hannon (2005) argues that entrepreneurship education is “much more deeply embedded in US HEIs”, exemplified by the fact that in the UK in 2003/4 UCAS identified 92 entrepreneurship courses compared to 4,500 business courses. The recent study commissioned by the NCGE Consortium[7] conducted by Botham and Mason (2006) identifies that “in the United States enterprise education in higher education has grown dramatically since the early 1980s. From 300 in the early 1980s, the number of Universities offering entrepreneurship related courses grew to over 1600 by the early 21st century. The number of endowed entrepreneurship chairs reached almost 240 by 1999 and just over 400 by 2004. This widespread teaching of entrepreneurship is perhaps one of the reasons for the entrepreneurial nature of the US economy”. As the OECD (2001) observes: “For any person who makes his or her way through the education system to an undergraduate degree, a lack of knowledge about entrepreneurship can no longer have much force as an entry barrier to new business formation. A person must make some effort to avoid entrepreneurship awareness or training.”[8] The growth in literature on entrepreneurship and more recently on graduate entrepreneurship continues and has led to a number of significant reviews over the past three decades (Dainow, 1986; Gorman et al., 1997; Hannon, 2005; Pittaway and Cope, 2005). However, the UK is not like the US, where “state-of-the-nation” reviews of enterprise education have been undertaken for decades (see for example, inter alia: Solomon et al., 2002; Solomon et al., 1994; Solomon and Fernald, 1991; Solomon, 1988; 1986; Vesper and Gartner, 1997; Vesper and McMullan, 1988; Vesper, 1987; 1986; Plaschka and Welsch, 1990). In the UK reviews of activity in supporting enterprise and entrepreneurship development within UK HEIs are few (see for example: Hannon, 2007; Price et al., 2004; LBS, 1999), as across Europe (Wilson, 2004; Hytti, 2004; Hytti and O’Gorman, 2004). These national and cross-national studies have tended to be one-off projects. This difference is mainly due to the access to funding in the US from bodies such as the Ewing Marion Kauffman Foundation that significantly supports these activities, for example, at the Universities of George Washington and Illinois. The most notable study of HEIs in England was undertaken by Jonathan Levie, University of Strathclyde, and reported in 1999 (LBS, 1999). It was an extensive survey but unfortunately it has not been repeated. Selected findings from this study are used as a general UK comparator in this article.

Approach At the end of 2005 English RDAs identified that a better understanding of the provision of HE support for student enterprise and graduate entrepreneurship was required to inform the development of regional development policies and actions. No consistent and comparable data were easily accessible. The production of regional “maps” of provision was seen to potentially support benchmarking and the exchange of good practices. With the support of the RDAs, NCGE, in early 2006, devised a mapping survey instrument and commissioned a team of researchers to support data collection, analyses and reporting[9]. The initial design was influenced by a workshop with experts held in Birmingham, UK; access to the Kauffman Foundation survey instruments; and a review of earlier UK reports and studies (Price et al., 2004; LBS, 1999). The instrument was subsequently piloted at two HEIs. The survey aimed to undertake a snapshot capture of data within the academic year 2005-06. In addition to capturing basic data concerning the location and size of the institution, the general structure of the main survey instrument examined three key areas: (1) All credit bearing programmes and full modules relating to enterprise and entrepreneurship education at all levels and modes of delivery. This section further included data collection on the first registration of the provision, numbers of participating students and their profiles, the primary learning outcomes, the leading faculty or centre, and the primary target participants. Further data were sought about the teaching resources engaged in the delivering of the identified provision. The same data fields were used to collect data regards any planned credit bearing provision. (2) All non credit bearing provision relating to enterprise and entrepreneurship education and support. This section listed 24 categories of provision and collected data against each category for the year started, numbers of students participating, the frequency of the activity, the target participants, the leading faculty or centre, and the primary funding sources. (3) The third section collected data against 28 institutional characteristics that are indicative of support for enterprise and entrepreneurship. The instrument sought to clarify if, or not, each institution possessed any of the listed characteristics. A full copy of the online template used in this study can be viewed at: www.ncge.org. uk/im/register.htm The approach to securing full engagement by HEIs in providing relevant and accurate data was initiated through personal visits by NCGE Directors to many of the HEIs in seven of the nine regions of England, including meetings with RDA staff to update on the approach, progress and timings. In the remaining two regions, South-East and London, where personal visits were limited mainly due to the volume of institutions, NCGE Directors briefed HEI contacts directly by phone. After initial contact, by visit or by phone, a follow-up email provided details of the online mapping template, the URL link to gain access and a unique institutional password that enabled the HEI contact to enter and save their data. The unique password only allowed access to an agreed specific dedicated template.

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NCGE staff and the research team maintained regular telephone contact to maximise completion and to provide appropriate support (including, for example, answering questions and resolving any issues that arose). In most cases, contacts were able to complete the online template. However, in a limited number of cases, personal visits were made by the researchers to support the contacts with data collection and template entry where necessary. All data provided was self-reported and the survey undertaken on a voluntarily basis. The support and co-operation of participating HEIs is acknowledged by NCGE. 94 per cent of the HEIs identified for this study entered data in the online template. This dataset therefore represents the most recent and comprehensive national data available and thereby illuminates the landscape of support for student enterprise and graduate entrepreneurship across England’s HEIs. All accredited/non-accredited enterprise and entrepreneurship support provision All accredited provision: general In 2006, there are 889 current enterprise programmes or modules reported by HEIs across the English regions. Figure 1 illustrates reported provision by region and Figure 2 presents the percentage of total provision reported in each region. Clearly, in England the regions vary in the numbers of HEIs within administrative regional boundaries and vary from as low as 5 in the North-East to over 40 in the

Figure 1. Accredited programmes/modules in each region

Figure 2. Accredited programmes/modules in each region (%)

London region. Table I shows the breakdown of HEIs and student populations by region. Furthermore, this table highlights the total numbers of students engaged in all reported enterprise and entrepreneurship support activity by region and further analysed by type of activity, i.e. “in-curricula” programme and full modules and hence credit-bearing activity, or, “extra-curricula” and hence non-credit-bearing activity. Overall Table I shows a national penetration of the total HE student population of those engaged in reported enterprise activity of 7 per cent, two thirds of whom are engaged in “extra-curricula” type provision.

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All accredited provision: UG versus PG; module versus programme The reported data for “in-curricula” provision are analysed by level of study and categorised as: Undergraduate levels (UG); Postgraduate levels (PG); and “Other”, and by mode of delivery: Module; Full Programme. The data in Figure 3 show that 64 per cent, or almost two-thirds, of all current reported provision is at the UG level. Similarly, among all 889 programmes/modules which are currently offered in HEIs in England, almost two thirds are provided as modules, with 43 per cent at UG level and 17 per cent at PG level. Full programme provision is just over one-third of all current provision, with 21 per cent at UG level, and 16 per cent at PG level. In addition, about 3 per cent were “other” programmes/modules generally described as more vocational in nature. Figure 4 shows provision of accredited enterprise education programmes and full modules in each region in comparison to that at the national level. Approximately 20 per cent of all modules in the NE are reported as vocational which is influencing ENG

LDN

SE

SW

EE

EM

WM

NW

YH

NE

Number of participating 123 35 18 12 9 9 11 14 10 5 HEIs/total in study 94 90 100 92 100 100 92 93 91 100 As a percentage of all HEIs listed for the study (%) Number of students in 1,899 346 412 151 129 170 175 232 183 101 HE (000s) All students in HE as a 100 18 22 8 7 9 9 12 10 5 percentage (%) 132 18.3 28.2 8.0 15.7 22.1 6.1 15.9 11.9 5.7 Number of all reported students engaged in enterprise (000s) As a percentage of all 7 5 7 5 12 13 3 7 7 6 students in HE (%) 44.1 6.2 5.9 2.5 10.2 3.8 1.9 8.0 4.1 1.3 Number of reported enterprise students “in-curricula” (000s) As a percentage of all 34 34 21 32 65 17 31 50 35 23 enterprise students (%) 87.9 12.1 22.2 5.5 5.5 18.3 4.2 7.9 7.8 4.3 Number of reported enterprise students “extra-curricula” (000s) As a percentage of all 66 66 79 68 35 83 69 50 65 77 enterprise students (%)

Table I. Regional distribution of HEIs and student engagement in enterprise

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Figure 3. Total accredited programmes/modules by Level and Mode (%)

Figure 4. Total accredited programmes/modules by level and mode and by region

regional enterprise provision at the UG level. The West Midlands region has reported a lower level of full PG programmes than other regions. Both the London and the East of England regions report a regional strength in PG enterprise provision. All accredited provision: primary lead faculties Figure 5 clearly illustrates that Business Schools are significant as the primary lead providers in the regions of England, being responsible for nearly 64 per cent of the delivery of all reported current enterprise provision. Engineering Faculties and Arts, Design and Media Faculties are each reported as the next highest primary lead providers with less than 10 per cent of all reported current provision.

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Figure 5. Total accredited enterprise provision by primary lead faculty (%)

At the national level, Business Schools clearly dominate “in-curricula” provision and are more than 7 times more likely to be providing support than the next lead HE Faculties, and significantly higher than other Faculties such as Computer Sciences; Medicine and Health and Social Sciences. There are no reported programmes/modules currently provided by Law Faculties. The regional analyses displayed in Figure 6 highlight the dominance of the Business Schools across all regions of England but with clear regional variations. Regions such as South West, Yorkshire and the Humberside, North West, North East and London are all reported with a current provision by Business Schools as lower than 64 per cent, whilst some regions, in particular the East of England region, report a very high level of provision by its Business Schools. Provision by other primary lead faculties varies across the regions accordingly. Figure 6 also shows that in the London region a much higher than average provision is lead by the Engineering faculties, with other regions also showing higher levels – South West, Yorkshire and Humberside and the North East. There are also reported strengths in Arts, Design and Media in the North West and South East regions and in the North East and Yorkshire and Humberside regions it is the Computer Science Faculties that provide double the national average. The East Midlands is reported with strength in provision lead by Pure Science Faculties and the London and South East regions both have higher than national average levels of current enterprise provision through Medicine & Health Faculties. All accredited provision: primary target participants The mapping data also report which student groups are the primary target participants for current enterprise and entrepreneurship support provision. Responses highlight the degree to which provision is generally and broadly open to students with general enterprise tendencies, whether one or more faculties are targeted, if students are targeted by named category (female, ethnic, international), or if interests in particular enterprise activity (social, creative, science) are targeted. From Figure 7 it is clear that HEIs report that nearly 44 per cent of all current enterprise provision is targeted at student groups at one faculty only, with just over

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Figure 6. Total accredited programmes/modules by primary lead faculty: regional analysis (%)

10 per cent targeting multi-faculty provision. Nearly 21 per cent of all current provision targets UG students, almost twice the level of PG students. The reported data in Figure 7 illustrate that very low levels of provision, if any at all, target specific named student categories – female, ethnic, international – or those specifically interested in social or creative enterprise. The highest targeted provision is in Science, Engineering and Technology enterprise (4.4 per cent).

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Figure 7. Primary targeted participants for programmes/modules (%)

The regional analyses of reported primary targeted participants are presented in Figure 8. The primary targeting of students at one faculty is dominant across most regions, except for the West Midlands and North West regions of England. In these two regions there is a higher than national average emphasis on primarily targeting UG students. As a contrast the South West region proportionally has a major emphasis on targeting single faculty students as the primary target for current provision. Nationally, although provision primarily targeting Science, Engineering and Technology (SET) enterprise is low overall, in the regions there is a higher than average primary targeting of SET in the London and Yorkshire and Humberside regions, and to a lesser degree in the North West region. Generally the national picture portrays hardly any current provision that is targeting female, ethnic and international students, or those students interested in social or creative enterprise. Regionally there are a few exceptions. 3 per cent of provision in the South West region is targeting female students, but there is not much evidence of this elsewhere. The South East region has some provision primarily targeted at social enterprise and some targeting of creative enterprise reported in the North West, North East and London regions. Perhaps unsurprisingly the London and East of England regions have well above the national average for the primary targeting of international students. Care must be taken in interpreting the above data. HEIs were asked to select the primary target participant. Although few targeted the categories highlighted above this does not mean that those engaged were not female, ethnic or international students. Clearly they are, but these student groups were not specifically targeted. Similarly, for students with an interest in social, creative or scientific enterprise – clearly students engage in such enterprise activity, but most HEIs do not target their accredited provision in these areas. All accredited provision: primary learning outcomes For all reported accredited programmes/modules listed in the study, HEIs were asked to report the primary learning outcomes sought for each provision. The selection was derived from the eight categories in the NCGE Entrepreneurial Outcomes benchmark template and including three additional outcomes emphasising the desire to deliver individuals capable of either: becoming freelance or self-employed; starting a new

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Figure 8. Primary targeted participants for programmes/modules by regions (%)

business; or exploiting institutionally owned IP. The 13 outcomes are presented in Table II. Figure 9 presents the national reported data for primary learning outcomes from all current “in-curricula” enterprise provision. Across England, over one quarter (27 per cent) of all programmes/modules primarily aim to deliver against Learning Outcome 1: “to raise awareness, knowledge and understanding about enterprise/entrepreneurship concept and practice”. Approximately one sixth (15 per cent) aim to primarily deliver against Learning Outcome 2: “to develop individual enterprising/entrepreneurial skills,

No.

Primary enterprise learning outcomes

LO1

To raise awareness, knowledge and understanding about enterprise/entrepreneurship concept and practice To develop individual enterprising/entrepreneurial skills, behaviours and attitudes To develop personal self-confidence and capability To develop empathy with an entrepreneurial way of life To embed entrepreneurial values and beliefs To motivate and inspire students toward an enterprising or entrepreneurial career or life To understand venture creation processes To develop generic entrepreneurial competencies To develop key business “how-to’s” To develop personal relationship and networking skills To prepare for becoming a freelancer or self-employed To start a new business To exploit institutionally-owned IP

LO2 LO3 LO4 LO5 LO6 LO7 LO8 LO9 LO10 LO11 LO12 LO13

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Table II. Primary enterprise learning outcomes

Figure 9. Primary learning outcomes for accredited enterprise provision (%)

behaviours and attitudes” and one tenth primarily against Learning Outcome 13: “to exploit institutionally owned IP”. Nationally, there were no reported data for the following three learning outcomes as primary deliverables for current enterprise provision: Learning Outcome 9: “to develop key business “how-to’s”; Learning Outcome 10: “to develop personal relationship and networking skills”; Learning Outcome 11: “to prepare for becoming a freelancer or self-employed”. Similarly, there were barely any reported responses for LO12: “to start a business”. Clearly, as primary learning outcomes are selected rather than all learning outcomes then it is inappropriate to infer that there are some learning outcomes that are not being delivered through current enterprise provision in HE. It would be appropriate to suggest that some learning outcomes however are not reported as a primary focus for current provision. There is considerable variation across the regions as illustrated in Figure 10. Proportionally, the East Midlands and London regions are significantly at a much higher level than the national average for LO1. Although low nationally, and non-existent in some regions, in the North West, 27 per cent of programmes/modules primarily aim to deliver against Learning Outcome 6: “to motivate and inspire students toward an enterprising or entrepreneurial career or life” reporting a significant shift in focus from other regions.

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Figure 10. Primary learning outcomes of accredited enterprise provision by region (%)

Overall the data illuminate a diverse landscape for primary learning outcomes from reported current enterprise provision. There is an indicative focus nationally on LO1 and to a lesser degree LO2 suggesting that current provision has been in the main designed to primarily deliver knowledge and understanding about enterprise and entrepreneurship with some support for the development of related skills and behaviours. Clearly one region is emphasising the development of students inspired and motivated toward enterprising and entrepreneurial careers and lives. The spread of the reported data further suggest that there may be scope for reviewing current enterprise provision against a broader canvas of learning outcomes, particularly if the expectation from entrepreneurship education is to deliver increasing levels of graduates capable of successfully entering the worlds of free-lance, self-employed or new business start-up employment options. Some institutions may prefer for provision to primarily focus on developing graduates with enterprising or entrepreneurial capacities, self-confidence, behaviours, beliefs and values. All accredited provision: student engagement profiles The self-reported data presented here analyses the profiles of all students engaged in current enterprise and entrepreneurship provision across England by level of study (UG/PG) and by mode of delivery (Programme/Module). Table III presents the main data and Figure 11 provides per cent distributions. 45 per cent (19,774) of all “in curricula” enterprise students in England are engaged in UG modules; 26 per cent (11,368) on UG full programmes; 16 per cent (7,219) on PG modules; 11 per cent (4,986) on PG full programmes; and 2 per cent (707) on “other” provision. A total of 44,054 students are engaged in “in-curricula” activity representing approximately 2.3 per cent of the just under 1.9 million students enrolled in the HEIs in this study. As with all sections of reported data there are significant regional variations. Higher than average levels of engagement in UG provision, and hence lower PG provision, are

evident in the North West, Yorkshire and Humberside, East Midlands and South West regions, whereas conversely slightly higher than the national average levels of engagement in PG provision are reported in the London region and much higher engagement levels in both the South East and the East of England regions (see Figure 12).

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All accredited provision: growth rates Data are reported for the start year for all listed current enterprise programmes/modules thereby providing indicative perspectives on longevity and rates of growth of programmes. Data were requested only for current programmes. The findings are therefore not reporting an historical catalogue of provision started but not currently running. Figure 13 shows the number of new enterprise education programmes/modules started each year from 1970, the earliest reported programme that is still part of current provision, through to 2006. The graph clearly illustrates periods of rising and declining rates of growth in new provision. Few developments that are still offered are more than 10 years old with the majority less than 5 years old. There are clear points of significant increase in the rate of growth of new provision. Recently these are reported to have reached their peaks around 1996, 1999, and 2004. The decline reported for 2006 is partially due to the data collection point being partway through an academic year. Additional provision will have been reported in the section on planned provision. Although not reported here there are some regional variations with some reaching their highest peaks in 2003, 2004 or 2005. This section has presented the data for all current accredited provision. The next section illustrates the findings for non-accredited current provision.

197

Programmes No. of students on full-time UG programmes No. of students on modules UG level Total UG students No. of students on full-time PG programmes No. of students on modules PG level Total PG students No. of students on “Other” provision Total students population involved in the region

Number

%

11,368 19,774 31,142 4,986 7,219 12,205 707 44,054

26 45 11 16 2 100

Table III. Analysis of all students involved in enterprise education by level and mode

Figure 11. Profile of enterprise students (%)

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Figure 12. Profile of enterprise students in the English regions (%)

All non-accredited provision All non-accredited provision: general These data report all current non - accredited enterprise provision across all the study HEIs in England. The data identify the range and number of events provided; their primary source of funding; and, the levels of student engagement in the events. All non-accredited provision: total events Shown below is a list of the 24 non-accredited events identified for inclusion in the mapping study:

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Figure 13. Numbers of enterprise progs./modules started each year (1970-2006)

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) (16) (17) (18) (19) (20) (21)

enterprise workshops; business plan competitions; YOMP (a business game); enterprise summer school; fellowships/internship; enterprise placements within industry; NCGE Flying Start; Young Enterprise Graduate Programme (YEGP); Students in Free Enterprise (SIFE); CMI enterprises; New entrepreneurship scholarships (NEW); Shell Technology Enterprise Programme (STEP); career service events; Student Union events; alumni activities; personal coaching; enterprise mentoring; access to finance, funds, investments; access to technical advice; access to specialist advice; access to external professional advice;

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(22) access to enterprise/entrepreneur networks; (23) financial awareness training; and (24) marketing and sales support and training. A total of 5,324 current non-accredited enterprise events have been reported by HEIs in England at the time of the study. Figure 14 shows that Event 1 (Enterprise Workshops) and Event 16 (Personal Coaching) account for the majority of all non-accredited enterprise education events in HEIs in England. The third most common type of “extra-curricula” events were Event 22 (Access to Networks) and Event 13 (Career Service Events). Events 8, 9, 10 and 17 are reported at very low levels of provision, below 0.5 per cent, and hence are identified as 0 per cent provision due to round-up calculations. All non-accredited provision: primary funding sources All accredited provision is funded through mainstream state funding for education. In the case of non-accredited provision this is not funded through the same mechanism. A variety of funding opportunities currently support student enterprise activity. These vary over time due to changes in government policies and initiatives, changes in institutional needs and demands on funds for this and other activities, and the desire and willingness of non-government and commercial organisations to support enterprise in HE. Access to funding opportunities is likely to be highly competitive internally and externally and in some cases may not be universally available. Figure 15 illustrates the range and use of 18 different funding sources by HEIs to support their enterprise activities. The chart depicts for each funding source the per cent of all responses reporting that source. Abbreviations used in the chart are explained below:

Figure 14. Provision of non-accredited enterprise events in England (%)

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Figure 15. Non-accredited activity funding sources: by type (%)

UCF

University Core Funding.

HEIF

Higher Education Innovation Funds.

RDA

Regional Development Agency.

USF

University Special Funds.

CETL Centres for Excellence in Teaching and Learning. GDC

Government Development Contract.

SEC

Science Enterprise Challenge.

HEA

Higher Education Academy.

CSI

Country-Specific Initiative.

Many of the funding sources listed and reported as used to support current non-accredited activity are public funds. Nationally, in England, over three quarters of all activity is reported as being funded from public sources at European, national or regional levels. The dominant source of current funding, nearly one third of all funding, is HEIF (Higher Education Innovation Funds). HEIs in England provide almost one fifth of all funding through their own core funds. RDAs (Regional Development Agencies) are reported as providing just over 8 per cent of all funding. The use of private/commercial sources of funding is reported as low. Just over 5 per cent of funding comes through sponsorship with less than 1 per cent funded through either paid fee income or private sector commercial contracts. Clearly endowments are not a considered route for funding current non-accredited activity in HE. Overall Figure 15 illustrates a limited range of funding in substantive use, a high dependency on public funds with few opportunities for non-public funds being currently exploited. Viewed in relation to Figure 13 and the periods of increased rate of new growth in provision it is likely that funding initiatives such as HEIF (in its third

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Figure 16. Numbers of students engaged with non-accredited events (%)

round in 2006) and previously SEC (finishing in 2006) have had an impact on activities. However access to such funds and the nature of these funds changes and creates unpredictability in the development and planning for new activities.

All non-accredited provision: total student engagement There are a total of 87,869 student engagements reported in England with current non-accredited activities at the time of this study. Figure 16 shows that the numbers of student engagements involved with the non-accredited events is at the highest level for Event 1 (Enterprise Workshops). Engagement in Event 13 (Career Service Events) is reported at the second highest level, and Event 14 (Student Union Events) is at the third highest level. The non-accredited activities reported with the lowest total number of student engagements are Events 5, 8, 9, 10 and 17. Some events occurred at low levels of engagement below 0.5 per cent and therefore, due to automated rounding up, are shown as 0 per cent. In comparing the highest and lowest events of student engagements with those provided by HEIs offers an indicative view of the match between supply and demand. In reviewing Figure 14 it is noted that Event 1 (Enterprise Workshops) and Event 13 (Career Service Events) are both most commonly provided by HEIs and engaged in by students. Although HEIs report that Personal Coaching is most likely provided, students clearly engage with Student Union Events. At the lower end of provision and in terms of student engagement Events 8 (YEGP), 9 (SIFE), 10 (CMI Enterprisers) and 17 (Enterprise Mentoring) are noted. It is important not to misinterpret these findings. High and low responses are no indicator of quality. Indeed some initiatives specifically limit supply and student engagement, either by design or by the resource capability required to scale up activity any further. Additionally some activities require personal or small group approaches rather than with large student groups, for example, personal coaching.

Figure 17 shows the number of students reported as being involved with non-accredited activities in each region and in comparison with the national average level. As with other data areas in this study there is clear regional variation. Conclusions There has clearly been substantial change to the HE entrepreneurship landscape in England during the past decade. The findings from this mapping study have illuminated current reported enterprise and entrepreneurship provision. This is valuable evidence to support further development needs in the UK university sector. There is a growing level of activity across most HEIs in England and healthy level of interest and awareness of enterprise and entrepreneurship by staff and students. The data identify that the rate of growth in new provision has been recently high probably driven by the access to a variety of funding opportunities. The total of all reported course provision, 889, would appear to be a significant increase since the Levie report although there are likely differences in the types of data collected. Nonetheless, a 15 per cent increase from 104 to 120 courses was reported between 1997/98 and 1998/99. This study revealed 157 new programmes/modules started in 2004 alone. The study reveals that 7 per cent of all students in HEIs in England are reported engaging in enterprise activity. This can range from attending an enterprise workshop through to a full degree programme at UG or PG levels, with the majority, two-thirds, engaging in “extra-curricula” forms of enterprise provision, and that two thirds of the 7 per cent of “enterprise” students will be UGs. Clearly the nature of the experience will be markedly different for different types of engagement. The data also reveal that there is a dominance in provision through Business Schools and for targeting students from a single faculty, most likely therefore to be the

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Figure 17. Students involvement of non-accredited enterprise events: by region

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Business and Management Faculties or Schools. This was a finding of the Levie study (LBS, 1999) that noted “only 25 per cent of all students taking entrepreneurship courses were non-business students . . . even though non-business students comprise almost 90 per cent of the student population”. This finding highlights the challenge of diversity in the conceptions of enterprise and entrepreneurship education. Atherton (2004) explores this point and distinguishes two specific meanings that are of relevance: firstly, becoming an entrepreneur; and secondly being entrepreneurial. It is not evident from the data that there is a general strong focus on either conception across the HE sector. But these data raise further questions. In a climate of rhetoric that supports an “enterprise for all” vision and where this is already being carried out through compulsory education, is a 7 per cent level of student engagement a satisfactory level, or should there be a higher goal? If so is there an optimal level of engagement and what would this be? What should be the benchmark for individual HEIs? Also the data reveal significant differences in the type of provision that students engage in. Is double the engagement in extra-curricula rather than in-curricula activity appropriate? Should there be a better balance? Would the learning experience of in-curricula opportunities provide deeper learning and be more likely to lead to the development of changed capacities within students? Similar observations apply to the balance between engagement by undergraduate or postgraduate students. It is further clear that the data reveal differences across the regions of England in the nature, approach, aspirations, outcomes, scope and scale of enterprise and entrepreneurship provision. Within each region these differences will be further amplified by the make up of regional HE structures and variations between individual institutions as these too vary immensely as highlighted elsewhere (Hannon, 2007). Overall, a number of future challenges are presented. The study reports substantial growth in activity and practice across England. It will be important to understand the nature and scale of the impact that this is having on individual students and graduates, on staff and faculty, on institutions, on regions and more broadly on the economy and society as a whole. Although efforts in this direction have been made it remains unclear at the national level the overall impact of investments in enterprise and entrepreneurship education on the development of an entrepreneurial economy and a general societal culture of enterprise and in particular on the development of entrepreneurial behaviours and attitudes. Some research does provide some evidence of a positive relationship, particularly between engagement in enterprise education and entrepreneurial propensity (GEM, 2006; Rasheed, 2004; Charney and Libecap, 2002). Additionally, the growth in activity, and the seemingly continued expected growth in demand requires an associated growth in the scale and capability of the community of educators who are leading current and future growth in the field, not just in scale and scope, but also conceptually. This challenge requires development in curricula and pedagogic innovations and educator capability as well as growth in institutional resource support from a broad base of sources not being limited to public funds. This then highlights a critical challenge concerning the capacity for sustaining the growth achieved to date and future developments in entrepreneurship education across the HE sector, to be able to build on the scope of activity identified through this study, learn from the experience, know what works best and scale up good and best practice across faculties, institutions and regions.

The overarching concern that this study helps to illuminate, not all reported within the limits of this paper, is the systemic fragility of enterprise and entrepreneurship provision in HEIs in England arising from, inter alia: . the narrow choices and uncertainty of future funding sources; . the potential decline in the rate of growth of new provision possibly due to loss of funding in some areas; . a general lack of high policy institutional support and structural drivers; . a lack of investment in the development of effective people and processes; . competing policy priorities; . a lack of champions – in government, in regions, in institutions, in professions; . the slow development of future education leaders; . the slow growth of the community of practice; and . the need for increased development, sharing and learning of good practice internationally. A consortium[10] of national organisations and government recently commissioned a study of good practice across the UK in delivering entrepreneurship outcomes through entrepreneurship education practices. The final report recommendations (Botham and Mason, 2006) emphasise: . . . [HEI enterprise activity] currently remains small scale and restricted to relatively few students and subjects. Scaling up the level of activity is far from easy and many of the existing activities in the case study HEIs face serious ongoing challenges to their future existence . . . For most of the activities examined in this study, future funding is a critical challenge . . . Without more substantial and reliable funding, much existing activity may struggle to survive and its further development and diffusion will be seriously constrained. It will also constrain the scaling up of existing activity.

The report further highlights that: . . . staff resources and skills for teaching entrepreneurship are in short supply. In many cases, teaching is dependent on one or two highly committed individuals. Should these individuals leave, it is often far from clear that any enterprise education would continue. Currently very few academic staff have the skills or experience necessary to teach or facilitate enterprise courses. Even some staff currently teaching entrepreneurship have had little exposure to teaching and learning methods used in other institutions . . . Funding and staff skills are two of the main barriers to wider dissemination.

Finally the study concludes that: . . . there is no single model of good practice. Much experimentation is underway. This is essential if enterprise education outwith Business Studies is to develop effectively. Experimentation needs to be encouraged . . . and, . . . as a priority, concepts of good practice and an appropriate outcome framework need to be developed for non-specialist enterprise education and, in particular, for where enterprise is incorporated into mainstream subject curricula.

Implications and next steps There are implications emerging from and strengthened by the evidence-base that this study now provides. It was only in February 2005 that the UK Chancellor of the

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Exchequer, Gordon Brown, observed that “today only one per cent of college or university students are engaged in enterprise” (cited in BVCA, 2005). Clearly the evidence base now suggests that we have come a long way. Brown also sought to ensure that by 2006 all schools will offer enterprise education and that “every college and every university should be twinned with a “business champion”.” (cited in BVCA, 2005). With the implementation of the Davies Review (2002) the former should be achieved but in the post-16 sector there is still further progress to be made. Government has a significant role in the UK in shaping the future education environment for enterprise and entrepreneurship. There still needs to be a coherent cross-departmental policy to ensure effective progression across all levels of the education system. The Norwegian approach discussed earlier in this paper shows a way forwards (Ministry of Education and Research, 2006). There is a strong need to develop sustainable long-term institutional models and strategies for enterprise and entrepreneurship provision in universities that enable current efforts and successes to be built upon and scaled up. Such approaches should feed off the good and best practice that has been developed across the UK and internationally where in some countries HEIs have been tackling the same agendas for two or more decades. There is also a need for mainstreaming more of the provision within core funded education delivery as well as for developing innovative opportunities for resourcing extra-curricula activity through the closer integration of entrepreneurs, alumni and external agencies. But why should any institution or educator put the effort into doing this? The top-level policy arguments have not yet been won over, particularly within an increasingly competitive education environment where low recruitment one year can stop the momentum of several years efforts overnight. More exemplars and role models from around the globe are needed as demonstrators. In the US, the Ewing Marion Kauffman Foundation now supports several US HEIs to develop campus-wide models and strategies for entrepreneurship education. This could be a useful approach for some UK institutions. Some observers note that “the area most in need of reform is that of teacher training. The EU believes that teachers do not receive sufficient training on how to bring the concept of entrepreneurship into the classroom. They believe that there is insufficient exchange and dissemination of good practice. It believes that by disseminating good practice to teachers, enterprise can be encouraged and many of the pit falls uncovered by early practitioners can be avoided. In particular, they think that it is necessary to explain why promoting an entrepreneurial attitude can be important” (BVCA, 2005). The EU’s Expert Group on Entrepreneurship Education strongly advocates a significant increase in teacher training in addition to better dissemination and sharing of international best practice and experiences. The Norwegian Government’s national strategic plan strongly emphasises the need for teaching training in entrepreneurship education (Ministry of Education and Research, 2006). And why should other then the few passionate dedicated educators get involved? Where are the professional and personal incentives and rewards for driving forward this agenda in a university department or faculty or across an institution as a leading internal champion? The UK RAE has significantly affected staff and institutional behaviour whether for the better or not, but there are extremely limited opportunities for encouraging engagement in enterprise and entrepreneurship within HE. It is also important that there is a greater understanding of how entrepreneurship education practice delivers the types of entrepreneurial outcomes that would be desirable

from such an experience. The need for agreeing and implementing a shared understanding of expected and desired outcomes is recognised across Europe (for example see Hytti, 2004). A guiding framework of outcomes needs to be clarified, articulated and widely applied. NCGE is working with UK partners to develop such a framework. Finally, if an “enterprise for all” vision is appropriate and desirable then not only do the challenges of educator capability and institutional capacity need to be addressed but the overarching models and approaches will need to be more inclusive. The study findings are unequivocal in demonstrating the significant role of Business School in current provision. However, this creates potential barriers to engagement across those communities of educators and learners that base their goals and aspirations on a different set of beliefs and values to those that may be promoted by a business school. To engage the Art, Design and Media Faculties, the “creative” disciplines, other areas of humanities and social sciences may require adopting, developing, testing approaches and models based upon different language and terminology, different aspirations and goals, different value and belief systems. In 2004, an ISBE Consortium led by the author and reporting to NCGE on a global review of the literature on graduate entrepreneurship recommended that: . further research should be commissioned to define the scope and nature of good practice in entrepreneurship education; . consideration be given to the development of a benchmarking framework; . there should be national recognition and awards for excellence and best practice; . the professional development needs of entrepreneurship educators should be addressed; and . there need to be greater support for the provision of effective learning and personal development opportunities. To close this paper, a number of opportunities for tackling the challenges raised above are noted. NCGE is already working with partners in a number of key areas to: . implement the action plan from the 2006 International Entrepreneurship Educators Conference at York[11]; . work with the new RDA/NCGE Task Group to embed the mapping survey on an annual basis across all parts of the UK to inform future development; . further capture and disseminate good practice across diverse contexts; . implement a new development programme for educators with UKSEC, the Higher Education Academy and the Ewing Marion Kauffman Foundation; . agree an overarching National Entrepreneurship Outcomes Framework across the education system to aid progression and guide curricula innovations; . build further international linkages and partnerships for sharing experiences; . seek further integration of collective efforts to avoid re-invention of wheels; and . continually secure the engagement and buy-in of key stakeholders. And regards the mapping survey instrument? There is room for improvement here. Some areas were found by institutions to be more difficult to respond to than others, particularly teaching resources and student profile data. NCGE purposefully did not

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collect any data regards applied pedagogies to maintain a level of simplicity in data collection. Again this is a useful development area to extend. Other areas are emerging. Clearly striking a balance between ensuring data collection is not an imposition or additional workload on institutions and providing valuable and valued results for institutions and regions and national agencies will always be a fine line to tread. Overcoming any fragilities in support and development and delivering enterprise education opportunities for all demands an ongoing understanding of the “state of play” across the sector. The online mapping study provides the underpinning evidence base. Notes 1. www.dti.gov.uk/science/ 2. www.dti.gov.uk/science/knowledge-transfer/index.html 3. www.dti.gov.uk/science/knowledge-transfer/heif/page12054.html 4. www.dti.gov.uk/science/knowledge-transfer/schemes/Science_Enterprise_Challenge/ page12138.html 5. www.heacademy.ac.uk/SubjectNetwork.htm 6. www.hefce.ac.uk/Learning/tinits/cetl/ 7. The consortium consisted NCGE, Council for Industry and Higher Education, DTI Small Business Service, Enterprise Insight 8. OECD (2001), Putting the Young in Business; Policy Challenges for Youth Entrepreneurship, Paris p. 67 9. The research team working with NCGE was led by Dr. Jonathan Scott, Aston University with Srikanth Sursani and Cindy Millman, University of Central England in Birmingham, UK. Acknowledgement is given to their contribution to data collection and collation. 10. The consortium consisted the DTI’s Small Business Service, the Council for Industry and Higher Education, the Higher Education Academy, Enterprise Insight and was led by the National Council for Graduate Entrepreneurship. 11. See www.ncge.org.uk/communities/Education/conf_action.php

References Atherton, A. (2004), “Unbundling enterprise and entrepreneurship”, Innovation and Entrepreneurship, May, pp. 121-7. Botham, R. and Mason, C. (2006), “Good practice in enterprise development in UK higher education”, a report for The National Council of Graduate Entrepreneurship, The Council for Industry and Higher Education, the Small Business Service, Enterprise Insight and the Higher Education Academy, NCGE, Birmingham. BVCA (2005), “Investing in enterprise”, a report by IrwinGrayson Associates, British Venture Capital Association, London. Charney, A. and Libecap, G. (2002), Impact of Entrepreneurship, Kauffman Center for Entrepreneurial Leadership, Kansas City, MO. Dainow, R. (1986), “Training and education of entrepreneurs: the current state of the literature”, Journal of Small Business and Entrepreneurship, Vol. 3 No. 4, pp. 10-23. Davies, H. (2002), “A review of enterprise and the economy in education”, HM Treasury, London, February.

Department for Culture, Media and Sport (DCMS) (2006), Developing Entrepreneurship for the Creative Industries: The Role of Higher and Further Education, Department for Culture, Media and Sport, Creative Industries Division, London. Department for Education and Skills (DfES) (2003), The Future of Higher Education, DfES, Cm5735, January. Department of Trade and Industry (1998), Our Competitive Future: Building the Knowledge Driven Economy, Command Paper 4176, The Stationery Office, London. Department for Trade and Industry (2000), “White Paper: Excellence and opportunity – a science and innovation policy for the 21st Century”, Cm 4814, The Stationery Office, London. European Union (EU) (2000), European Charter for Small Enterprises, Feira European Council, June. European Union (EU) (2002), Final report of the expert group, ‘Best Procedure’ project on Education and Training for Entrepreneurship, November. European Union (EU) (2004a), “Action plan: the European agenda for entrepreneurship”, EC, COM (2004) 70 final, February. European Union (EU) (2004b), “Education for entrepreneurship”, final report of the expert group, November. Gibb, A.A. and Hannon, P.D. (2007), “Towards the entrepreneurial university”, International Journal of Entrepreneurship Education, Senate Hall Academic Publishing, Pershore (forthcoming). Global Entrepreneurship Monitor (GEM) (2006), Global Entrepreneurship Monitor 2005 Report, Babson College, Babson Park, MA and London Business School, London. Gorman, G., Hanlon, D. and King, W. (1997), “Some research perspectives on entrepreneurship education, enterprise education, and education for small business management: a ten-year literature review”, International Small Business Journal, April/June, pp. 56-77. Hannon, P.D. (2005), “Graduate entrepreneurship in the UK: defining a research and education policy framework”, paper presented at the 28th ISBE National Conference “Illuminating Entrepreneurship”, Blackpool, November. Hannon, P.D. (2007), “The state of education and support for enterprise and entrepreneurship: a mapping study of England’s HEIs”, International Journal of Entrepreneurship Education, Senate Hall Academic Publishing, Pershore (forthcoming). Hannon, P.D., Scott, J., Sursani, S.R. and Millman, C. (2006), “Mapping provision of enterprise education and support for entrepreneurship in England’s HEIs”, Proceedings of the 29th ISBE National Conference, Cardiff, November. Hytti, U. (2004), “State of art of enterprise education in Europe”, results from the Entredu project, Small Business Institute, Turku School of Economics and Business Administration, Turku. Hytti, U. and O’Gorman, C. (2004), “What is ‘enterprise education’? An analysis of the objectives and methods of enterprise education programmes in four European countries”, Education þ Training, Vol. 46 No. 1, pp. 11-23. ISBE (2004), “Making the journey from student to entrepreneur: a review of the existing research into graduate entrepreneurship”, National Council for Graduate Entrepreneurship, Research Paper number 001, Birmingham. Lambert, R. (2003), Lambert Review of Business – University Collaboration, HM Treasury, London. London Business School (1999), “Entrepreneurship education in higher education in England: a survey”, London Business School and the Department for Education and Skills, London. Ministry of Education and Research (2006), “See the opportunities and make them work! Strategy for entrepreneurship in education and training”, joint Strategic Plan by the Norwegian Ministries of Education and Research, Trade and Industry, and Local Government and Regional Development, Ministry of Education and Research, Oslo.

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National Committee of Inquiry into Higher Education (NCIHE) (1997), “Higher education in the learning society: report of the National Committee”, HMSO, London. Organisation for Economic Co-operation and Development (OECD) (2001), Putting the Young in Business: Policy Challenges for Youth Entrepreneurship, OECD, Paris, p. 67. Pittaway, L. and Cope, J. (2005), “Entrepreneurship education – a systematic review of the evidence”, Proceedings of the 28th ISBE National Conference, Blackpool, November. Plaschka, G.R. and Welsch, H.P. (1990), “Emerging structures in entrepreneurship education: curricula designs and strategies”, Entrepreneurship Theory and Practice, Vol. 14 No. 3, pp. 55-71. Price, A., Finlayson, R., Scott, J., Wilkinson, D., Myers, K., Richardson, C., Marston, A. and Miller, C. (2004), “Final project report: mapping graduate enterprise”, NCGE Research Paper number 002, July. Rasheed, H.S. (2004), “The effects of entrepreneurship training and venture creation on youth entrepreneurial attitudes and academic performance”, University of South Florida, Tampa, FL. Solomon, G.T. (1986), National Survey of Entrepreneurial Education,Vol. 1-6, US Small Business Administration, National Center for Research in Vocational Education, University of California, Berkeley, CA. Solomon, G.T. (1988), “Small business management and entrepreneurial education in America: a national survey overview”, Journal of Private Enterprise, November. Solomon, G.T. and Fernald, L.W. Jr (1991), “Trends in small business management and entrepreneurship education in the United States”, Entrepreneurship Theory and Practice, Vol. 15 No. 3, pp. 25-39. Solomon, G.T., Duffy, S. and Tarabishy, A. (2002), “The state of entrepreneurship education in the united states: a nationwide survey and analysis”, International Journal of Entrepreneurship Education, Vol. 1 No. 1, Senate Hall Academic Publishing, Pershore, pp. 65-86. Solomon, G.T., Weaver, K.M. and Fernald, L.W. Jr (1994), “Pedagogical methods of teaching entrepreneurship: an historical perspective”, Gaming and Simulation, Vol. 25 No. 3. Vesper, K.H. (1986), “New developments in entrepreneurship education”, in Sexton, D.L. and Smilor, R.W. (Eds), The Art and Science of Entrepreneurship, Ballinger, Cambridge, MA, pp. 379-87. Vesper, K.H. (1987), “Entrepreneurship academics: how can we tell when the field is getting somewhere?”, Journal of Business Venturing, Vol. 3, pp. 1-10. Vesper, K.H. and Gartner, W.B. (1997), “Measuring progress in entrepreneurship education”, Journal of Business Venturing, Vol. 12, pp. 403-21. Vesper, K.H. and McMullan, W.E. (1988), “Entrepreneurship: today courses, tomorrow degrees?”, Entrepreneurship Theory and Practice, Vol. 13 No. 1, pp. 7-13. Wilson, K. (2004), “Entrepreneurship education at European universities and business schools – results of a joint pilot survey”, European Foundation for Entrepreneurship Research (EFER), September. Corresponding author Paul Hannon can be contacted at: [email protected]

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New graduate employment within SMEs: still in the dark?

New graduate employment within SMEs

Rick Holden Leeds Business School, Leeds, UK

211

Stephanie Jameson Leeds Metropolitan University, Leeds, UK, and

Andreas Walmsley Faculty of Business and Communication, York St John University, York, UK Abstract Purpose – A report conducted for the Government in 2002 concluded that public policy, although rising to the challenges presented in stimulating a stronger relationship between supply and demand in the SME graduate labour market, was essentially “running blind”. SMEs were clearly playing an increasingly important role in the wider graduate labour market, yet the evidence base on patterns of recruitment, deployment and graduate contribution was weak and insubstantive. The purpose of this paper is to revisit this issue and critically review research undertaken since 2002. Design/methodology/approach – A decision was taken to critically review the research literature published in the UK on graduate employment in SMEs since 2002 as this was the year that the original report was presented to the Government. The methodological design draws out the main findings from the 2002 report and the associated research agenda. This is then used as a basis from which to evaluate recent research. The methodological design ensures that the key themes of graduate recruitment and utilization are addressed within the context of the overall SME graduate labour market. Findings – The data suggest that whilst there may be some “glimmers of light”, serious deficiencies remain in relation both to information about the SME graduate labour market in general and to the utilization of graduates in particular. There was an apparent shift in the research agenda, towards graduate enterprise and business start-up. Originality/value – Provides a timely review of the evidence base in an area which has seen increasing policy interventions. Draws an important parallel with emergent research in the specific field of graduate start-up. Keywords Graduates, Small to medium-sized enterprises, Employment, United Kingdom Paper type Literature review

Introduction Graduates are an important resource. Higher Education Statistics Agency (HESA) data reveal that for the academic year 2004/05 there were approximately 1.4 million full time students in the UK; and that the total number of students (i.e. full and part time) was in fact approaching 2.3 million (HESA, 2006). The UK government has primarily justified this expansion on economic grounds including assumptions about a future knowledge based economy. Organisations in all sectors and of all sizes can prosper through the greater use of graduate labour. However such a picture masks considerable complexity. Graduate labour markets, both in the UK and abroad, are experiencing change and upheaval. In practice both the supply of and demand for graduate labour is subject to considerable debate and evident tensions. In the UK, commentators now speak of “new” graduate jobs and a “non traditional” graduate labour market (see, for

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example, Elias and Purcell, 2003). It is within this non-traditional graduate labour market where considerable importance is attached to the smaller business. Our purpose in this paper is to re-visit the graduate labour market in respect of small and medium sized enterprises (SMEs). We use the term “re-visit” deliberately. During the course of 2001-2, and in the context of heightened interest in graduate employability, a significant piece of research for the UK government (commissioned by the Small Business Service) sought to take stock of how small and medium sized enterprises figured within this changing graduate labour market (Holden et al., 2002). The research stemmed from rising concern amongst policy makers that after years of experimentation in stimulating graduate demand in SMEs there remained a lack of understanding about what impact this has on firms and how the relationships involved actually work. Drawing principally upon data and literature from the 1990s the research offered little encouragement to those looking for clear evidence to encourage more SMEs to recruit new graduates. This paper seeks to take stock of new graduate employment in SMEs five years on from this important “benchmark” study. Our report to Government in 2002 (Holden et al., 2002) argued that it was meaningful to talk of a distinctive SME graduate labour market operating in the UK. In other words, we proposed that the SME graduate labour market is a constituent part of wider graduate supply and demand relationships in the economy but with characteristics which set it apart from the operation of larger firms. In relation to the size of this market, we concluded that it was relatively small but growing. Importantly though, the empirical base for such conclusions was weak. We were reliant on a limited number of estimates drawn from research samples and speculation on the basis of SMEs being regarded as the engine of economic growth and thus providing increasing numbers of graduate job opportunities. The characteristics of the SME graduate labour market were largely opaque. We suggested, on the basis of limited evidence, that graduate uptake was positively related to firm size and to business growth. Very little however, appeared to be known in relation to a range of variables i.e. sector differences; different occupational and technological contexts; degree types and classifications. Some research had speculated that the graduate recruitment which does take place in SMEs may reflect responses to new skill mixes across occupations. This seemed to be particularly significant for intermediate (rather than higher level) jobs. The point, though, is that most of these issues were largely based on speculation. The lack of a strong empirical base stemmed principally from the limitations in official data. The report concluded that whilst SMEs were clearly playing an increasingly important role in the wider graduate labour market, the evidence base on patterns of recruitment, deployment and graduate contribution was weak and insubstantial. Two broad fields of research were identified as critical to generating a richer and more nuanced understanding of the graduate SME relationship without which, it was considered, policy makers would continue to be “running blind” in rising to the challenges presented in stimulating a stronger relationship between supply and demand in the graduate labour market. The first of these identified the need for information about the SME graduate labour market, its underpinning processes and diversity, and how it relates to the wider changes taking place in the economy in graduate supply and demand. The second pointed to the need for a richer picture of the recruitment and in particular the subsequent utilization of graduates by SMEs.

This paper seeks to take stock of new graduate employment in SMEs five years on from this important “benchmark study”. We draw on research retrieved as a result of searches principally within two main sources: UK journals and research reports from bodies working, at least in part, within the graduate labour market field. The paper unfolds as follows: Using the themes of “recruitment” and “utilization” we seek to present an overview of the state of understanding and a critical “update”. Our reading of the data suggests that whilst there may be some “glimmers of light”, serious deficiencies remain both in relation to information about the SME graduate labour market and comparative evidence of the added-value and wider contribution that graduates make to SMEs. In the final section of the paper we discuss the findings in the context of both methodological considerations and policy implications. We note the need to re-position the graduate-SME relationship within what would appear to be the new research “flavour of the month”: graduate enterprise and start-up, and reflect upon the implications of this for our understanding of this non traditional labour market more broadly.

Recruitment Labour market data The over-arching data deficiency identified in 2002 was the broad market context; data which tells us about all graduates in all sizes of firms in all sectors and in all occupations. Moving forward three years, Harris and Reid (2005) provide a further example of this “data difficulty”. They make use of Labour Force Survey data to compare numbers of graduates in SMEs in Northern Ireland with other UK regions. Although useful, this data says little about first destination employment. So, whilst they identify that 6 per cent of employees in small businesses in the manufacturing sector are graduates, we have no way of knowing at what stage in their career the employment in an SME commenced. What Harris and Reid’s (2005) study does do, is support the notion that graduate employment increases with firm size. Thus, the Labour Force Survey 2000 data suggest that the percentage of UK employees with a degree in firms of 1-10 employees was 7.6 per cent, which rose to 17.5 per cent for firms above 50 employees. Our report to Government recommended the inclusion in its first destination survey of leavers, a question which specifically addressed the size of organization joined by the graduate. Encouragingly, the Higher Education Statistics Agency commenced this field of enquiry for the year 2002/3. Thus we have two years of data to date. This illustrates for example that in the region of 40 per cent of higher education leavers obtain first destination employment within SMEs (see Table I). HESA make an interesting distinction between “graduate” and “non-graduate” level jobs. The figure of 40 per cent reduces to 30 per cent if the focus is only on “graduate-level” employment. Additional variables, in respect of Standard Industrial Classification and Standard Occupational Classification are illustrated in Tables II-V. In fact, although not fully illustrated here, the depth of the data is such that it would be possible to identify for example, how many female graduates, from a particular discipline, joined micro firms in a management capacity. It is not the purpose of this paper to delve into the analysis of this data but rather, simply to note its existence and its potential for assisting much needed research.

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2002/03 Size (no. of employees)

214

Table I. Destination of leavers by firm size and graduate marker (please see footnote to tables for explanation and definitions)

1 to 49 50 to 249 250 þ Total

Total n %

Graduate n %

2003/04 Nongraduate n %

Total n %

Graduate n %

Nongraduate n %

37,960 25 26,020 24 11,905 28 39,900 24 27,815 24 12,025 27 27,195 18 19,930 18 7,235 17 29,385 18 21,930 19 7,420 17 88,075 57 64,440 58 23,460 55 93,815 58 68,275 58 25,385 57 153,160 100 110,395 100 42,605 100 163,105 100 118,025 100 44,835 100

Notes: The HESA Destinations of Leavers from Higher Education (DLHE) Target Population contains all United Kingdom (UK) and European Union (EU) domiciled students reported to HESA for the reporting period 1 August to 31 July as obtaining relevant qualifications and whose study was full-time or part-time (including sandwich students and those writing-up theses); for further information on DLHE please refer to information on HESA’s web site: www.hesa.ac.uk; totals will not equal sum of categories given exclusion of respondents where category of interest was unknown; the total number of leavers of higher education (i.e. including respondents where firm size was unknown) was 232,364 in 2002/03 and 238,243 in 2003/04; HESA’s rounding strategy for the purposes of data confidentiality result in all absolute figures being divisible by five; the percentage figures are based on non-rounded data, though this will only make a difference where overall figures are very small; the graduate marker intends to provide an indication of whether a job can be classified as being a “graduate” job; it is defined using four character SOC 2000 code groups – for details, see RP6 at: www2.warwick.ac.uk/fac/soc/ier/research/current/7yrs2/ Source: Higher Education Statistics Agency

Demand and supply Our conclusions in 2002 suggested an immature market with very few firms having specific processes for recruiting graduates. Indeed, much recruitment into SMEs was via schemes/initiatives with unclear indications as to the sustainability of such employment. We noted that graduate recruitment into SMEs can be, and has been, investigated from the supply (HE leavers) (for example, Westhead, 1998; Belfield, 1999) or demand (SME owner/managers) perspective (for example Johnson and Pe´re´-Verge´, 1993; O’Brien and Clark, 1998; Yorke, 1999). On the demand side, research suggested that SME recruiters were not models in miniature of larger and more regular recruiters. SMEs tended to be portrayed as not engaging fully in the graduate recruitment process. Recruitment practices were less formal, and “milkround” type engagement with higher education institutions practically non-existent. The limited evidence that was available suggested that SMEs were often characterised by other barriers stemming mainly from management inexperience (and sometimes suspicions) of harnessing new graduate skills. A further barrier was the perceived capability gap amongst new graduates. Turning to the supply side, we noted research suggesting that graduates were either ignorant of SME employment opportunities, or that their decisions not to work in such firms was based on graduates’ perception of SMEs not offering as many opportunities (fringe benefits, higher salaries, career progression) as larger firms. We also noted that notwithstanding the important role played by brokers and intermediaries in relation to schemes/initiatives the SME graduate labour market was poorly understood – or prioritised – by careers, placement and other services that effectively act as gatekeepers within the wider graduate labour market. This, as a result, had held back both an interest from graduate leavers and demand from SMEs.

2002/03 Standard Industrial Classification (SIC)

1 to 49 n %

Size (no. of employees) 50 to 249 250 þ n % n %

Agriculture and forestry 500 1.3 105 0.4 Fishing 10 0.0 5 0.0 Mining and quarrying 45 0.1 60 0.2 Manufacturing 2,555 6.7 2,265 8.3 Electricity, gas and water supply 75 0.2 125 0.5 Construction 755 2.0 535 2.0 3,655 9.6 1,825 6.7 Wholesale and retail trade; repair of motor vehicles, motorcycles and personal and household goods Hotels and restaurants 2,075 5.5 765 2.8 Transport, storage and communication 690 1.8 655 2.4 Financial activities 855 2.3 985 3.6 Property development, renting, 8,880 23.4 4,595 16.9 business and research activities Public administration and defence; 925 2.4 1,315 4.8 social security Education 7,910 20.8 9,435 34.7 Health and social work 4,755 12.5 2,635 9.7 Other community, social and personal 4,000 10.5 1,795 6.6 service activities Private households with employed 95 0.3 0 0.0 persons International organisations and bodies 55 0.2 30 0.1 Not known/not applicable 90 0.2 35 0.1 Total 37,955 100 27,195 100

Total n

%

150 0 465 7,380 1,080 1,330 8,060

0.2 0.0 0.5 8.4 1.2 1.5 9.2

755 15 575 12,220 1,290 2,630 13,555

0.5 0.0 0.4 8.0 0.8 1.7 8.8

1,170 3,330 7,055 8,435

1.3 3.8 8.0 9.6

4,020 4,685 8,905 21,950

2.6 3.1 5.8 14.3

12,070

13.7

14,315

9.3

11,435 23,025 2,785

13.0 26.2 3.2

28,840 30,440 8,600

18.8 19.9 5.6

5

0.0

105

0.1

New graduate employment within SMEs 215

125 0.1 215 0.1 80 0.1 210 0.1 88,005 100 153,360 100

Notes: The HESA Destinations of Leavers from Higher Education (DLHE) Target Population contains all United Kingdom (UK) and European Union (EU) domiciled students reported to HESA for the reporting period 1 August to 31 July as obtaining relevant qualifications and whose study was full-time or part-time (including sandwich students and those writing-up theses); for further information on DLHE please refer to information on HESA’s web site: www.hesa.ac.uk; totals will not equal sum of categories, given exclusion of respondents where category of interest was unknown; the total number of leavers of higher education (i.e. including respondents where firm size was unknown) was 232,364 in 2002/03 and 238,243 in 2003/04; HESA’s rounding strategy for the purposes of data confidentiality result in all absolute figures being divisible by five; the percentage figures are based on non-rounded data, though this will only make a difference where overall figures are very small; the graduate marker intends to provide an indication of whether a job can be classified as being a “graduate” job; it is defined using four character SOC 2000 code groups – for details, see RP6 at: www2.warwick.ac.uk/fac/soc/ier/research/current/7yrs2/ Source: Higher Education Statistics Agency

Moving forward five years, is the picture still as biased towards employment in large organizations? If one risks taking the East Midlands as being representative of development in the UK as a whole, then an interest in placing graduates in SMEs is far from on the wane. Otter (2005) notes a wide range of ongoing initiatives throughout this region aimed at encouraging graduate employment with particular emphasis on SMEs. Interestingly, this region is trying to increase productivity not only by increasing levels of skills but also by trying to stimulate demand for skills by

Table II. Destination of leavers by industry 2002/03

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Table III. Destination of leavers by industry 2003/04

2003/04 Standard Industrial Classification (SIC) Agriculture and forestry Fishing Mining and quarrying Manufacturing Electricity, gas and water supply Construction Wholesale and retail trade; repair of motor vehicles, motorcycles and personal and household goods Hotels and restaurants Transport, storage and communication Financial activities Property development, renting, business and research activities Public administration and defence; social security Education Health and social work Other community, social and personal service activities Private households with employed persons International organisations and bodies Not known/not applicable Total

Size (no. of employees) 1 to 49 50 to 249 250 þ n % n % n %

Total n %

550 5 45 2,430 75 805 3,305

1.4 0.0 0.1 6.1 0.2 2.0 8.3

95 0 65 2,250 125 565 1,800

0.3 0.0 0.2 7.7 0.4 1.9 6.1

115 0 455 7,325 965 1,375 9,365

0.1 0.0 0.5 7.8 1.0 1.5 10.0

765 15 570 12,020 1,165 2,745 14,485

0.5 0.0 0.4 7.4 0.7 1.7 8.9

2,220 690 775 9,585

5.6 1.7 1.9 24.0

735 675 980 5,295

2.5 2.3 3.3 18.0

1,555 3,415 7,515 10,315

1.7 3.6 8.0 11.0

4,525 4,785 9,280 25,240

2.8 2.9 5.7 15.5

815

2.0

1,305

4.4

10,960 11.7 13,085

8,725 5,305 4,335

21.9 10,275 35.0 11,775 12.6 30,835 13.3 3,175 10.8 25,115 26.8 33,625 10.9 1,965 6.7 3,330 3.6 9,645

18.9 20.6 5.9

100

0.3

0.1

40 0.1 65 0.2 39,900 100

5

0.0

15 0.1 40 0.1 29,385 100

5

0.0

130 0.1 85 0.1 93,810 100

110

8.0

185 0.1 195 0.1 163,305 100

Notes: The HESA Destinations of Leavers from Higher Education (DLHE) Target Population contains all United Kingdom (UK) and European Union (EU) domiciled students reported to HESA for the reporting period 1 August to 31 July as obtaining relevant qualifications and whose study was full-time or part-time (including sandwich students and those writing-up theses); for further information on DLHE please refer to information on HESA’s web site: www.hesa.ac.uk; totals will not equal sum of categories, given exclusion of respondents where category of interest was unknown; the total number of leavers of higher education (i.e. including respondents where firm size was unknown) was 232,364 in 2002/03 and 238,243 in 2003/04; HESA’s rounding strategy for the purposes of data confidentiality result in all absolute figures being divisible by five; the percentage figures are based on non-rounded data, though this will only make a difference where overall figures are very small; the graduate marker intends to provide an indication of whether a job can be classified as being a “graduate” job; it is defined using four character SOC 2000 code groups – for details, see RP6 at: www2.warwick.ac.uk/fac/soc/ier/research/current/7yrs2/ Source: Higher Education Statistics Agency

employers. Much of this demand is to be met by the SME sector. Indeed, the East Midlands perceives its large and diverse selection of small firms as a key strength. The region’s skills strategy therefore focuses on trying to encourage SMEs to recruit and thereby retain graduates in the region, as well as encourage graduates to seek employment in SMEs (Pollard et al., 2004). A series of research inquiries (Booth, 2004; Pollard et al., 2004; Otter, 2005) have generated much data of value on the graduate labour market generally within this

2002/03 Standard Occupational Classification

Size (no. of employees) 1 to 49 50 to 249 250 or more n % n % n %

Managers and senior officials 4,850 12.8 2,515 9.3 Professional occupations 12,345 32.5 12,000 44.1 Associate professional and technical 9,415 24.8 5,775 21.2 occupations Administrative and secretarial 3,920 10.3 3,130 11.5 occupations Skilled trades occupations 795 2.1 200 0.7 Personal service occupations 1,975 5.2 1,170 4.3 Sales and customer service occupations 2,210 5.8 1,415 5.2 Process, plant and machine operatives 235 0.6 195 0.7 Elementary occupations 2,170 5.7 745 2.7 Not known/not applicable 25 0.1 25 0.1 Total 37,955 100 27,195 100

Total n

%

10,985 26,730 27,780

12.5 30.4 31.6

18,355 51,080 42,975

12.0 33.4 28.1

11,675

13.3

18,730

12.2

New graduate employment within SMEs 217

485 0.6 1,485 1.0 1,680 1.9 4,835 3.2 6,545 7.4 10,175 6.6 420 0.5 855 0.6 1,590 1.8 4,510 2.9 100 0.1 155 0.1 88,005 100 153,160 100

Notes: The HESA Destinations of Leavers from Higher Education (DLHE) Target Population contains all United Kingdom (UK) and European Union (EU) domiciled students reported to HESA for the reporting period 1 August to 31 July as obtaining relevant qualifications and whose study was full-time or part-time (including sandwich students and those writing-up theses); for further information on DLHE please refer to information on HESA’s web site: www.hesa.ac.uk; totals will not equal sum of categories, given exclusion of respondents where category of interest was unknown; the total number of leavers of higher education (i.e. including respondents where firm size was unknown) was 232,364 in 2002/03 and 238,243 in 2003/04; HESA’s rounding strategy for the purposes of data confidentiality result in all absolute figures being divisible by five; the percentage figures are based on non-rounded data, though this will only make a difference where overall figures are very small; the graduate marker intends to provide an indication of whether a job can be classified as being a “graduate” job; it is defined using four character SOC 2000 code groups – for details, see RP6 at: www2.warwick.ac.uk/fac/soc/ier/research/current/7yrs2/ Source: Higher Education Statistics Agency

region. However, with specific reference to the SME graduate labour market it is questionable if our understanding has advanced in any meaningful or dramatic way. Booth (2004), for example, argues the need to generate a “mutual attraction and nurture confidence of both parties in their future together”. A number of “critical success factors” are noted including, on the supply side, the need to change outdated perceptions of work in smaller companies and measures to “balance” the “glossy brochures and presentations” from larger companies. On the demand side she argues for the need for more information which demonstrates the value a graduate can add, together with assistance with the actual recruitment process. Here, for example, there is a suggestion that enhanced demand might result if companies can access skills (of graduates) at the moment they need to, and in appropriate ways (e.g. via a dedicated web site). A report from the Shell Technology Enterprise Programme (STEP, 2005) addresses graduate recruitment trends in the region. SMEs figure significantly within this. Based on interviews with 49 SMEs, the research confirms much of what has been discussed earlier and elsewhere in terms of constraints and barriers which affect the SME graduate labour market. For example, a perceived lack of experience and

Table IV. Destination of leavers by Standard Occupational Classification 2002/03

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Table V. Destination of leavers by Standard Occupational Classification 2003/04

2003/04 Standard Occupational Classification (SOC)

Size (no. of employees) 1 to 49 50 to 249 250 or more n % n % n %

Managers and senior officials 4,790 12.0 2,535 8.6 Professional occupations 13,515 33.9 13,015 44.3 Associate professional and technical 10,115 25.4 6,745 23.0 occupations Administrative and secretarial 3,805 9.5 3,110 10.6 occupations Skilled trades occupations 995 2.5 235 0.8 Personal service occupations 2,225 5.6 1,475 5.0 Sales and customer service occupations 2,005 5.0 1,320 4.5 Process, plant and machine operatives 230 0.6 155 0.5 Elementary occupations 2,155 5.4 755 2.6 Not known/not applicable 55 0.1 30 0.1 Total 39,900 100 29,385 100

Total n

%

10,710 28,385 30,450

11.4 30.3 32.5

18,035 54,920 47,310

11.1 33.7 29.0

12,010

12.8

18,930

11.6

495 0.5 1,720 1.1 2,005 2.1 5,705 3.5 7,335 7.8 10,665 6.5 445 0.5 835 0.5 1,815 1.9 4,725 2.9 155 0.2 245 0.1 93,815 100 163,105 100

Notes: The HESA Destinations of Leavers from Higher Education (DLHE) Target Population contains all United Kingdom (UK) and European Union (EU) domiciled students reported to HESA for the reporting period 1 August to 31 July as obtaining relevant qualifications and whose study was full-time or part-time (including sandwich students and those writing-up theses); for further information on DLHE please refer to information on HESA’s web site: www.hesa.ac.uk; totals will not equal sum of categories, given exclusion of respondents where category of interest was unknown; the total number of leavers of higher education (i.e. including respondents where firm size was unknown) was 232,364 in 2002/03 and 238,243 in 2003/04; HESA’s rounding strategy for the purposes of data confidentiality result in all absolute figures being divisible by five; the percentage figures are based on non-rounded data, though this will only make a difference where overall figures are very small; the graduate marker intends to provide an indication of whether a job can be classified as being a “graduate” job; it is defined using four character SOC 2000 code groups – for details, see RP6 at: www2.warwick.ac.uk/fac/soc/ier/research/current/7yrs2/ Source: Higher Education Statistics Agency

immediate “work ready” skills are noted as the main barriers cited by SMEs for not targeting graduates. Outside of this regionally based research Bowen et al. (2004) draw similar conclusions. SMEs, they maintain, are reluctant to employ graduates and graduates are equally wary of SME employment. This is the context for the development of the Network75 initiative which aimed at reducing these attitudinal barriers by offering undergraduates placements in SMEs. Bowen et al.’s (2004) findings focused predominantly on the SME perspective and can be considered encouraging given that participating SMEs were more likely to consider employing graduates after the placement experience. Westhead and Matlay (2005) endeavour to take a more “longitudinal” perspective. They suggest that the STEP which, similar to Network75 arranges placements in SMEs but this time in students’ summer holidays, fails to increase the likelihood of a STEP student entering a small firm two years after graduation. This, along with the finding that students who are prepared to trade lower wages for an executive position are also more likely to be employed in a small firm, lead the authors to conclude that “market forces” rather than “ignorance” shapes the lower probability of graduates obtaining employment in a SME.

These contributions, taken as a whole, represent, we suggest, a somewhat generalized approach to the SME graduate relationship. By and large they broadly confirm a relationship characterized by mutual unattractiveness whether as a result of ignorance or market forces and which only really offers very broad based targets for policy development. We conclude this section, however, with reference to three pieces of work which in very different ways offer a glimpse of something new. Pittaway and Thedham (2005), in their attempt to explore the “gap” between policy rhetoric and the reality of graduate recruitment, adopt a more rigorous delineation between SMEs of different sizes. Their study relating to the hospitality, leisure and tourism industries indicates that of the 139 owner-managers surveyed, 36 (26 per cent) employed graduates. However, there was a strong skew towards graduate employment with increasing business size and growth aspirations. Given the preponderance of small and micro-firms within the hospitality, leisure and tourism industries, Pittaway and Thedham (2005) draw the conclusion that SMEs in this sector have a low level of graduate employment. Furthermore, they suggest that in relation to employer perceptions regarding the usefulness of graduate skills, micro-businesses believed that: graduates would not like to work in the business; the business did not need graduate skills and that graduates would not fit within their workforce. Although Pittaway and Thedham’s (2005) work is sector specific, it may well be the case that micro firms in other sectors are an inappropriate context in which to recruit a graduate. This could inform policy decisions and avoid energy and investment being wasted targeting the “wrong” size of firm. In a further sector-specific study, Martin and Chapman (2006) investigate SME owner-managers’ reluctance to employ marketing graduates. Although much of their study revolves around graduate capability, their findings also focus on what prevents graduates from seeking employment in SMEs. Here the term “socialisation” is used when describing higher education’s role in developing graduates’ preference to seek large firm employment. Evidently, Martin and Chapman (2006) are critical of HE in this respect and argue that many graduates in their study who entered SME employment “by default” were satisfied with this outcome. Equally telling is their finding that it was precisely the large firm orientation of marketing, as taught in higher education that has resulted in a mismatch of SME employers’ needs and graduate capability. Overall, Martin and Chapman (2006) rightly confirm that overcoming low levels of graduate employment in SMEs in the marketing sector is a complex issue. Nonetheless, the issue of socialisation is useful as it questions provenance of attitudes and values and thereby goes beyond a simple static comparisons of supply and demand. Finally, we return to the East Midlands. Part of the IES study (Pollard et al. 2004) focuses on what East Midlands’ graduates want from an employer. Respondents were asked to rank seven factors according to importance when choosing a job. Interesting/challenging work was seen as most important, and in fact, size of employer as least relevant. Nonetheless, a further, more direct question on the role of employer size on employment choice reveals some surprising results. The question itself asked students what size of company they would prefer to work in, in the first few months after finishing their course, and in three years’ time. The options given were small (number of employees , 50), medium (50 , n , 500), and large (n . 500). Almost twice as many full-time leavers preferred to work in a small company than in a large company (41 per cent compared to 24 per cent). The research team interprets this as possibly indicating that new graduates may prefer to enter the labour market via

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smaller employers and via temporary work and it provides a note of some controversy on which to conclude this section, appearing on the face of it to be at odds with other research based in the East Midlands, the more conventionally held wisdom and, indeed, by implication, the research of Pittaway and Thedham (2005). Certainly, if many graduates are not seeking traditional organizational careers (see Mayrhofer et al., 2005) this needs further investigation, but is of critical importance to our understanding of the graduate labour market, particularly in relation to SME employment. We move now to our third and final theme, utilization. Utilization We noted in 2002 the extensive debate concerning the kind of skills SME owner/managers think graduates need. We recorded at least one (Holden and Jameson, 1999) study where, paradoxically, managers had complaints about the lack of skills in the graduate labour market, yet under-utilization of graduates was also regarded as a problem. The main capability gaps for SMEs appeared to stress the generic and transferable skills of new graduate entrants. The more robust studies (e.g. Harvey et al., 1997; Williams and Owen, 1997; Rajan et al., 1998; Conway and Baines, 2000) pointed to an observed lack of initiative, weak interpersonal skills, low levels of business awareness and poor team working skills. We were unable to conclude whether this was accounted for mainly by supply factors or a demand effect stemming at least in part from inappropriate matching of entrants to jobs. It could also be the case that this was due to ill framed or unrealistic expectations of managers. Overall though, the evidence on graduate contribution to SMEs was positive but predominantly drawn from anecdotal and snap-shot assessments often after only short periods of graduate engagement. This said, when graduates found themselves either temporarily (scheme or initiative) recruited to an SME or permanently recruited, few studies showed graduates “failing”. Satisfaction amongst employer and employee (graduate) was high and on this evidence fears and assumed risks that seem to hold back more SMEs from recruiting new graduates appeared to have little foundation. We detected few departures from this skills discourse. One notable exception was Holmes“ (2001) work on graduate identity. This ethnographically-based investigation into graduate organisational entry painted a more positive picture of employment in SMEs, with graduates indicating high levels of responsibility and autonomy. The question now is, to what extent in 2006 have we a more robust evidence base upon which to develop our understanding of graduate utilization in SMEs? Our reading of available research suggests little progress has been made. Data on the Department of Trade and Industry’s flagship Knowledge Transfer Programme[1], is the only published research which seeks to assess, in economic terms, the contribution of graduate labour within an SME. Over 85 per cent of KTPs are based in SMEs. The 2004/5 Annual Report claims on average one-off increase in profits of nearly £50,000 from participation in the partnership (DTI, 2005). A remaining difficulty, though, is that of attribution to the recruitment of the graduate. Interestingly the report also notes that the percentage of Associates staying with their company after completing their contract is fairly stable at around 50 per cent. Elsewhere, we note the work of Arnold and colleagues (Arnold et al., 2002) exploring graduate experience of work in small organizations in the UK and The Netherlands. Whilst their research is oriented more to the issue of transition than strictly utilization, Arnold et al. (2002) broadly confirm the data reported on pre 2002 and more recently in

the KTP reports. Although focused exclusively on the views of the employed graduates, the small firms in the sample seemed to offer graduates a lot of freedom to do things “their way”1 and possibly as a consequence, to develop their skills. Whilst the authors make some important points about our understanding of issues like “responsibility” (see also below) their conclusion is that “on the whole graduates were quite pleased with their experiences of working in small organisations, both in absolute terms and relative to expectations.” McLarty (2005) has been working with data obtained from 18 graduates employed in SMEs in East Anglia for a number of years (see, for example, McLarty, 2000). The work is important because it is based on more than just “snapshot” data. Each graduate was interviewed at least twice, and managers of SMEs” opinions were also sought. This latest analysis highlights the likelihood of a tension between a graduate’s initial perceptions of what skills they can bring to the SME with actual employment experience. Teamwork, for example, drops in perceived significance over time leading McLarty (2005) to suggest that this may be overrated in both the literature and within the HE capability agenda. He concludes, that higher education needs “to focus more on defining experiential generic skills rather than relying on core skills and transferable skills which may be too inconsequential to be effective in SMEs”, yet the precise implication of this conclusion remains obscure. Again, as with recruitment, we would suggest that there has been an incremental move forward in our understanding of the relationship between graduates and SMEs. However, overall there has been little that attempts to enter new territory. A partial exception is the work of Pittaway and Thedham (2005). They broadly accept the argument that within the UK there is a lack of management and leadership ability in SMEs but then seek specifically to assess the role that graduate labour may have in filling this gap. Of particular note is their evidence which suggests that graduates in micro firms are more likely to be under-utilized compared with other sizes of firms in the SME sector. As far as medium-sized business owners were concerned they believed that graduates would improve business performance and their skills would be needed and they would fit with the workforce. To an extent this offers a slightly different picture to that reported by Holden et al. (2005) who through survey data on the employment and use of graduates by SMEs raised serious questions concerning graduate under-utilization largely independent of firm size or growth. They found that even amongst growth firms and in firms where the owner manager was positive about employing graduates, graduates were being used in a predominantly non-managerial capacity. In both pieces of research though, a remaining uncertainty is whether under-utilization, wherever it occurs is principally a supply side or a demand side issue. A further problem is exactly what owner managers mean when they use such terms as “managerial” and “operative” (see also Arnold et al., 2002). There is a need, we suggest, for greater conceptual clarity. Nevertheless, although both of these pieces of research were limited to the Hospitality and Tourism sectors, conceptually, methodologically and indeed in terms of potential policy development, we can begin to see some progress in this more recent research. It is further aided by the potentially helpful conceptual considerations produced, for example, by Purcell et al. (2004) and Otter (2005) in relation to the wider graduate labour market. Purcell et al. (2004) work with a five-fold classification of graduate occupational typology (traditional graduate, modern graduate, new graduate, niche graduate and non-graduate) whilst Otter (2005), based on work with graduate

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placements in SME suggests a four fold typology regarding the graduate engagement with SMEs (high tech businesses with knowledge transfer needs; businesses in a supply chain subject to pressure to increase efficiency/quality; businesses offering services which have been outsourced from larger businesses and the rest). Such work will surely help focus attention on a more nuanced understanding of the SME graduate labour market This is helped further by the learning we can draw from Arnold et al.’s (2002) work in relation to slippery issues such as graduate “responsibility” within an SME. As Arnold et al. (2002) suggest, it is inappropriate to speak of responsibility without specifying what the responsibility is for. There is an important point here for studies of the graduate-SME relationship that use overly simplistic survey designs to measure complex concepts. Discussion It was difficult in 2002 to escape the conclusion that research had failed to provide anything like a sound evidence base upon which to consider and develop public policy in relation to the SME graduate labour market; whether principally interventionist or non-interventionist. To what extent, then, five years on from the “benchmark” SBS report are we emerging from the gloom of a fairly damning report on the state of knowledge and understanding about the SME graduate labour market. We structure this Discussion section as follows. First we seek to sum up the recent research data and literature, and its impact upon our understanding and insight, in relation to new graduate employment within SMEs. Secondly, we introduce into the discussion a question as to whether there has been a subtle change in the research agenda, away from a specific focus on graduates in SMEs and towards graduates starting their own businesses. We reflect on the implications of this for our understanding of the non traditional graduate labour market more broadly. Clearly a major deficiency in terms of robust data on the first destinations of graduates in relation to size of organization is now in the process of being remedied. Issues about the extent to which such data provides an accurate picture of specifically graduate level employment in SMEs will remain, but its significance should not be under-estimated. Critically, this data should provide a more illuminating reference, or starting point, in terms of addressing particular areas of apparent tension and interest and enable research to be appropriately and accurately framed to tackle such issues. Beyond this statistical development, progress remains essentially somewhat disappointing. We have little more insight into the apparent paradox of “mutual suspicion” on behalf of graduates and SME owner-managers yet apparent “satisfaction” once engaged, however that engagement is procured. And, if we add the research of Pollard et al. (2004) suggesting that SMEs are in fact the first choice of many graduate leavers, we have further complication and ambiguity. In respect of the utilization of new graduate labour within SMEs, research is still largely dominated by a, not always fruitful, skills discourse. We have a continuing tension between the research from an established initiative such as the Knowledge Transfer Partnership, with its claims of significant added value as a result of graduate employment, and nagging concerns about under-utilization. In many ways this is unsurprising because taken as a whole the research is still struggling to escape from an ambiguity about just what it is seeking to measure and how it is seeking to undertake such measurements. Conceptual and methodological problems, therefore, would appear to be major obstacles to further progress. There are exceptions. In this respect, for example, the approach of Pittaway

and Thedham (2005) offers a glimpse of a more nuanced and appropriate research design by segmenting the small firms sector by size and other pertinent variables. It is pertinent at this juncture to note the work of Grant and Perren (2002). The authors argue that research in small business has been dominated by a functionalist paradigm and that the health and future development of research requires a broadening of perspectives. We have some sympathy with this view. We noted in 2002 the need for in-depth, qualitative research to effectively counter the useful, but limited, survey-style research that had dominated the skills discourse within this particular field of small business research. Similarly Holmes’ (2001) work on identity and graduate employment in SMEs fits comfortably within Grant and Perren’s call for alternative research paradigms. It is important to note that other than the partial exception of Holden and Harte (2004) (full research not yet published) there has been no development of this work, flagged by Holmes (2001), in terms of the paucity of a wholly skills based approach. Of course, it is only five years since the research was undertaken which culminated in the report to the Small Business Service. It might be argued that this is an unrealistically short period of time to undertake the “update” which has been our purpose in this paper. At first blush this might seem a fair grievance. We would however counter this by drawing on our observation of a shift in the prevailing orthodoxy in respect of what it is important to research in terms of the graduate labour market. The change we identify is away from the graduate SME labour market as such and towards that of graduate start-up and graduate entrepreneurship. Some measure of this shift can be found in one of the outcomes from this literature search. The research team trawled four electronic databases (Ingenta Journals, Emerald, ZETOC and EBSCO) from 2000 to 2005, firstly using the paired terms “graduates” and “SMEs”, and secondly “graduate” and “entrepreneurship”. The results certainly provide some evidence for a growing interest in the topic of graduate entrepreneurship, while the graduates as SME employees focus has, if not waned, certainly not increased (full results can be seen in Appendix B). A further indicator of this development, we would suggest, is the establishment of the National Council for Graduate Entrepreneurship, the Centres for Excellence in Teaching and Learning (CETL) initiative[2] and, related to this, the fact that if it is ever possible to speak of readily available research funding, then it is tied to this research focus. This is not a disingenuous argument. Our concern is that the research in this field of graduate start-up and entrepreneurship may be characterized by similar problems and deficiencies to those we have discussed above. It is not the purpose of this paper to review the research and literature on graduate start-up. We would suggest, though, that our admittedly partial understanding of the body of work emerging under this research umbrella is characterized by: . an impoverished database in terms of flows of graduate into start-up/self employment; . a conceptual ambiguity in terms of graduate entrepreneurship, graduate start-up; . a quantitative methodological bias most evident in the burgeoning “intent” type surveys; and . a failure to address a longitudinal dimension, assessing the extent to which intent is actually translated into action and the nature of this journey.

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If our reading of this shift in the research “flavour of the month” is broadly accurate it confirms and reinforces the significance of the non-traditional labour market (within which SMEs, self employment sit alongside other employments contexts) in terms of fully employing the ever rising number of graduates entering the labour market. At the same time, though, it surely alerts us to the dangers of this research agenda floundering in similar ways to that evident in respect of the graduate SME labour market. Hence, from this perspective this review is, we would venture, not only legitimate but very timely in terms of its critique and conclusions. Conclusion There can be no doubt that a proportion of graduates find first destination employment in SMEs. The market is distinctive. Whilst at the moment it remains relatively small scale it is not without complexity. Much of this complexity is poorly understood. Parts of it are influenced significantly by a system of brokers working with various public funded initiatives. There is mutual suspicion on behalf of new graduates and SME owner managers. Overall, though, graduates do appear to make a contribution to the SME but the evidence on which this is based is largely anecdotal. Indeed, much of the evidence about the SME graduate labour market as a whole is also predominately characterized by “snap shot” assessments, often after short periods of engagement. This much we knew in 2002. Public policy, whilst recognizing the value of expanding the SME demand for new graduates, was largely “running blind”; poorly supported by a level of detail and quality of intelligence on the evolving SME graduate labour market and the relationship between new graduates and SMEs. Five years on it would be churlish to suggest nothing has changed. There are glimmers of light. The HESA statistics provide one such positive development. There is also a growing recognition and acknowledgment of the need to address size and sector diversity. Indeed, research differentiated along broad size/sector lines may also be too crude. The newly available statistics may help frame even more appropriately differentiated studies. This said, and in terms of a research agenda which in 2002 stressed the importance of a richer picture of the recruitment and in particular the subsequent utilization of graduates by SMEs, we are not much further forward. Critical questions remain unanswered. For example, how do the particular characteristics of SME employment impact upon graduates’ notions of “graduateness” and their ability to make the transition from student to effective employee within an SME? Are the processes whereby graduates “learn the company” significantly different in an SME vis a` vis a large company or indeed between different types of SMEs? How do graduates draw on their capabilities in their existing tool bag and seek to generate new ones or improve those deemed deficient? Whilst we can identify voices arguing for alternative and more sophisticated research which might, for example, seek to explore how over time a graduate learns his/her new role in an SME or provides a real understanding of impact in terms of issues such as responsibility, leadership, strategic decision making, it would seem that this agenda has yet to see the light of day. In 2002 public policy had clearly recognized the value of expanding SME demand for new graduates. It simply was ill equipped to base any decision making on a sound evidence base. This is still the case. The problems of ensuring that a supply of graduates meets demand or that demand soaks up the supply of graduates have not disappeared. However, the politics of 2007, whilst not relinquishing an emphasis on the small

business sector as the nation’s engine of growth, nevertheless has seen a new favourite emerge. The “enterprising” graduate and the potential for more new graduates to start their own business and contribute in this way to the development of prosperity, economic success and appropriate deployment of “graduate” labour. Thus, our conclusions are twofold. Not only does this review remind us of the need for more nuanced and sophisticated research in this small, but growing slice of the non-traditional graduate labour market, it also sends a message, in a modest way, to those leading the graduate start-up research agenda. Our understanding about the recruitment and utilization of graduates in SMEs is still in the twilight and the problems and weaknesses identified may all too readily prevail in respect of this newer research agenda. Notes 1. Formerly The Teaching Company Scheme, the KTP involves the employment of an Associate (recently qualified graduate) for a project lasting one to tree years. 2. A number of the recently established government funded CETLs focus specifically upon equipping students in HE with enterprising and entrepreneurial skills. References Arnold, J., Schalk, R., Bosley, S. and Van Overbeek, S. (2002), “Graduates’ experience of work in small organizations in the UK and The Netherlands: better than expected”, International Small Business Journal, Vol. 20 No. 4, pp. 477-97. Belfield, C.R. (1999), “The behaviour of graduates in the SME labour market: evidence and perceptions”, Small Business Economics, Vol. 12, pp. 249-59. Booth, J. (2004), Get Ahead: Supplying High Level Skills to Smaller Companies, East Midlands Universities Careers Task Force, Loughborough. Bowen, E., Lloyd, S. and Thomas, S. (2004), “Changing cultural attitudes towards graduates in SMEs to stimulate regional innovation”, Industry and Higher Education, Vol. 18 No. 6, pp. 385-90. Conway, C. and Baines, S. (2001), “How do small and medium sized enterprises become knowing firms? The role of graduates in the transfer of knowledge and skills”, paper presented at the 24th ISBA National Small Firms Policy and Research Conference, Hinckley, 14-16 November. Department of Trade and Industry (DTI) (2005), Knowledge Transfer Partnerships Annual Report 2004/05, DTI, London. Elias, P. and Purcell, K. (2003), “Research paper no. 1 – Measuring change in the graduate labour market”, Employment Research Services Unit, University of the West of England, Bristol & Warwick Institute for Employment Research, Warwick. Grant, P. and Perren, L. (2002), “Small business and entrepreneurial research: meta-theories, paradigms and prejudices”, International Small Business Journal, Vol. 20 No. 2, pp. 185-211. Harris, R. and Reid, R. (2005), “Graduate employment and training in SMEs in Northern Ireland: an overview using the 2000 Labour Force Survey”, Industry & Higher Education, Vol. 17 No. 4, pp. 55-63. Harvey, L., Moon, S. and Geall, V. (1997), Graduates’ Work: Organisation Change and Students’ Attributes, Centre for Research into Quality, Birmingham. HESA (2006), website available at: www.hesa.ac.uk/holisdocs/pubinfo/student/subject0405.htm (accessed 12 June). Holden, R.J. and Harte, V. (2004), “New graduate engagement with ‘professional development’: a pilot study”, Journal of European Industrial Training, Vol. 28 Nos 2,3,4, pp. 272-82.

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Holden, R.J. and Jameson, S. (1999), “A preliminary investigation into the transition and utilization of hospitality graduates in SMEs”, Tourism and Hospitality Research, Vol. 1 No. 3, pp. 231-42. Holden, R.J., Jameson, S. and Lashley, C. (2005), “Graduate transition into employment in hospitality SMEs: on a road to nowhere?”, Industry & Higher Education, Vol. 19 No. 1, pp. 65-73. Holden, R.J., Jameson, S. and Parsons, D.J. (2002), “Making a difference: the contribution of graduates to small business success”, report to the Small Business Service, Department of Trade and Industry, London. Holmes, L. (2001), “Reconsidering graduate employability: the ‘graduate identity’ approach”, Quality in Higher Education, Vol. 7 No. 2, pp. 111-19. Johnson, D. and Pe´re´-Verge´, L. (1993), “Attitudes towards graduate employment in the SME sector”, International Small Business Journal, Vol. 11 No. 4, pp. 65-70. McLarty, R. (2000), “Evaluating graduate skills in SMEs: the value chain impact”, The Journal of Management Development, Vol. 19 No. 7, pp. 615-28. McLarty, R. (2005), “The dimensions of graduate skills following SME employment experience”, Industry & Higher Education, Vol. 19 No. 1, pp. 35-43. Martin, P. and Chapman, D. (2006), “An exploration of factors that contribute to the reluctance of SME owner-managers to employ first destination marketing graduates”, Marketing Intelligence & Planning, Vol. 24 No. 2, pp. 158-73. Mayrhofer, W., Steyrer, J., Meyer, M., Strunk, G., Schiffinger, M. and Iellatchitch, A. (2005), “Graduates’ career aspirations and individual characteristics”, Human Resource Management Journal, Vol. 15 No. 1, pp. 38-56. O’Brien, E. and Clark, D. (1998), “Graduates – their entrepreneurial role in the small firm”, in The Marketing and Entrepreneurship Interface 1996-1998, Academy of Marketing Symposium, pp. 401-11. Otter, S. (2005), Graduate Placement Evaluation Study, Otter Consulting Limited, Tavistock. Pittaway, L. and Thedham, J. (2005), “Mind the gap: graduate recruitment in small businesses”, International Small Business Journal, Vol. 23 No. 4, pp. 403-26. Pollard, E., Williams, M. and Hill, D. (2004), Graduate Employment in the East Midlands, Institute for Employment Studies, Brighton. Purcell, K., Elias, P. and Wilton, N. (2004), “Research paper no. 3 – Higher education, skills and employment: careers and jobs in the graduate labour market”, Employment Studies Research Unit, University of the West of England, Bristol & Warwick Institute of Employment Research, Warwick. Rajan, A., Chapple, K. and Battersby, I. (1998), Graduates in Growing Companies: The Rhetoric of Core Skills and Reality of Globalisation, Centre for Research in Employment and Technology in Europe, Tunbridge Wells. STEP Enterprise Ltd (2005), Graduate Recruitment Trends in the East Midlands: Initial Research Findings, Nottingham, July. Westhead, P. (1998), “The Shell Technology Enterprise Programme: benefits reported by students and ‘host’ employers”, Journal of Small Business and Enterprise Development, Vol. 5 No. 1, pp. 60-78. Westhead, P. and Matlay, H. (2005), “Graduate employment in SMEs: a longitudinal perspective”, Journal of Small Business and Enterprise Development, Vol. 12 No. 3, pp. 353-65. Williams, H. and Owen, G. (1997), Recruitment and Utilization of Graduates by Small and Medium Sized Enterprises, Sheffield Hallam University, Sheffield. Yorke, M. (1999), “The skills of graduates: a small enterprise perspective”, in O’Reilly, D., Cunningham, L. and Lester, S. (Eds), Developing the Capable Practitioner: Professional Capability through Higher Education, Kogan Page, London.

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Figure A1. Publications on graduates in SMEs and entrepreneurship 2000-2005

Corresponding author Rick Holden can be contacted at: [email protected]

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Colin Jones University of Tasmania, Hobart, Australia Abstract Purpose – This paper seeks to address the issue of how graduate skills are developed. The focus is not on which skills, but rather what type of learning environments are required within higher education to support the development of skills valued and demanded by SMEs within Australia. Design/methodology/approach – This paper takes a step back to consider the underlying issue of how an individual student’s habits of thought are altered. In doing so, the past works of Morgan, Dewey, Whitehead, and Tyler are synthesized with the modern work of Baxter Magolda, Heath, and Biggs. Findings – It is argued that that without the development of a student-centred learning environment, most graduates will not develop the types of skills demanded by SMEs in a meaningful way. The failure to treat knowledge and skills as equal drivers of curriculum design will result in an imbalance that relegates skill development to a secondary learning outcome. Practical implications – By removing the distraction of what skills should be developed, a clearer focus is possible regarding how educators should assist students to develop a broad array of generic graduate skills. From this perspective, skills can be viewed as an essential element of the educational process, rather than a new element that must be squeezed in between content. Originality/value – This paper extends recent discussion of skills development through the use of an evolutionary perspective. Viewed as a process of creating social change, education becomes increasingly connected to a world that lies beyond institutional boundaries, thus promoting the notion of developing graduates for the world that awaits them. Keywords Graduates, Self development, Small to medium-sized enterprises, Australia Paper type Research paper

Journal of Small Business and Enterprise Development Vol. 14 No. 2, 2007 pp. 228-240 q Emerald Group Publishing Limited 1462-6004 DOI 10.1108/14626000710746664

Introduction The every increasing importance of SMEs to all global economies and the increasing responsibility of Universities to ensure the availability of skilled graduates to SMEs are universally acknowledged. What is less accepted is the ability of the higher education sector to effectively assist students develop lifelong skills (Matlay and Mitra, 2002). Rather than add to the growing literature related what skills should be developed; this paper aims to focus on how any such determined skills could (and should) be developed. In doing so, this paper returns a focus to some specific educational issues that receive less discussion (perhaps) due to the existing confusion of what skills should be developed. However, the position of the author is that many SME specific skills will be developed on the job, and what is important is that graduates have a capacity for learning additional skills beyond a broad base of skills applicable to all types of employment. This view is based on recent past development of the National Employability Skills Framework (NESF) in Australia, which was founded on the

findings that large, medium and small firms all increasingly demand graduates with a similar skill set. These skills are illustrated in Table I. While the NESF provides for a general, but transferable skills set, it also provides a focus on the nature of the requirements that students must satisfy in order to claim mastery of each skill. Therefore, there is a clear onus on higher education institutions guided by such frameworks to employ authentic assessment (Wiggins, 1989) procedures to determine student developmental outcomes – a particularly salient point given the increasing level of activity across Australian universities to embed graduate attributes across all courses. This paper is structured as follows. First, the notion of a reasonable adventurer (Heath, 1964) is considered and proposed to be a universally attractive type of graduate student. Then, related self-developmental issues are considered, allowing a more fine-grained focus on how students must change to incorporate new habits of thought (Veblen, 1925). Following this is a discussion of the process niche construction (Olding-Smee et al. (2003), through which the co-evolution of

Skill

Requirement

Communication

Contribute to productive and harmonious relations between employees and customers Contribute to productive working relationships and outcomes

Teamwork

Problem solving

Initiative and enterprise Planning and organising

Self-management Learning

Technology

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Exemplars

Listening & understanding; empathising; negotiating; using numeracy effectively; writing to the needs of the audience; sharing information; and reading independently Working with people of different ages, gender, race; working as an individual and/or team member; coaching, mentoring and giving feedback Contribute to productive Developing creative, innovative and practical outcomes solutions; solving problems in teams; applying a range of strategies & initiative and independence to problem solving Contribute to innovative Adapting to new situations; being creative; outcomes translating ideas into action; generating a range of options; initiating innovative solutions Contributes to long-term and Managing time priorities; being resourceful; short-term strategic planning taking initiative and making decisions; allocating people and other resources to tasks; collecting, analysing and organising information; and developing a vision and a proactive plan to accompany it Contribute to employee Having a personal vision and goals; evaluating satisfaction and growth and monitoring own performance; articulating own ideas and vision; taking responsibility Managing own learning; contributing to the Contribute to ongoing improvement and expansion learning community at the workplace; using a range of mediums to learn – mentoring, peer in employee and company support, networking, information technology operations and outcomes courses Contribute to the effective Having a range of basic IT skills; applying IT as execution of tasks a management tool; using IT to organise data; being willing to learn new IT skills

Table I. National employability skills framework

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student and learning environment is claimed to be possible. The paper concludes with a synthesis of the concepts discussed drawing out implications for educators involved in the development of skills in the higher education area. Towards the development of students capable of independence Rather than separate skills into personal or business (McLarty, 2005) or any other array of categories (e.g. transferable, core, etc), this paper begins with a different issue. A question not related to what skills, but rather a question driven by a curiosity in how skills are developed. How is it that some students are capable (more so than others) of coping with change, identifying and exploiting opportunities and being able to reconcile the known with the unknown? This is a question not distracted by the potentially never-ending list of SME related skills. This question returns a focus to the generative mechanisms through which future graduate interaction in a SME world is determined. Whilst there are many competing definitions of generative mechanisms, Mahoney’s (2003, p. 4) extensive review of generative mechanisms views “causal mechanism[s] as an unobserved entity, process, or structure that acts as an ultimate cause in generating outcomes”. Within the context of this paper therefore, generative mechanisms are the students’ habits of thought, which are plastic enough to be self-altered through frequent reflection. In his study of Princeton undergraduates, Heath (1964) identified six specific attributes through which a student’s ability to create their opportunities for satisfaction were enhanced. Let us consider each briefly to outline the nature of how each might relate to skills frameworks, such as the NESF. The first attribute is intellectuality, the ability to alternate between being a believer and a sceptic – an ability to remain curious whilst determining what matters through making connections between the object under consideration and the reality of their world. The second attribute is close friendships, or the ability to discover the individuality of others – the realisation that they have shared feelings with others and that prior perceptions have been altered due to these friendships. The third attribute is independence in value judgements, or the ability to rely upon personal experience rather than known external authorities. This increased reliance upon one’s judgement provides an avenue towards self-reflection that may be travelled with much vigour and enthusiasm. The fourth attribute is a tolerance of ambiguity, or the ability to view life as a series of interruptions and recoveries (Dewey, 1922), to be able to suspend judgements until sufficient information is obtained to make the right decision. The fifth attribute is the breadth of interest demonstrated. Heath (1964, p. 34) calls this an “uncommon interest in the commonplace”. So depth replaces breadth to enable the sustained pursuit of specific problems. The last attribute is a balanced sense of humour – a benign, but lively sense of humour that distinguishes the reasonable adventurer, making he or she good company, and capable of being sensitive towards others across conflicting circumstances. So Heath (1964) promotes the idea of a fully functioning graduate, one that is capable of using his or her individuality in ways that are beyond their pre-existing mental endowments. The key is the fact that he or she is tethered to the reality of their world, yet capable of finding deep satisfaction from the ingredients of their raw life. This outline of the reasonable adventurer forms the author’s ideal minimal outcome for

any graduate, be they destined to employment in a large firm, a SME, or self-employment. It is the contention of this paper that the reasonable adventurer concept is the chassis around which other features (i.e. skills) can be fashioned, and is the primary structure upon which the journey into the future is possible. It represents a state of development without which, all other attempts at skill development will be merely add-ons to an inferior model of graduate. The challenge of facilitating the development of the reasonable adventurer is not limited to program design. It is unlikely that any program that works in one university would deliver identical results in another due to resource and personnel differences. So, the focus proposed here is upon the underlying processes related to how any such self-development is possible. Be that towards the reasonable adventurer concept by itself or with an extended focus to include specific SME skills. As noted by Jones (2005), enabling students to experience the type of learning environment required for such educational outcomes also provides the opportunity for the development of a skill set that is increasingly demanded by Australian SME (and larger) employers. Described “as the ‘third leg’ of the university sector, alongside teaching and research” (Hartshorn, 2002, p. 150), the development of enterprise skills is a genuine outcome in its own right. Whilst it may be unrealistic (and not possible) for universities to guarantee (Clanchy and Ballard, 1995) that all students will graduate with a specific skill set, this however does not prevent universities from guaranteeing that undergraduates will have the opportunity to attempt such self development (Crebert et al., 2004). Therefore, this paper aims to throw some light on the underlying processes through which any such graduate development is possible. The challenge of self-development Free from the constraints of what skills should be developed, we now have created sufficient space to consider the process of self-development required to support the acquisition of any particular skill set. In work that presents similarities to Heath’s (1964) research, Baxter Magolda (2004) promotes the self-development concept of self-authorship. Through her work, a journey of self-discovery is outlined through three specific dimensions, the epistemological, intrapersonal, and interpersonal. Baxter Magolda defines self-authorship as “the ability to collect, interpret, and analyse information and reflect on one’s own belief in order to form judgements” (1998, p. 143). Whilst the connection between self-authorship and the reasonable adventurer concept should soon become self-evident, the discussion will now deliberately wander further away from skills development, to go deeper into the nature of the cogs and wheels of the generative mechanisms that will eventually determine the nature and longevity of acquired skills. The value of this digression while emerge once the concept of niche construction is also considered. Before we proceed further, a brief recap of the main points discussed so far. What has been claimed thus far is that an over emphasis on what graduate skills are relevant to SMEs appears to have prevented a more explicit focus on how any such skills can be developed in the higher education sector. It has been suggested that if we go back further, we can focus on what process of self-development is required to provide a sufficient base upon which specific SME skills can be more profitably developed. To this end, Heath’s (1964) concept of the reasonable adventurer has been introduced to

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highlight a degree of attainment suggested to increase the successful acquisition of any specific skill set. The paper will now proceed with an overview of Baxter Magolda’s (2004) proposed concept of self-authorship. In doing so, this section aims to highlight several specific personal development issues that cannot be ignored and must be factored into the design of any educational program designed to develop SME skills. Let it be stated that the author concurs with Tyler’s (1949, pp. 5-6) assertion that “education is a process of changing the behavior patterns of people. This is using behaviour in the broad sense to include thinking and feeling as well as overt action”. Clearly these three forms of altered behaviour can accommodate aspects of critical thinking, self-reflection and skill development. The first aspect of this approach relates to the way in which our students know what they know. Baxter Magolda (2004, pp. 17-18) describes four phases through which students typically are required to move in order to develop a capacity for self-authorship. She proposes the need to move “from absolute knowing (in which knowledge is assumed to be certain), through transitional knowing (in which some knowledge is believed to be uncertain), to independent knowing (in which knowledge is assumed to be largely uncertain)” to “contextual knowing (in which knowledge claims are made based upon relevant evidence within a context)”. Building on Perry’s (1970) theory of evolving adult epistemological structures, the central driver is personal reflection from which meaning of experience is developed. Essentially, developing the ability to construct one’s own knowledge rather than merely taking in the knowledge of others (Belenky et al., 1986). However, the challenge that confronts all educators is dealing with different rates of learning and development across individual students (Weimer, 2002). Given that students develop incrementally, it would seem logical that learning activities designed to aid such development should also work through sequential design. While this idea has intuitive appeal, Weimer notes that little research has been conducted to support such a notion. Nevertheless, holding this thought a little longer provides the cue to introduce the concept of niche construction. The concept of niche construction provides an interesting lens through which to consider student developmental issues. Specifically, it provides clues as to how each students’ habits of thought (i.e. the generative mechanisms) may be self-altered. Niche construction The process illustrated in Figure 1 is an adaptation of Olding-Smee et al.’s (2003) niche construction process. These authors in championing the neglected process of niche construction bring to life the previous work of Lewontin (1983). Lewontin sought to refute the assertion that an organism proposes (a set of predefined) solutions to the problems it encounters in its environment, and that the environment then efficiently rewards or punishes those solutions that prove beneficial or injurious to the organism. For Lewontin, any explanation of the process of adaptive change must cater for the ongoing reciprocal interaction between the organism, its generative mechanism and the environment. He asserted that organisms determine relevance, alter their external world, and transduce physical signals from their external environment. Essentially, rather than merely being on the receiving end of natural selection, organisms both make and are made as a consequence of interaction with their environment.

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Figure 1. The proposed causal pathways of niche construction

Developing this line of thinking, Olding-Smee et al. (2003) again cast doubt on the conventional view that organisms adapt to their environment, but environments do not adapt to their organisms. From an educational perspective (as observed by the author), this conventional view would assume that student interaction within a particular learning environment would result in the sorting of students by specific (learning or skill) traits as ordered by the assessment procedures they encounter – that, while some students may improve throughout the process, the learning environment would remain unaltered through such interaction. It is highly likely that such a process could occur through the application of a lecturer-centred approach complete with reliance upon norm-reference assessment procedures. However, within this paper the process of teaching and learning is considered from a learner-centred perspective. In Figure 1, it is assumed that change internal to the student (i.e. habits of thought) and its behavioural expression (i.e. phenotypic expression) is possible due to interaction with a learning environment (LE). The illustrated process begins with the interaction between a student as an individual and as a group member within the learning environment (Et). During this first period of time, each student and his or her group will engage in various learning activities, which will be assessed using both summative and formative feedback. During the process of assessment, the fitness of the routines used individually by each student and by his or her group will be assessed. Such routines represent the activity systems responsible for phenotypic expression (e.g. the content and context of the student’s/group’s performance and associated identity projected for consumption).

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As a consequence, the habits of thought of each student are subject to differential selection (for or against) on the basis of their contribution to the phenotypic expression of the individual and/or group. A combination of freedom (Whitehead, 1929) and reflection (Tyler, 1949) then provide the means through which the group, and therefore individuals, may alter behaviours via a shift in their collective and separate habits of thought. This process of group and individual change is facilitated in the first instance by the summative information received (i.e. a grading) and then by the formative information that relates to both negative and positive aspects of the group’s/individual’s performance. Therefore, the various assessment procedures used act as selection mechanisms. This process of generating both summative and formative assessment performs two important functions. First, the summative feedback provides an indication of the immediate fitness of the group’s/individual’s performance vis-a`-vis the performance criteria at a particular moment in time. Second, the formative feedback provides feedback through which future change is possible. So the “difference between them is that at some point the judgement has to be final” (Biggs, 2003, p. 142). The other factor that influences the composition of the interacting elements is that of the internally held perceptions within the group that may be altered to produce many different outcomes. So, three forms of inheritance are possible and likely throughout this process. First, the students’ habits of thought (derived from their habits of life) are subject to revision as they determine what mental capabilities will best assist their progress. Altered habits of thought are then inherited (or transferred) from one learning environment to the next (i.e. LEt to LEt þ 1) either via individual student behaviour or through their contribution to their group. Second, those aspects of the modified phenotypic expression (deemed to be favourable) and related to any changed habits of thought, are inherited by the groups from one learning environment to the next (i.e. LEt to LEt þ 1). Third, and perhaps most importantly, the behaviours of the individuals and the groups has the potential to alter the nature of future interaction between the learning environment and all entities to be assessed. This is the central thesis of the niche construction concept; it provides a process through which students can alter their learning environment within their time and space and/or at least place pressure on the learning environment within their time and space. Based on the author’s observations, students can indeed be the continuous co-architects of ever-changing learning environments. In its simplest form, such changes have been determined through the changing perceptions of individuals that impact upon the process of peer assessment operating on and within group performances. As groups collectively alter their judgements as to what satisfies the stated learning objectives contained within the process of criterion-based assessment that alters the process of natural selection operating on both individuals and groups. Also, as students make profitable alterations to their habits of thought (and therefore their routines) they do so locked in an inquisitive battle to find better solutions to the problems present in their learning environment. Many of the solutions they devise place substantial pressure on the learning activities used. This creates the need to adjust learning activities to continually stretch the students’ capabilities. As such, the students have the ability to inherit a modified learning environment due to their direct and indirect influence.

Discussion So far, the discussion has not attempted to unite the concepts of the reasonable adventurer, self-development and niche construction. The process of synthesizing these concepts, binding them with the thoughts of those associated with educational excellence now forms the challenge of this paper. The aim is to demonstrate that without a well designed learner-centred approach; the aim of developing skills (be they for SMEs or otherwise) may well fall short of the mark. The ideas introduced represent the resurrection of much pedagogical brilliance that all too frequently is ignored due to the pursuit of efficient teaching practices in higher education. From the outset, let it be stated that the potential evolution of any student’s habits of thought is cast as a phylogenetic process, not just an ontogenetic process (i.e. based on a fixed set of instructions). This is because it is a process determined by much more than the mere inheritance of genetic ability. It is also determined by the interaction of the student with other students and the learning environment within which they congregate. Therefore it is also phylogenetic evolution (Hodgson, 1993), allowing for the total and ongoing evolution of a group of students. It has been proposed that generative mechanisms (i.e. habits of thought) determine structural change (the capacity for actual behaviour), and that these mechanisms may also be altered through a blind (and differential) process of selection. That said, it is argued that the focus of the students’ learning experince should be related “to the interaction between learner and the external conditions in the environment” to which they react (Tyler, 1949, p. 63). Tyler felt strongly that the learning process “takes place through the active behaviour of the student; it is what he [or she] does that he [or she] learns, not what the teacher does”. This suggests the need to provide much freedom (Whitehead, 1929) to allow students to react to their environment – to allow their learning to occur in the here and now, in true Whiteheadian spirit. The dulling boredom of involvement with an imitation subject (Sawyer, 1943) can be removed through the provision of freedom to apply formal ideas to the problems that lay beyond the classroom, into the world of the (individual) student. Exactly just how such interaction occurs between student and learning environment is an issue open to many possible explanations. The use of an evolutionary approach provides a useful way of considering this process whilst still remaining aware of identifying any specific causal factors. Many early psychologists, for example, Lloyd Morgan and John Dewey, have discussed such issues. For Morgan (1896), congenital impulses are adapted through the grafting of acquired dispositions through individual experience with altered environments – this being especially so during the period of youthful plasticity, when individual intelligence has the most influence upon the modification of habit. Essentially, an evolutionary process is at play with intelligent selection (or choice) determining which profitable experiences should be retained and which unprofitable experiences dispensed with. In a similar vain, Dewey (1922, p. 93), notes that is not through the growth of customs (in terms of instincts) that development occurs. He suggests rather, that it is through the acquisition of new (and profitable) habits. Dewey states that it is through personal impulses that “the re-organization of activities turn, they are the agencies of deviation, for giving new directions to old habits and changing their quality”. Clearly,

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Whitehead’s (1929) concept of educational freedom is essential throughout this process. Through the provision of freedom, student impulses may interact with the learning environment in such as a manner as to assist in the development of independent action and new skills. In this sense, Dewey states that habits are not a native predisposition, but rather, they are organized activities that have been acquired through a secondary process. The above discussion suggests that the needs of students desirous of skills development extend beyond traditional lecturer-student process, towards a learner-centred approach skewed towards experiential learning, self-exploration, freedom, and continual reflection. An approach where students can frequently interact with challenging learning activities assessed on the basis of the grades of intelligence demonstrated (Morgan, 1896). Too often students are required to perform isolated tasks (in the guise of skills development) that amount to little more than an opportunity for an internal stock take of existing skills, but contribute little to serious skills development. At best, any developed association of impulse and experience is likely to be consigned to memory only. Alternatively, under circumstances where the interaction between impulse and experience is reoccurring, congenital impulses have a greater opportunity for genuine conformation, or modification through which acquired impulsive tendencies are developed. That is, conscious selection is replaced by sub-conscious automation. Morgan attributes the sources of impulsive tendencies on one hand based to the inheritance of ability, but also due to the individual acquisition of ability. The above discussion relates nicely to the work of both Heath (1964) and Baxter Magolda (2004). Skill development in the sense discussed by Morgan and Dewey is reliant on students using their individuality to extend their future abilities beyond their initial mental endowments. They are required to understand the environment within which their various impulses interact, to modify their habits so as to ensure progress. In this sense, they are following the path that Heath argues will lead them towards becoming a reasonable adventurer. Clearly this is not a passive educational process within which students are subdued. The self-development process will not proceed if students accept received knowledge as absolute, they must be capable of pressing forward to challenge their individual epistemological assumptions and find meaning in their knowing vis-a`-vis the contextual situations they encounter. In this respect, the concept of niche construction provides a process through which to consider how skill development could occur within a learner-centred environment. Most importantly, it demonstrates a process through which students actively change the structure and meaning of their world. It does not represent a static challenge within which student outcomes are determined through a ranking process (i.e. norm-referenced assessment), but rather an endless staircase of possibility. A process that offers the opportunity to all students to continually test the fitness of their impulses, a process that makes possible the acquisition of valuable skills. Skills that relate directly to the NESF and therefore, skills that are in demand by SMEs. Finally, a process that accommodates the varying levels of learning skills and self-awareness of individual students (Weimer, 2002). Alfred Whitehead’s (1929) brilliant protest against dead knowledge also offers much wisdom that transfers directly to the development of skills. For Whitehead (1929,

p. 93), the aim of any business school is to produce students with a zest for business that have an ability to apply their acquired wisdom to all future tasks with intellectual imagination. Further, Whitehead maintained the role of the university is to preserve “the connection between knowledge and the zest of life”. It is the development of an urge within our students towards new creative adventure that should be the ultimate aim of education”. For Whitehead, the issue is how knowledge is used, and specifically the time and place within which it is contextualised. He states that: The mind is never passive; it is a perpetual activity, delicate, receptive, responsive to stimulus. You cannot postpone its life until after you have sharpened it. Whatever interest attaches to your subject-matter must be evoked here and now; whatever powers you are strengthening in the pupil, must be exercised here and now; whatever possibilities of mental life your teaching should impart, must be exhibited here and now. That is the golden rule of education, and a very difficult one to follow (1929, p. 6, my emphasis).

Operationalizing the ideas of Whitehead leads to in a dynamic learning environment in which understanding is not only evoked in the students’ here and now, but also exercised and exhibited in their here and now. Through freedom, students are granted the responsibility to generalize how the development of their mental abilities and habits of thought provide fitness in their world. They are afforded the opportunity to re-organize their activities through the means of positive deviance (Sparks, 2001), thus potentially improving upon existing habits. They are given the opportunity to construct the niche within which their development is occurring; precisely the task required of them post graduation. This is a highly significant fact, that students are not working to perfect a specific task (i.e. appreciation of a specific strategy for a specific situation), but rather learning how to make sense of their personal abilities within an ever-changing learning environment (i.e. they are learning to strategize). The development of this skill set is argued to provide a far more important skill that is likely to be highly valued by Australian SMEs. As illustrated in Figure 1, the process of niche construction occurs over several time periods. Within and across time periods, the specific (learning) traits selected for or against and in combination, place upward pressure on the selection pressures associated with assessment procedures. Returning to the specific skills highlighted by the NESF, it is not hard to imagine how students will be continually required to improve their communication skills to operate within their group, and to assist the group operate in a competitive learning environment. Much teamwork is required to coordinate their activities within and across workshops and semesters. Understanding how best to approach different tasks vis-a`-vis the nature of different assessment procedures requires the ongoing engagement of problem solving skills. Students are not merely complying with the rules and regulations of a learning environment, they are also using their initiative, planning and organizing skills to shape the nature of their learning environment. In undertaking such tasks, those students that develop most do so through the use of self-discipline and the development of contextual knowledge. Finally, the endless freedom afforded the students encourages them to experiment and gain proficiency across a range of technologies. Throughout such a process, each student’s habits of thought are subject to change with the opportunity to lock in favourable new capabilities that increase their fitness across the various learning environments they encounter.

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Conclusion That graduates need to develop better skills to assist the competitiveness of Australian SMEs is not a proposition questioned within this paper. The focus has been on considering how skills may effectively be developed. The general argument made is that skills cannot be added on through requiring students to engage in isolated activities that are not specifically linked to other learning activities. Worse still, that the common practice of having students deliver the occasional presentation or work infrequently in a group is unlikely to aid the development of any useful skills. It has been claimed that without specific (and ever-present) assessment processes; the necessary selection pressures are absent, thereby preventing the possibility of an evolutionary process. Assessment therefore should be conducted in an authentic manner, designed to “test those capacities and habits we think are essential, and test them in context” (Wiggins, 1989, p. 41). As a result, assessment outcomes for students relate to the symbiotic relationship between their simultaneously developing knowledge and skills. Viewing assessment as something other than a sorting mechanism that ranks students from best to worst introduces many new responsibilities to the educator. Both summative and formative feedback should be provided to the students from which they can reflect on their performance. “They must talk about what they are learning, write about it, relate it to past experiences, apply it to their daily lives” (Chickering and Gamson, 1987, p. 3). As previously stated, this process of generating both summative and formative assessment performs two important functions. First, the summative feedback provides an indication of the immediate fitness of the student and/or his or her group’s performance vis-a`-vis their fellow students at that particular moment in time. Second, the formative feedback provides feedback through which future change is possible. With the “difference between them is that at some point the judgement has to be final” (Biggs, 2003, p. 142). This suggests the needs to ensure students have the support and guidance of the educator regardless of how many mistakes are encountered on their journeys. A useful way of supporting the process of niche construction is to gather regular informal and formal feedback. This process can serve as both an invitation and a means of legitimising both the role of students as change agents and any new habits of thought under consideration. A simple way to proceed is to ask students what aspects should be kept, added and removed from the learning environment to aid their learning. This process can provide very rich and insightful feedback that can guide modifications to the learning environment with greater surety. Finally, the need to allow students to self-develop in a guided manner has been suggested to be the primary purpose of education. Adopting the position that the primary purpose of education is to bring about changes in the student behaviour (Tyler, 1949), we can move towards a more inclusive curriculum within which skills are not the poor cousin of knowledge. They are in fact elevated to the same status and receive equal focus with regards the development of desirable learning outcomes. To many traditional educators this may lessen the role of higher education, but as Whitehead so forcefully asserted, “the proper function of a university is the imaginative acquisition of knowledge . . . a university is imaginative or it is nothing-at least nothing useful” (1929, p. 96). The self-development needs of Baxter Magolda

(2004) and Heath (1964) require the presence of excitement, curiosity, self-confidence and reflective capacity. Skill development cannot be added on to a process designed to gift knowledge. Skills are a way of knowing, they are inseparable from knowledge and must be treated so. References Baxter Magolda, M. (1998), “Developing self-authorship in young adult life”, Journal of College Student Development, Vol. 39 No. 2, pp. 143-56. Baxter Magolda, M. (2004), Making Their Own Way, Stylus, Sterling, VA. Belenky, M., Clinchy, B., Goldberger, N. and Tarule, J. (1986), Women’s Ways of Knowing: The Development of Self, Voice, and Mind, Basic Books, New York, NY. Biggs, J. (2003), Teaching for Quality Learning at University: What the Student Does, 2nd ed., Open University Press, London. Chickering, A.W. and Gamson, Z.F. (1987), “Seven principles for good practice in undergraduate education”, American Association for Higher Education Bulletin, Vol. 39 No. 7, pp. 3-7. Clanchy, J. and Ballard, B. (1995), “Generic skills in the context of higher education”, Higher Education Research & Development, Vol. 14 No. 2, pp. 155-66. Crebert, G., Bates, M., Bell, B., Patrick, C. and Cragnolini, V. (2004), “Developing generic skills at university, during work placement and in employment: graduate perceptions”, Higher Education Research & Development, Vol. 23 No. 2, pp. 147-66. Dewey, J. (1922), Human Nature and Conduct: An Introduction to Social Psychology, Henry Holt and Company, New York, NY. Hartshorn, C. (2002), “Understanding notions of enterprise in the higher education sector”, Industry & Higher Education, Vol. 16 No. 3, pp. 149-58. Heath, R. (1964), The Reasonable Adventurer, University of Pittsburgh Press, Pittsburgh, PA. Hodgson, G.M. (1993), Economics and Evolution: Bringing Life Back into Economics, Polity Press, Cambridge. Jones, C. (2005), “Creating employability skills: modification through interaction”, Industry & Higher Education, Vol. 19 No. 1, pp. 25-34. Lewontin, R.C. (1983), “Gene, organism, and environment”, in Bendall, D.S. (Ed.), Evolution from Molecules to Men, Cambridge University Press, Cambridge. McLarty, R. (2005), “The dimensions of graduate skills following SME employment experience”, Industry & Higher Education, Vol. 19 No. 1, pp. 35-44. Mahoney, J. (2003), “Tentative answers to questions about causal mechanisms”, Proceedings of the 99th American Political Science Association Conference, Philadelphia, PA. Matlay, H. and Mitra, J. (2002), “Entrepreneurship and learning the double act in the triple helix”, The International Journal of Entrepreneurship and Innovation, Vol. 3 No. 1, pp. 7-16. Morgan, C.L. (1896), Habit and Instinct, Edward Arnold, London. Olding-Smee, F.J., Laland, K.N. and Feldman, M.W. (2003), Niche Construction: The Neglected Process in Evolution, Princetown University Press, Oxford. Perry, W.G. (1970), Forms of Intellectual and Ethical Development in the College Years: A Scheme, Rinehart & Winston, Troy, MO. Sawyer, W.W. (1943), Mathematician’s Delight, Penguin, Harmondsworth. Sparks, D. (2001), “Change: it’s a matter of life or slow death”, Journal of Staff Development, Vol. 22 No. 4.

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Tyler, R.W. (1949), Basic Principles of Curriculum and Instruction, The University of Chicago Press, Chicago, IL. Veblen, T. (1925), The Theory of the Leisure Class, George Allen & Unwin, London. Weimer, M. (2002), Learner-Centered Teaching: Five Key Changes to Practice, Jossey-Bass, San Francisco, CA. Whitehead, A.F. (1929), The Aims of Education and Others’ Essays, The Free Press, New York, NY. Wiggins, G. (1989), “Teaching to the (authentic) test: testing can once serve teaching and learning if tests clarify and set intellectual standards”, Educational Leadership, Vol. 46 No. 7, pp. 41-7. Corresponding author Colin Jones can be contacted at: [email protected]

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The role of gender in US microenterprise business plan development Ronald G. Cook

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Rider University, Lawrenceville, New Jersey, USA

Paul Belliveau Paul Belliveau Associates, Westfield, New Jersey, USA, and

Christine Lentz Rider University, Lawrenceville, New Jersey, USA Abstract Purpose – This paper proposes to examine the role that gender plays in a microenterprise program (MEP) that focused on developing quality business plans. Design/methodology/approach – Data were collected over four years from 1,013 participants in a microenterprise business development program. Empirical evidence is presented on the outcomes of the program. Findings – Women and men had similar program completion rates and similar overall business plan scores. However, women scored significantly better on the presentation of their plan to judges. The level of formal education a participant had upon entering the program mattered, but only for women. Research limitations/implications – Further research could determine whether the type of formal education made a difference in producing higher scoring plans (liberal arts, business, etc.) or is it the process of formal learning that matters? Startups and existing firms, segmentation of firm type (retail, service, etc.) should be researched in conjunction with gender. Practical implications – MEPs that emphasize helping women should pay particular attention to the level of formal education a participant has upon entering the program. Women were also found to do a better job of explaining their business plan to outsiders, which should enhance their growth potential. Originality/value – This article systematically examines differences that gender makes in completing a business plan development program. Keywords Gender, Business planning, United States of America Paper type Research paper

Introduction Microenterprises are commonly described as businesses with limited capital, few or no employees, and limited role in the market (Tezler, 1992, Cook and Belliveau, 2004). They are typically a self employment option and are often home-based (Cook et al., 2004). Although microenterprises are also international in scope, our discussion will focus on microenterprises in the US. Microenterprise programs (MEPs) have been created to encourage entrepreneurship and economic development at the grass roots level (Servon and Doshna, 2000). According to the 2005 Directory of Microenterprise Programs (Aspen Institute, 2006),

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there were approximately 517 microenterprise programs in the United States, providing loans, technical assistance, and training services to entrepreneurs. This number has grown substantially since 1992, when the Aspen Institute reported only 84 programs in the US. US MEPs provide training and loans geared toward creating and expanding businesses (Cook and Belliveau, 2004). However, they tend to differ from other economic development programs because of their smaller scale, focus on low-income participants, emphasis on training and technical assistance (Servon and Doshna, 2000), complementary role in poverty alleviation (Servon, 1997), and concern with clients’ economic literacy and access to credit (Association for Enterprise Opportunity, 2002). If not for these types of programs, microenterprise clients would have no other access to business training and credit (Servon, 1999). MEPs tend to “focus on entrepreneurs who generally confront higher levels of adversity than do other entrepreneurs” (Cook et al., 2004, p. 398). These tend to be minority and women-owned new firms, as over 68 percent of MEPs have a client base of 50 percent or more women (Aspen Institute, 2006). As Robb’s (2002) study demonstrated, survival rates for these ventures are likely to be lower than those of new firms owned by white males. Recent statistics document the growth in women entrepreneurship as “the number of women-owned businesses in the US grew 20 percent between 1997 and 2002, twice the national average for all businesses . . . and women now own nearly 30 percent of non-farm businesses in the United States in 2002” (Bergman, 2006, p. 1). Clearly, increased women business ownership reflects an earlier finding by Scherer et al. (1990), who noted that in the 1980s, the number of self-employed women increased by 69 percent compared to a 13 percent increase in the number of self-employed men. Even so, women still lag behind men in both opportunity-based and necessity-driven entrepreneurship in the US (Breeden, 2004). Gender barriers to entrepreneurship Women face greater barriers to new venture creation than do men. They tend to try entrepreneurship with fewer financial assets, experience in management, and resources in terms of their human and social capital (Carter, 2000). Much of the research on entrepreneurial activity indicates that many women encounter barriers stemming from their lack of requisite knowledge, skills, training, and experiences deemed critical to venture creation and growth. Further, men also have established networks to help them generate relevant information concerning their new business (Thomas, 2001). Entrepreneurs often face problems associated with obtaining credit and financing. Women tend to be more disadvantaged than men in their ability to raise external financing (Carter, 2000), as there is evidence of direct and indirect discrimination by financial institutions (Verheul and Thurik, 2001). In addition, many seem not to have the requisite managerial and technical expertise that facilitates success (Jones and Tullous, 2002). As a result, women tend to be less optimistic than men in their expectation of future business success, and believe that they need more help (Carter, 2000). To obtain funding from a lender, the submission of a formal business plan is usually required (Longenecker et al., 2006; Bangs, 2002). The business plan communicates to

lenders what the business is about, how an investment will be applied, and how it will be paid back (Bangs, 2002). Since the development of a complete business plan should address all aspects of the venture (Bangs, 2002) and the lack of a written business plan can increase the risk of failure (Perry, 2001), we considered business plan completion to be an essential ingredient in entrepreneurial success and an important focus of training efforts by MEPs. Yet many microenterprises have neither the business plan, nor the ability to create one, making training programs for business plan development critical (Cook et al., 2004). This article examines business plan scores in an MEP, as determined by an evaluation of the written plan and its presentation before a panel. Our interest is understanding the role that gender plays in the ability to develop a quality business plan. This focus is important because lenders used the scores from business plans developed in this MEP as a quality benchmark when considering which plans to fund. The MEP studied was created by a state economic development agency to focus on the entrepreneurial needs of minority and women-owned microenterprises. The following explains the operation of this program. Program background In 1992, a state economic development agency (SEDA) established a microenterprise training program to develop entrepreneurs in the successful running of their businesses. The MEP was open to anyone in the state, but targeted women and minority entrepreneurs who needed to develop a business plan for the start-up or expansion of their firms. The program enjoys a major distinction from otherwise similar efforts: students in this program were guaranteed access to lenders. This access consisted of working with lender instructor/facilitators. Curriculum During the program, one three-hour evening class was held each week for eight consecutive weeks, at multiple locations throughout SEDA’s state. The culmination of the program, approximately two weeks after the last class, was the student’s presentation of the completed plan to a SEDA panel of lenders and small business advisors (SEDA calls this process panel review). If the student completed their business plan and presented it at panel review, they were a graduate of the program. In the panel review process, five panelists first scored the written business plan, in advance, and then scored the student’s verbal presentation of it to the panel. These two steps provided measures of the quality of the business plan. The verbal and written components of the panel review score were each given a score between 1 and 5, with 5 being the best. These components were then combined for an overall panel review score, which ranged from 2 to 10. Judging process The SEDA’s concept of providing entre´e to lenders directly confronts the aforementioned access-to-capital problem as it gives these entrepreneurs an important contact with lenders. While panel review judges may be biased as to which business concepts are more attractive, this MEP structure has a number of steps that, on the surface, would appear to reduce the possibility of evaluation bias. For the written component, these are as follows:

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judges see the written plan prior to the verbal presentation; panelists do not evaluate students whom they have worked with during the term; and there are five judges for each plan so the rankings do not depend on just one panelist’s opinion.

For the verbal presentation, judges see, hear and question the entrepreneur(s). These sessions are highly interactive as lenders test the knowledge and ability of the entrepreneur(s) in such areas as industry trends, market potential, financials, and so forth. Lenders know that even the best business plans can only be projected accurately for maybe a year (Longenecker et al., 2006; Bangs, 2002). Therefore, lenders look for the ability of owners to understand how to adapt to changes in the market. A verbal presentation allows the lender the opportunity to evaluate the entrepreneur’s integrative knowledge. We were interested in assessing the difference gender might make in the ability to complete the program and in business plan scores; and if the educational background of the participants varied by gender. In the subsequent sections, we present the hypotheses, methodology, and findings/conclusion. Hypotheses Gender influence on program completion and panel review scores We were interested in learning if gender mattered in completing the business plan program, and in achieving a better score at panel review. Part of the business development process was the eight week training program where participants learned about business plan creation and were coached by lenders. From an earlier study of a women-only MEP, research suggests that women enrolled in MEPs to attain financial independence, acquire business and financial skills, and to gain confidence in their ability to start their business (Dumas, 2001). While women aspire to be entrepreneurs, they need specific training opportunities to develop feelings of competency and a strong expectation for success (Scherer et al., 1990). Men and women entrepreneurs also tend to differ in the type of interaction sought during training. Coming into these programs, women generally had fewer prior networking opportunities and therefore, tended to seek face-to-face interactions, whereas men more often sought assistance via the telephone (Jones and Tullous, 2002). Therefore, we believed that women would benefit more from these training programs than men, and this would reflect in a higher graduation rate from the program and in higher panel review scores for their business plans. Further, since the panel review score consisted of two main elements, written and verbal, would any difference in overall score also be reflected in these? Accordingly, we offer the following hypotheses: H1a. Women are more likely to graduate from this MEP than are men. H1b. Women are more likely to have higher total panel review scores than male graduates. H1c. The verbal presentation scores are more likely to be higher among women than among men. H1d. The written plan scores are more likely to be higher among women than men.

Education and gender Previous research suggests a positive relation between education level and business performance (Rogers et al., 2001; Chaganti and Greene, 2002), and between education and business plan development programs (Cook and Belliveau, 2004). Women were also found to have slightly higher levels of education than men, whereas men have significantly greater prior work experience when entering training programs (Sicilian and Grossberg, 2001). This has contributed to women showing greater propensity for entrepreneurship training than men (Scherer et al., 1990). Education was also one of the issues addressed in some of the Global Entrepreneurship Monitor (GEM) reports. Although each GEM report focused on different facets of entrepreneurship and the basic unit of analysis was country, together they offer some insight in the role of gender and education in entrepreneurship. For example, according to the 2001 GEM report, the rate of entrepreneurial activity in the US was slightly higher among high school-educated men versus men who had at least some college. The finding was similar for women except that entrepreneurial activity lessened for those who earned a college degree (Reyolds et al., 2002). The 2001 GEM report suggests that, in general, there is an opportunity cost associated with education that tends to lower entrepreneurial activity, in that a higher education allows a person to earn more in the marketplace (Reyolds et al., 2002). However, for a growth venture, the 2003 GEM report found that people with post-secondary or graduate education were twice as likely to be involved in an entrepreneurial firm as those with less education (Reyolds et al., 2004). The 2005 GEM report notes that for the US, education levels tend to be higher for those individuals involved in new ventures (versus the general population) whereas education levels for owners of established ventures tend not to be different than the general population (Minniti et al., 2006). Differences can occur in situations where starting a venture is a necessity versus pursuing an opportunity but in developed countries like the US, entrepreneurship is generally considered opportunity-based (Reyolds et al., 2002). Accordingly, we offer the following hypotheses: H2a. A higher education level will increase panel review scores for both men and women. H2b. A higher education level for women will increase panel review scores for women. H2c. A higher education level for men will increase panel review scores for men.

Method The authors used four years of data from registration and panel review information collected for all participants by the SEDA staff. Gender and education level were self reported on the registration form. Education level was based on the highest degree earned, which ranged from high school (the minimum required to enroll) to a graduate degree. This was translated into years of schooling, which ranged from 12 to 18. There were 1,013 participants in the program, consisting of 44 percent (446) males and 56 percent females (567). Since we were measuring all the participants of the program and not a sample, response rates and response bias were not relevant here.

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Findings Descriptive statistics Of these 1013 participants, 401 (39.6 percent) completed the program (graduated) and 612 (60.4 percent) did not. These 401 graduates developed 355 business plans (some were on teams). Hypotheses that examined panel review scores are based on the 355 business plans. Of the 446 men in the program, 39.2 percent graduated whereas of the 567 women, 39.9 percent graduated. Panel review and program completion hypotheses It was postulated that women were more likely to graduate from this MEP than men. We compared graduation rates between men and women using a chi-square test. There was no difference in the graduation rates based on gender (p ¼ 0:841) so hypothesis H1a was not supported. It was postulated that women were more likely to have a higher total panel review scores than men. Using a t-test, the mean panel review scores of women entrepreneurs was 7.27 versus 7.05 for men. This difference was not significant, with p ¼ 0:087. Therefore, the total panel review hypothesis was not supported. Next, we compared the two components of the panel review score, written and verbal, by gender, to determine if there were differences. Using a t-test, the written plan mean score for women was 3.37 whereas it was 3.32 for men, with p ¼ 0:519. The verbal presentation mean score was 3.90 for women and 3.75 for men, with p ¼ 0:045. Hence, of the two panel review components, the verbal presentation hypothesis was supported but the written was not. Education and gender hypotheses We postulated that a higher education level would increase panel review scores for both women and men. The average education level of all graduates was 3.3 years of college. For women, it was 3.2 years, and for men, it was 3.6 years (this gender difference in education level was not significant, p ¼ 0:070). We classified a graduate as having either a higher educational level (greater than 3 years of college) or lower education level (less than 3 years of college), and then used a t-test to compare panel review score means. Mean panel review scores for graduates with a higher educational level was 7.30 whereas graduates with a lower educational level, it was 7.01. This difference was significant, with p ¼ 0:040, and therefore, hypothesis H2a was supported. Next, we isolated gender. We postulated that the education level difference would contribute to different panel review scores, and we conducted the same t-test on women only, and then on men only. For women, mean panel review scores for graduates with a higher educational level was 7.44 whereas graduates with a lower educational level, it was 7.04, p ¼ 0:023. Hence, hypothesis H2b was supported. For men, mean panel review scores for graduates with a higher educational level was 7.13 whereas graduates with a lower educational level, it was 6.96, p ¼ 0:478. Therefore, hypothesis H2c was not supported. Discussion The examination of the role of gender in this business plan development program revealed a number of important findings. We were first interested in learning if gender,

in and of itself, made a difference in the ability to graduate from this program or for the graduates, influenced their panel review score. According to the 2005 Microenterprise Program Directory report, 68 percent of US MEPs had a client base of over 50 percent women (Aspen Institute, 2006). These numbers are similar to earlier reports from the same group, suggesting that understanding more about role of gender in these programs matters. When one considers that the number of women-owned (whole or majority), privately-held business in the US grew 17 percent from 1997-2004, compared to 9 percent for all businesses (Center for Women’s Business Research, 2005), the economic impact of the ventures is also increasing. In the first gender hypothesis set, we examined possible differences in graduation rates and panel review scores. Because previous research suggested that women tend to benefit more from these types of training programs than men, we wondered if women would do better in this program than men. The significant finding here was that in the presentation of the business plan before the SEDA panel, women scored significantly higher. This portion of the process focused on judging the ability of the participant to articulate their written plan, and respond to questions. Earlier research noted that a well written business plan is easier to understand and communicate (Cook et al., 2004), which suggests that a high scoring verbal presentation would likely follow a high scoring written plan. In this study, there was no difference in the written plan scores between men and women, yet the presentation at panel review clearly was a strength for women. Education’s importance is related to the fact that it can be changed over time. Since education was found to contribute significantly to higher panel review scores, does this advantage apply equally when considering the gender of the participant? Our interest was in learning if all or just some entrepreneurs might benefit from increasing their formal education level before undertaking a business planning program. Examining the panel review scores by gender revealed that the level of formal education that a participant has when entering the program does matter, but only for women. The difference in women’s panel review scores based on high versus low education level was large enough not only to provide a significant difference in the plan scores for them, but for all graduates. Among men, education level did not influence panel review scores. Something clearly occurred here, since the education level of all men and women participants was equivalent (3.1 years of college), and for just the graduates, men’s education level was higher (3.6 years of college versus women’s 3.2 years of college) but not significantly so. However, even though women graduates in the program had a slightly lower formal education level than men, they had higher panel review scores. As the education level clearly made a difference for women with respect to obtaining higher panel review scores, we compared different groupings to see what specific level of education level mattered with regard to panel review scores. Table I lists the

Education level of graduates . ¼ 4 years of college vs. , 4 years . ¼ 2 years of college vs. , 2 years Graduate school vs. high school 4 years of college vs. high school

PR score of 1st group

PR score of 2nd group

Significance level

7.44 7.41 7.51 7.40

7.04 6.82 6.82 6.82

p ¼ 0:024 p ¼ 0:005 p ¼ 0:006 p ¼ 0:016

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Table I. Comparisons of women panel review scores based on education

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Table II. Comparisons of women existing businesses’ panel review scores based on education

significance differences in panel review scores for women depending on their education level: Another interesting finding was that when conducting the same statistical tests for men, no significant differences were found among any pairing, even among the groups with the greatest difference in level of education. For example, when comparing men whose highest level of education was high school versus men who had a graduate degree, the panel review mean scores were 6.92 and 7.37, respectively. This difference was not significant, with p ¼ 0:198. Overall, our results expand previous research that suggests that the education level of the participant is an important factor in doing well in these MEP programs (Cook and Belliveau, 2004). We can clarify the earlier research by saying that education level of the participant does indeed matter, but only for women. One possible explanation might have to do with the type of firm that participants are writing their business plans for. This program was open to entrepreneurs writing business plans for both startups and existing businesses, and these data were self-reported on the registration form. Startup ventures were ideas being researched but not yet underway, whereas existing businesses were in operation. Women developed plans for startups two-thirds of the time. Men tended to be evenly split, with 50.5 percent researching startups and 49.5 percent researching existing firms. The difference in the choice of firm type between men and women was significant (p ¼ 0:007). Given that a startup lacks a track record, the ability to create accurate projections tends to be more difficult than an existing firm (Longenecker et al., 2006). Therefore, a higher level of education may help in the development of a startup business plan. To test this explanation, we examined women graduates who had startups. Surprisingly, there was no significant difference in panel review scores between women with different educational levels. However, there was significant difference in panel review scores between women graduates with different education levels who had existing firms. Women graduates who had existing businesses and whose terminal education level was high school had the lowest panel review average score of any group, at 6.3. In comparison, women whose terminal education level was high school and were pursuing startups had a panel review average of 7.1. Comparatively, men scored 7.1 for existing and 6.6 for startups. The only significant difference in these four groups occurred between panel review scores of women pursuing startups versus women pursuing existing firms, at p ¼ 0:03. That was also the only significant difference in panel review scores involving just different firm types. In contrast, isolating firm type and gender, and then comparing different education levels showed significant differences for women pursuing plans for existing businesses. Table II indicates these results.

Education level of graduates: . ¼ 4 years of college vs. , 4 years . ¼ 2 years of college vs. high school Graduate school vs. high school 4 years of college vs. high school

PR score of 1st group

PR score of 2nd group

Significance level

7.55 7.6 7.30 7.74

6.87 6.33 6.33 6.33

p ¼ 0:05 p ¼ 0:001 p ¼ 0:02 p ¼ 0:000

Education clearly helped women developing business plans for existing firms because if they had at least two years of college, their mean panel review score increased to 7.6, from 6.33 for women whose terminal degree was high school. We now believe that the challenges of running a venture and developing a business plan were greater for women who did not obtain schooling beyond high school. As we examined gender differences by type of firm (startup and existing) and level of education, as reflected in either graduation rates or panel review Scores, we ran partial correlations and controlled for each variable separately. Results for firm type and education are shown in Table III. Findings indicate that controlling for each variable, the relationships relating to firm type and education level were confirmed.

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Conclusion We have identified a few key differences in business plan development based on gender. For men, formal education level did not influence the business plan scores earned at panel review. For women, it was the opposite, as formal education level played a strong role in determining quality business plan development, particularly for women with existing ventures. In fact, the difference in women’s panel review scores based on education level was large enough to make a significant difference not only them, but for all graduates. Further, this effect could not be a result of disparate education levels as there were no significant differences between women and men’s formal education levels upon entering the program. Women and men tended to graduate from this program at equal rates, and had equivalent overall business plan scores. However, women scored significantly higher than men in presenting their plan to the judges at panel review. This suggests that since they have a better ability to articulate their business plan to outsiders, they may be better equipped to gain investors if their ventures grow. Future research directions In recent years, the number of women-owned ventures has increased substantially and the growth of these ventures has outpaced the overall US economy (Office of Advocacy, 2006). Continuing to better understand what differences gender might make in business plan development should help this trend continue. To build upon our findings, we suggest identifying whether the type of education (business, liberal arts, sciences, etc) matters, or whether it is simply the process of formal learning that helps in the creation of a high scoring business plan. Additional research that examines

Panel review score Gender Note: * *p , 0:01

Education level (controlled for firm type)

Firm type (controlled for education level)

0.14 * * 0.07

0.03 0.16 * *

Table III. Partial correlations of firm type and education level

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gender and firm choice (i.e. service, retail, etc.), or gender and family responsibilities may also offer new insights on business plan development. References Aspen Institute (2006), 2005 Microenterprise Program Directory, available at: http;//fieldus.org/publications/highlights2005.pdf (accessed February 10, 2006) Association for Enterprise Opportunity (2002), “Key elements of microenterprise development”, available at: www.microenterpriseworks.org/about/keyelements.htm (accessed November 10, 2005). Bangs, D.H. Jr (2002), The Business Planning Guide, 9th ed., Upstart Publishing Company, Chicago, IL. Bergman, M. (2006), “Women-owned businesses grew at twice the national average”, available at: www.census.gov/Press-Release/www/releases/archives/business_ownership/006351. html (accessed February 8, 2006). Breeden, R. (2004), “Small talk/start-ups and schooling”, Wall Street Journal, September 7, p. B4. Carter, S. (2000), “Improving the numbers and performance of women-owned businesses: some implications for training and advisory services”, Education þ Training, Vol. 42 Nos 4/5, pp. 326-34. Center for Women’s Business Research (2005), “Top facts about women-owned businesses”, available at: www.womensbusinessresearch.org/topfacts.html (accessed February 22, 2006). Chaganti, R. and Greene, P.G. (2002), “Who are ethnic entrepreneurs? A study of entrepreneurs’ ethnic involvement and business characteristics”, Journal of Small Business Management, Vol. 40 No. 2, pp. 126-43. Cook, R.G. and Belliveau, P. (2004), “The influence of human capital attributes in microenterprise training”, Journal of Small Business and Enterprise Development, Vol. 11 No. 4, pp. 467-73. Cook, R.G., Belliveau, P. and Sandberg, M.E. (2004), “Training and learning as drivers of US microenterprise business plan quality”, Education þ Training, Vol. 46 Nos 8/9, pp. 398-405. Dumas, C. (2001), “Evaluating the outcomes of microenterprise training for low income women: a case study”, Journal of Developmental Entrepreneurship, Vol. 6 No. 2, pp. 97-128. Jones, K. and Tullous, R. (2002), “Behaviors of pre-venture entrepreneurs and perceptions of their financial needs”, Journal of Small Business Management, Vol. 40 No. 3, pp. 233-49. Longenecker, J.G., Moore, C.W., Petty, J.W. and Pallich, L.E. (2006), Small Business Management: An Entrepreneurial Emphasis, 13th ed., South-Western, Cincinnati, OH. Minniti, M., Bygrave, W.D. and Autio, E. (2006), Global Entrepreneurship Monitor: 2005 Executive Report, available at: www.gemconsortium.org (accessed February 20, 2006). Office of Advocacy, Small Business Administration (2006), “The small business advocate”, US Government Printing Office, Washington, DC, Vol. 25 No. 3. Perry, S.C. (2001), “The relationship between written business plans and the failure of small business in the US”, Journal of Small Business Management, Vol. 39 No. 3, pp. 201-8. Reyolds, P.D., Bygrave, W.D. and Autio, E. (2004), GEM Global Report 2003, available at: www. gemconsortium.org/document.asp?id ¼ 356 (accessed February 22, 2006). Reyolds, P.D., Camp, S.M., Bygrave, W.D., Autio, E. and Hay, M. (2002), GEM Global 2001 Summary Report, available at: www.gemconsortium.org/document.asp?id ¼ 189 (accessed January 15, 2006).

Robb, A.M. (2002), “Entrepreneurial performance by women and minorities: the case of new firms”, Journal of Developmental Entrepreneurship, Vol. 7 No. 4, pp. 383-97. Rogers, C.D., Gent, M.J., Palumbo, G.M. and Wall, R.A. (2001), “Understanding the growth and viability of inner city businesses”, Journal of Developmental Entrepreneurship, Vol. 6 No. 3, pp. 237-54. Scherer, R.F., Brodzinski, J.D. and Wiebe, F.A. (1990), “Entrepreneur career selection and gender: a socialization approach”, Journal of Small Business Management, Vol. 28 No. 2, pp. 45-53. Servon, L.J. (1997), “Microenterprise programs in US inner cities: economic development or social welfare?”, Economic Development Quarterly, Vol. 11 No. 2, pp. 166-80. Servon, L.J. (1999), Bootstrap Capital: Microenterprises and the American Poor, Brookings Institution, Washington, DC. Servon, L.J. and Doshna, J.P. (2000), “Microenterprise and the economic development toolkit: a small part of the big picture”, Journal of Developmental Entrepreneurship, Vol. 5 No. 3, pp. 183-208. Sicilian, P. and Grossberg, A.J. (2001), “Investment in human capital and gender wage differences: evidence from the NLSY”, Applied Economics, Vol. 33, pp. 463-71. Tezler, R. (1992), “Small scale industry’s contribution to economic development”, in Baud, I. and Bruijine, G. (Eds), Gender, Small Scale Industry and Development Policy, IT Publications, London. Thomas, P. (2001), “Women entrepreneurs opt for equity ahead of growth”, Wall Street Journal, February 27, p. B2. Verheul, I. and Thurik, R. (2001), “Start-up capital: does gender matter?”, Small Business Economics, Vol. 16 No. 4, pp. 329-45. Further reading Reynolds, P.D., Carter, N.M., Gartner, W.B., Greene, P.G. and Cox, L.W. (2002), The Entrepreneur Next Door, Kauffman Foundation, Kansas City, MO. Vodopivec, M. (1998), “Turning the unemployed into entrepreneurs: an evaluation of a self-employment program in a transitional economy”, Journal of Developmental Entrepreneurship, Vol. 3 No. 1, pp. 71-96. Corresponding author Ronald G. Cook can be contacted at: [email protected]

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Entrepreneurship education in the UK: a longitudinal perspective Harry Matlay and Charlotte Carey UCE Business School, Birmingham, UK

252 Abstract

Purpose – This paper sets out to critically evaluate contemporary entrepreneurship education initiatives in the UK. The authors seek to compare and contrast various entrepreneurship education methods, approaches and curricula as well as relevant outcomes, in the UK context. Design/methodology/approach – Longitudinal case studies were used, over a ten-year period (1995-2004), to analyse in-depth qualitative data relating to the development and implementation of various approaches to entrepreneurship education, in a sample of 40 new and established universities in the UK. Findings – A number of interesting findings have emerged from this longitudinal study. It appears that conceptual and contextual as well as design and delivery factors can impact significantly upon entrepreneurship education courses developed in UK HEIs. Furthermore, a number of actual and perceived barriers needed to be overcome or mitigated in order to facilitate a better understanding of stakeholder needs and contributions. Practical implications – Measuring the outcomes of entrepreneurship education in the UK is still proving ellusive. This study provides a longitudinal overview of current entrepreneurship education initiatives in order to gain a better understanding of the scope and limitations of this type of educational programme. Originality/value – This paper presents an empirically rigorous, longitudinal case study approach to a rapidly growing aspect of higher education in the UK. The richness of the emergent data offers a valuable insight into pertinent aspects of entrepreneurship education and stakeholder needs and contributions. Keywords Entrepreneurialism, Education, Undergraduates, Postgraduates, United Kingdom Paper type Research paper

Journal of Small Business and Enterprise Development Vol. 14 No. 2, 2007 pp. 252-263 q Emerald Group Publishing Limited 1462-6004 DOI 14626000710746682

Introduction In recent years, it has become fashionable to view entrepreneurship education as the panacea for stagnating or declining economic activity in both developed and developing countries (Matlay and Carey, 2006). This dominant paradigm is based firmly upon the premise that, in a mature economy, more and better entrepreneurship education will invariable result in a comparable growth in the quantity and quality of entrepreneurial activity (Matlay, 2006). Similarly, for nations in transition, entrepreneurial education has become a crucial element of the progressive curriculum on offer across private and state sponsored business schools (Matlay, 2001; Li and Matlay, 2005). Furthermore, entrepreneurship education is also hailed as the most effective way to facilitate the transition of a growing graduate population from higher education and into self-employment or salaried work (Matlay and Westhead, 2005). Thus, over a relatively short period of time, entrepreneurship education has nudged itself to the top of socio-economic and political agendas, where it currently represents a high priority imperative for government policy throughout the industrially developed and developing world (Mitra and Matlay, 2004). Although the

volume of entrepreneurship education research has grown considerable over the last few years, the dominant paradigm and related conceptual models tend to provide only a limited or biased insight into the complexities inherent in enterprise curriculum development, provision and assessment. Thus, ongoing research tends to suffer from a range of inherent conceptual and contextual shortcomings which limit its significance, applicability and generalisation value (Matlay, 2007). Most researchers tend to focus on narrow aspects of entrepreneurship education and this strategy often produces a fragmented, snapshot picture of curriculum design and delivery (Shane, 2003). It should be noted that much of the mainstream entrepreneurship education research to date has carried out in business schools (Alvarez, 1996). Similarly, a large proportion of entrepreneurship education at university level is also on offer in business schools. As Shane (2003, p. 1) points out “ . . . the level of interest in entrepreneurship among business school students is also extremely high . . . every university campus, it seems, has a wealth of courses about how to start and finance new business”. Despite such widespread growth in related supply and demand, there still exist a great deal of disparity in the quality of entrepreneurship education programmes on offer, including curricula design, delivery methods and forms of assessment. Furthermore, there is a marked paucity of research that focuses upon entrepreneurship education designed to be delivered outside business schools and for the benefit of students specialising in subjects not directly related to business or graduating from other faculties (such as arts, health, music or built environments as well as engineering, electronics or computing). In the UK, the higher education system has expanded dramatically over the last two decades (Johnson, 2002). In contrast, however, the traditional graduate job market is in long-term decline, mainly due to the downsizing and restructuring strategies of large organizations and multinationals (Westhead and Matlay, 2004). Paradoxically, at a time when the demand for self employment, contract and non-traditional work is higher then ever, official statistics highlight the disparaging reality that just one percent of all college and university graduates are engaged in enterprise (see BVCA, 2005). The growing controversy on whether it is the supply or the demand side of entrepreneurship education in the UK that is curtailing graduate enterprise is unlikely to be resolved unless stakeholders are provided with the full range of empirically rigorous research data that could inform focussed and effective intervention. In this article we set out to critically evaluate developments in entrepreneurship education in UK HEIs over a ten year period, between 1995 and 2004. The first section includes a concise review of the specialist literature on entrepreneurship education. The second part provides an analysis of emerging results from longitudinal case study data collected over the period, across a matched sample of 40 established and new universities. The final section outlines conclusions, implications and policy recommendations relevant to the UK context. Conceptual and contextual issues in entrepreneurship education There is a growing body of specialist literature that focuses upon entrepreneurship in general and entrepreneurship education in particular. This incorporates both quantitative and qualitative research and draws upon the emergent results of studies undertaken in a variety of contexts and geographical areas. In common with

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other rapidly expanding areas of academic endeavour, the specialist literature on this pertinent topic suffers from considerable conceptual and contextual difficulties and this limits its applicability and generalisation value (Matlay, 2007). Conceptual and contextual clarity, empirical rigorousness and comparability of emergent results are of paramount importance to academic attempts bridging the entrepreneurship education and graduate enterprise chasm in the UK (Matlay and Carey, 2006). In this context, it would be useful to establish a common definitional platform which could represent a firm foundation upon which to build and expand the relevant knowledge base. Unfortunately, as a generic term, the concept of “entrepreneurship” has been used in a wide variety of contexts and currently covers a broad range of interchangeable meanings and situations. Such definitional diversity has not gone unnoticed and the search for conceptual and contextual convergence has resulted in increasingly complex models that claim to represent entrepreneurship in its many guises (Matlay and Westhead, 2004). Westhead and Wright (2000) argue that there is an urgent need for increased resources to be directed towards a better understanding of the factors that would increase the quantity and quality of entrepreneurs entering an economy. Others, however, point out that it is unlikely that a common entrepreneurial model could be developed to meet the specification and requirement of a wide range of observers and stakeholders (Bygrave and Hofer, 1991). From an educator’s perspective, Kuratko (2003, p. 11) believes that “ . . . entrepreneurship, or certain facets of it, can be taught . . . and business educators and professionals have evolved beyond the myth that entrepreneurs are born, not made”. It follows, therefore, that individuals can acquire both the knowledge base and the portfolio of skills that are required to start, develop and grow one or more successful businesses (Matlay, 2002). General knowledge and skills can be acquired in a variety of formal and informal ways, by attending liberal as well as vocational education and training courses. In a workplace situation, much of the relevant knowledge and skills are gained through experiential and/or action learning. There are, however, considerable differences between general and entrepreneurial knowledge as well as in the skills requirements of entrepreneurs and those of salaried workers (Matlay, 2005). It should be noted that for the majority of entrepreneurs, nascent entrepreneurship represents the beginning of their entrepreneurial career. Wagner (2004) connects nascent entrepreneurship to individuals who are considering a career switch from salaried employment to self-employment status. Importantly, however, there are attitudinal and motivational aspects to this type of transition and nascent entrepreneurship invariably involves the acquisition of more specific knowledge and skills (Lazear, 2002). Thus, one can identify significant differences between the knowledge and skills needs of entrepreneurial individuals and those of salaried employees working in organisations (Wagner, 2003). An entrepreneur would require a wider portfolio of skills and a considerably more extensive knowledge base in order to manage the start up process or support the growth and development stages of their business. In the average organisational setting, most employees would require a comparatively more limited portfolio of specific knowledge and skills, as defined by their much narrower job descriptions. Typically, a limited range of entrepreneurial attitudes and relevant knowledge could also be gained from work experiences. Similarly, some of the necessary

entrepreneurial skills could be acquired from Vocational Education and Training courses offered by HEIs and/or government sponsored organisations (Mitra and Matlay, 2004). It has been suggested that individuals working in small and medium-sized enterprises are more likely to gain entrepreneurial knowledge and skills than individuals employed in large organisations or multinationals (Gatewood et al., 2001). Furthermore, experiential and action learning in smaller firms can contribute to a significantly higher propensity for employees to leave their employment and attempt the transition into self-employment (Mason, 1991). It appears that smaller firms tend to provide a wider, richer and more extensive business experience than larger organisations (Johnson, 1986). According to Parker (2004), successful nascent entrepreneurship is largely a function of business skills in general and relevant entrepreneurship education in particular. Furthermore, the perceptions of nascent entrepreneurs in relation to the success of their future business can not only be influenced but also improved through relevant entrepreneurship education (Gatewood et al., 2002). In this context, Carter et al. (2003, p. 33) suggest that “ . . . greater insights about the factors influencing an individual’s choice to pursue entrepreneurial activity could lead to better designed economic and development programmes”. Similarly, Hytti and O’Gorman (2004) argue that the impact of well designed entrepreneurship education upon nascent entrepreneurship should not be underestimated and call for more and better courses to be provided at all levels of the educational system. Over the last two decades, the number of entrepreneurship programmes targeting nascent entrepreneurs has expanded considerably, both in Europe and in the US (Gartner and Vesper, 1994). In the US, the initial expansion of enterprise related courses was underlined by students’ and accreditation bodies’ dissatisfaction with general business education on offer at university level (Solomon and Fernald, 1991). Similar reasons were presented for the expansion of entrepreneurship education in Europe, Asia, Australia, New Zealand, Canada and other industrially developed and developing countries (Levie, 1999; Peters, 2001; Houston and Mulholland, 2003; Bell et al., 2002; Baharun and Ahmad, 2002; Li et al., 2003). At close scrutiny, how ever, it becomes evident that within the generic usage, entrepreneurship education incorporates diversity and heterogeneity in the number, quality and coverage of relevant courses (Solomon et al., 2002; Cox et al., 2002). As a result, the task of evaluating the performance and relevance of entrepreneurship education programmes as well as cross border comparisons become difficult and highly subjective (McMullan and Gillin, 2001). In particular, conceptualising and contextualising entrepreneurship education through discontinuous or opportunistic research is confounded by many intervening variables, most of which are difficult to identify or control (McMullan and Long, 1987; Gillin et al., 1996). Curran and Stanworth (1989) noted that, policy makers tend to promote entrepreneurship education in HEIs on the flowed assumption that increasing the number of students with relevant theoretical knowledge can lead to a substantial growth in the number of nascent entrepreneurs entering the economy. Despite government rhetoric and the expansion in entrepreneurship education programmes on offer, the actual impact that such courses can have upon entrepreneurial activity remains to be empirically proven (Matlay, 2006). More importantly, however, there is a notable reluctance on behalf of course directors and educators to stray from perceived

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“best practice” in entrepreneurship education, as promoted by prestigious business schools in the US or to adopt more innovative, “hands on” approaches based upon country-specific needs and experiences (Matlay, 2005). Furthermore, Cox et al., 2002, p. 230 conclude that “ . . . much of the entrepreneurship research to date has not provided empirical support for the claim that completion of formal courses in entrepreneurship and small business management increases the likelihood that an individual will start a business”. Block and Stumpf (1992) suggest that this could be due to flaws in research design or inadequate outcome measures to determine student satisfaction, their attitudes towards curricula or variations of individual performance in entrepreneurship programmes. Gorman et al.(1997) argue that most research studies in this topic focus upon samples of students with existing predisposition towards entrepreneurship. By not employing a relevant control group of students without previous experience of entrepreneurship education or a nascent predilection, researchers render their results as biased and unrepresentative of the wider student population. Despite inherent research flaws and generalisation problems, the continuous expansion in entrepreneurship education has contributed to the emergence of a relevant curriculum, together with a range of related delivery platforms and assessment methods. Considerable variations in course design, content and assessment, however, ignited acrimonious debates amongst various stakeholders, mainly in relation to course appropriateness and cost effectiveness. In this context, Charney and Libecap (2003, p. 386) argue that “ . . . approaches to entrepreneurship education have varied across colleges and universities from offering single courses in new business development or business plans preparation to integrated curricula that include marketing, finance, competitive analysis and business plan development”. Furthermore, the passage of time and interceding events can confuse issues and render causal link between entrepreneurship education and new venture formation difficult to establish and analyse (Borjas, 2000). These issues and difficulties are particular hard to mitigate when “snapshot” research methods are used (Cox et al., 2002). Longitudinal research studies using time series might prove more suitable for the analysis of the impact that entrepreneurship education has on the number and quality of nascent entrepreneurs entering the economy (Matlay, 2006). In this article we present the preliminary results of a longitudinal, ten year study of entrepreneurship education in a matched sample of 40 established and new universities in the UK.

Research methodology and sample Comparative longitudinal case study methods were used to collate, cross tabulate and analyse in-depth qualitative data relating to the development and implementation of various approaches to entrepreneurship education in the UK. A matched sample of case studies involving 40 new and established universities in the UK was selected and contacted on an annual basis during a period of ten years, between 1995 and 2004. The relevant annual research information was tabulated, analysed and mapped in order to provide comparative data for 20 new and 20 established universities located in England, Scotland and Wales.

Entrepreneurship education in UK HEIs Preliminary results from a longitudinal study (1995-2004) of entrepreneurship education in UK HEIs showed that during this period, all the 40 universities in the sample provided at least some small business and entrepreneurship education courses. It appears that during the first five years (1995-1999) period, new universities were keener and more proactive than older, established HEIs, in their offering of designated small business and entrepreneurship education courses (see Table I). For instance, 11 out of 20 new universities offered full time undergraduate courses in small business and enterprise development as compared to only 6 out of 20 established HEIs. The gap narrower in terms of part time courses: 8 out of 20 new universities and 5 out of 20 older HEIs offered this type of provision. Similar trends were in evidence in the case of the smaller sample of universities offering postgraduate courses in small business and enterprise development. In total four new universities offered full time and six provided part time postgraduate courses in entrepreneurship education. Only two older universities offered full time postgraduate courses in entrepreneurship education and four provided relevant part time modules. During the second five years (2000-2004) period, the provision of entrepreneurship education has increased considerably. By the end of the 2004 academic year, the majority of HEIs in the sample claimed to be providing designated entrepreneurship education at both undergraduate and postgraduate levels (see Table II). Interestingly, new universities were still in the lead with 19 out of 20 HEIs providing relevant full time undergraduate courses and 14 offering part-time modules. At postgraduate level, 16 of these HEIs were providing both full and part time courses in entrepreneurship education. Old universities appear to have significantly increased their provision of entrepreneurship education at both undergraduate and postgraduate levels: 17 HEIs in the sample offered full time undergraduate courses and 11 of these also provided relevant part time courses. At postgraduate level, 13 out of 20 HEIs in the sample provided full time courses and 12 of these also offered part time modules. Lack of perceived demand for entrepreneurship education amongst undergraduate and postgraduate students were cited as the main reason for not offering this type of courses across both new and established university. Lack of interest in

HEI type “New” University (n ¼ 20) “Old” University (n ¼ 20) Total

HEI type “New” University (n ¼ 20) “Old” University (n ¼ 20) Total

Undergraduate Full-time Part-time 11 6 17

8 5 13

Undergraduate Full-time Part-time 19 17 36

14 11 25

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Postgraduate Full-time Part-time 4 2 6

6 4 10

Table I. Research sample, 1995-1999 (n ¼ 40)

Postgraduate Full-time Part-time 16 13 29

16 12 28

Table II. Research sample, 2000-2004 (n ¼ 40)

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entrepreneurship amongst staff and shortages of relevant funding came second and third, respectively as reasons for non-provision. Conversely, when it was perceived that entrepreneurship education has become “fashionable” and government funding was made available through local and regional agencies, the provision of this type of courses increased considerably. A small proportion of HEIs in Scotland and Wales claimed to have other restriction imposed upon them, including regional and cultural factors that were not favourable for entrepreneurship and small business development. These applied mainly to rural areas where agriculture and hill farming dominated the socio-economic landscape. Over the period of the research study and across the whole sample, we could find no significant commonalities in the conceptual approaches to entrepreneurship education. It appears that each university decided upon, and used its own definition, of what represented entrepreneurship education at the time of provision. Importantly, we found evidence of a pragmatic “fluidity” in both the concept and context of course delivery. Furthermore, the vast majority of the relevant provision was delivered across various departments in business schools. For instance, during the 1995-1999 period, only 3 of the 40 universities offered entrepreneurship education outside their business school, mainly in computing and engineering faculties. By 2004, just under half (18) of these university have expanded their provision to other faculties, in addition to those offered in their business schools, including art, nursing, music and built environments. In the first half of the research period (1995-1999), the designated entrepreneurship education curriculum was dominated by a variety of traditional courses and independent modules, reflecting the existing provision of general and specific business studies provision. An in-depth analysis of such modules and courses confirmed that these were mainly “borrowed or adapted” from current business provision running concurrently with entrepreneurship education. During the second half of the research period (2000-2004), the variety of relevant courses and independent modules prevailed, but more specific as well as relevant entrepreneurship provision was also in evidence. Typically, the curriculum included theoretical and practical courses and modules, as well as both general business education and specific entrepreneurship provision. There was a marked emphasis on business strategy, marketing, accounting and finance courses and similar modules. Business plans and “successful entrepreneurship” case studies were predominant across both new and established universities. None of these HEIs offered any placements or sector specific work experience for their students, either at undergraduate or postgraduate levels. Furthermore, for specialised MBA courses, the work experience requirement was related to general business, rather then specific to entrepreneurship or the SME sector. In planning, designing and providing relevant entrepreneurship education in these HEIs, the main emphasis appeared to be on “flexibility”, “relevance” and “customer satisfaction”. Importantly, however, each course director and/or module coordinator seems to have justified and applied these criteria based on his or her personal knowledge and experience. We only succeeded in locating a very small number of providers (six in total) who claimed to have first hand or direct experience of entrepreneurship or small business management. The reminder claimed to be “familiar” or “versatile” with relevant text book theory and related case studies. Just over one quarter (11) of the sample made regular use of guest speakers who were

selected from the local “entrepreneurial community”, although more than half (23) of the providing HEIs claimed to occasionally invite guest lecturers with relevant “industry experience”. The use of information and communication technologies (ICTs) varied considerably across the sample. During the first half of the research study (1995-1999), much of the entrepreneurship education provision was delivered by traditional “chalk and blackboard” methods, with very little ICT or other innovative platforms in evidence across the whole sample. During the second half of the ten years period (2000-2004), we found evidence of a sample wide increase in the use of ICTs as well as other electronic platforms of curriculum delivery. These were mainly found at postgraduate level, in the delivery of both theoretical and practical aspects of entrepreneurship education. Significantly, however, a large proportion of undergraduate and about one third of postgraduate provision of entrepreneurship education was still delivered by traditional methods of teaching. At this level, most of the teaching emphasis for entrepreneurship education was placed on formal lectures as well as a mixture of formal and informal seminars. A minority of HEIs (four) provided structured and semi-structured workshops and “hands on” assistance or coaching in business planning. In the majority of the HEIs in the sample, the assessment of both full time and part time entrepreneurship education courses followed the traditional undergraduate or postgraduate routes, respectively. At undergraduate level, assessment included mainly a mixture of subject assignments (typically, 20 per cent-40 per cent) and end of term exams (mostly, 60 per cent-80 per cent). At postgraduate level, subject assignments and end of term exams accounted cumulatively for about 50 per cent of the marks and the traditional master dissertation involved a substantial research based project chosen by students, on a topic relevant to entrepreneurship. There were very few departures from these typical postgraduate assessment methods, although in two of the HEIs in the sample there was an option for either a “traditional” dissertation or an “extended business plan” (representing a commensurable research project that involved both theoretical and practical aspects of a specific enterprise start-up). It also emerged that despite its relevance to nascent entrepreneurs, very few of the students opted for the Business Plan project (fewer than 2 per cent of students). It appears that course directors and dissertation supervisors tended to discourage postgraduate students from choosing this option, mainly for personal or expediency reasons. Conclusions and recommendations There is a consensus amongst policy makers, researchers and business observers in the UK that entrepreneurship education could significantly increase both the number and the quality of graduate entrepreneurs entering the economy. The main premise of this “stakeholder paradigm” rests upon the assumption that the entrepreneurship education curriculum taught in UK HEIs can positively influence a graduate’s attitude towards an alternative career path and simultaneously equip the would be entrepreneur with the necessary knowledge and skills to start up, manage and develop an economically viable business. A number of relevant finding have emerged from the preliminary analysis of a longitudinal study on entrepreneurship education provision in UK HEIs. It emerges that that by the end of the ten year period of the research (1995-2004), all the 40 universities in the sample provided at least some

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entrepreneurship education courses. The HEIs that were slow to offer entrepreneurship education during the first half of the research period cited a perceived lack of demand from undergraduate and postgraduate students as well as amongst members of faculty staff. Shortages of relevant resources to fund such courses were also mentioned as a barrier to provision. Interestingly, when entrepreneurship education became “fashionable” and government funding made available, the provision of this type of courses increased considerably. A small proportion of HEIs in Scotland and Wales claimed to have been restricted by regional and cultural factors that were perceived as unfavourable for entrepreneurship education or small business development courses. Throughout the research period, we could not identify any significant commonalities in conceptual approaches, and each university appears to have decided and used its own definition of what constitutes entrepreneurship education. We found, however, evidence of a pragmatic “fluidity” in both the concept and context of course delivery. Although in the first five years of the research period the curriculum was dominated by traditional modules, during the second part of the study, relevant entrepreneurship courses have increased considerably. During the period, similar trends were evident in the use of ICTs as well as other electronic platforms of curriculum delivery, with most innovative approaches being applied at postgraduate level. Assessment of both full time and part time entrepreneurship education courses followed mainly traditional routes. At undergraduate level, there were subject assignments and end of term exams. At postgraduate level, subject assignments accounted for about half the marks and the balance comprised of a traditional master dissertation which involved a substantial research based project on a topic relevant to entrepreneurship. Conceptual and contextual difficulties and “snap shot” research of variable quality have contributed to the emergence of a fragmented knowledge base and a growing debate on the impact of entrepreneurship education upon the UK economy. Definitional problems as well as conceptual and contextual divergence have left some stakeholders confused by the growing debate on entrepreneurship issues. Most importantly, policy makers are left to question the relevance and efficiency of a growing number of entrepreneurship education courses as well as the viability of allocating further funding for this sector. In order to bridge the credibility gap that appears to affect this aspect of higher education in the UK, we suggest that more and better quality research is needed, on all the pertinent aspects of entrepreneurship education. The is a need for empirically rigorous, longitudinal research to measure the impact that such courses have on graduate entrepreneurship over time and across all sectors of economic activity in this country.

References Alvarez, J.L. (1996), “The role of business ideas in the promotion of unemployment: the case of entrepreneurship in the 1980s”, in Gual, J. (Ed.), The Social Challenge of the Creation of Employment in Europe, Edward Elgar, Cheltenham. Baharun, R. and Ahmad, F.S. (2002), “Entrepreneurship education: a comparison of male and female students in technical disciplines”, Akauntan Nasional, Vol. 9, pp. 30-3.

Bell, M., Bush, D., Nicholson, P. and Tran, T. (2002), Universities on Line: A Survey of Online Education and Services in Australia, Occasional Paper Series 02-A, Higher Education Group, March. Block, Z. and Stumpf, S.A. (1992), “Entrepreneurship education research: experience and challenge”, in Sexton, D.L. and Kasarda, J.D. (Eds), The State-of-the-Art of Entrepreneurship, PWS-Kent Publishing, Boston, MA, pp. 17-42. Borjas, G.J. (2000), Labour Economics, 2nd ed., McGraw-Hill, Boston, MA. BVCA (2005), Investing in Enterprise, British Venture Capital Association, London. Bygrave, W.D. and Hofer, C.W. (1991), “Theorising about entrepreneurship”, Entrepreneurship Theory and Practice, Vol. 16 No. 2, Winter, pp. 13-22. Carter, N.M., Gartner, W.B., Shaver, K.G. and Gatewood, E.J. (2003), “The career reasons of nascent entrepreneurs”, Journal of Business Venturing, Vol. 18 No. 1, pp. 13-39. Charney, A.H. and Libecap, G.D. (2003), “The contribution of entrepreneurship education: an analysis of the Berger Program”, International Journal of Entrepreneurship Education, Vol. 1 No. 3, pp. 385-418. Cox, L.W., Mueller, S.L. and Moss, S.E. (2002), “The impact of entrepreneurship education on entrepreneurial self-efficacy”, International Journal of Entrepreneurship Education, Vol. 1 No. 1, pp. 229-45. Curran, J. and Stanworth, J. (1989), “Education and training for enterprise: some problems of classification, evaluation, policy and research”, International Small Business Journal, Vol. 7 No. 2, pp. 11-22. Gartner, W.B. and Vesper, K.H. (1994), “Experiments in entrepreneurship education: successes and failures”, Journal of Business Venturing, Vol. 9 No. 2, pp. 179-87. Gatewood, E.J., Powers, J.B., Shaver, K.G. and Gartner, W.B. (2001), “The effects of perceived persistence”, working paper, Johnson Centre for Entrepreneurship, Kelley School of Business, Indiana University, Bloomington, IN. Gatewood, E.J., Shaver, K.G., Powers, J.B. and Gartner, W.B. (2002), “Entrepreneurial expectancy, task effort, and performance”, Entrepreneurship Theory and Practice, Vol. 27 No. 2, pp. 187-206. Gillin, L.M., Powe, M., Dews, A.L. and McMullan, W.E. (1996), “An empirical assessment on the returns to entrepreneurial education”, paper presented at the Babson Conference on Entrepreneurship Research, Seattle, March. Gorman, G., Hanlon, D. and King, W. (1997), “Some research perspectives on entrepreneurship education and education for small business management: a ten-year literature review”, International Small Business Journal, Vol. 15 No. 3, pp. 56-77. Houston, K. and Mulholland, G. (2003), Entrepreneurial Mathematics Graduates, University of Ulster, Jordanstown, mimeo. Hytti, U. and O’Gorman, C. (2004), “What is ‘Enterprise Education’? An analysis of the objectives and methods of enterprise education programmes in four European countries”, Education þ Training, Vol. 46 No. 1, pp. 11-23. Johnson, P.S. (1986), New Firms: An Economic Perspective, Allen & Unwin, London. Johnson, S. (2002), “Lifelong learning and SMEs: issues for research and policy”, Journal of Small Business and Enterprise Development, Vol. 9 No. 3, pp. 285-95. Kuratko, D. (2003), Entrepreneurship Education: Emerging Trends and Challenges for the 21st Century, Coleman Foundation White Paper Series, Chicago, IL.

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Lazear, E.P. (2002), “Entrepreneurship”, National Bureau of Economic Research Working Paper 9109, Cambridge, MA, August. Levie, J. (1999), Entrepreneurship Education in Higher Education in England: A Survey, London Business School, London. Li, J. and Matlay, H. (2005), “Graduate employment and small businesses in China”, Industry & Higher Education, Vol. 19 No. 1, pp. 45-54. Li, J., Zhang, Y. and Matlay, H. (2003), “Entrepreneurship education in China”, Education þ Training, Vol. 45 Nos 8/9, pp. 495-505. McMullan, W.E. and Gillin, L.M. (2001), “Entrepreneurship education in the nineties, revisited”, in Brockhaus, R.H., Hills, G.E., Klandt, H. and Welch, H.P. (Eds), Entrepreneurship Education: A Global View, Ashgate Publishing, Aldershot, pp. 57-77. McMullan, W.E. and Long, W.A. (1987), “Entrepreneurship education in the nineties”, Journal of Business Venturing, Vol. 2 No. 2, pp. 261-75. Mason, C. (1991), “Spatial variations in enterprise: the geography of new firm formation”, in Burrows, R. (Ed.), Deciphering the Enterprise Culture: Entrepreneurship, Petty Capitalism and the Restructuring of Britain, Routledge, London. Matlay, H. (2001), “Strategic issues in vocational education and training in central and Eastern Europe”, Education þ Training, Vol. 43 Nos 8/9, pp. 395-404. Matlay, H. (2002), “Conceptual and contextual issues in entrepreneurship education revisited: why is clarity eluding specialist research?”, paper presented at the 2nd SMEs in a Global Economy Conference, Wollongong, July. Matlay, H. (2005), “Entrepreneurship education in UK business schools: conceptual, contextual and policy considerations”, Journal of Small Business and Enterprise Development, Vol. 12 No. 4, pp. 627-43. Matlay, H. (2006), “Entrepreneurship education: more questions than answers?”, Education þ Training, Vol. 48 No. 5, pp. 293-5. Matlay, H. (2007), “Pertinent questions in entrepreneurship education: why, what, when, where and how?”, Education þ Training, Vol. 49 Nos 8/9, pp. 279-302. Matlay, H. and Carey, C. (2006), “Entrepreneurship education in the UK: a critical perspective”, paper presented at the ISBE Conference, Cardiff, November. Matlay, H. and Westhead, P. (2004), “From e-innovation to e-entrepreneurship: European perspectives”, paper presented at the 27th ISBA National Small Firms Policy and Research Conference, University of Teesside, Middlesbrough, November. Matlay, H. and Westhead, P. (2005), “Virtual teams and the rise of e-entrepreneurship in Europe”, International Small Business Journal, Vol. 23 No. 3, pp. 279-302. Mitra, J. and Matlay, H. (2004), “Entrepreneurial and vocational education and training: lessons from Eastern and Central Europe”, Industry & Higher Education, Vol. 18 No. 1, pp. 53-69. Parker, S. (2004), The Economics of Self-Employment and Entrepreneurship, Cambridge University Press, Cambridge. Peters, M. (2001), “Education, enterprise culture and the entrepreneurial self: a Foucauldian perspective”, Journal of Education Enquiry, Vol. 2 No. 2, pp. 58-71. Shane, S. (2003), A General Theory of Entrepreneurship: The Individual – Opportunity Nexus, Edward Elgar Publishing, Cheltenham. Solomon, G.T. and Fernald, L.W. (1991), “Trends in small business management and entrepreneurship education in the United States”, Entrepreneurship Theory and Practice, Vol. 15 No. 1, pp. 25-39.

Solomon, G.T., Duffy, S. and Tarabishy, A. (2002), “The state of entrepreneurship education in the United States: a nationwide survey and analysis”, International Journal of Entrepreneurship Education, Vol. 1 No. 1, pp. 1-22. Wagner, J. (2003), “The impact of personal characteristics and the regional milieu on the transition from unemployment to self-employment: empirical evidence for Germany”, Jahrbucher fu¨r Nationalo¨konomie und Statistik, Vol. 223, pp. 204-22. Wagner, J. (2004), “What a difference a Y makes – female and male nascent entrepreneurs in Germany”, IZA Discussion Paper No. 1,134, Institute for the Study of Labour, Bonn, May. Westhead, P. and Matlay, H. (2004), “Critical issues in graduate career choices”, Working Paper No. 23, Global Independent Research, Coventry. Westhead, P. and Wright, M. (2000), “Introduction”, in Westhead, P. and Wright, M. (Eds), Advance in Entrepreneurship, Edward Elgar, Aldershot. Further reading Lambing, P.A. and Kuehl, C.R. (2003), Entrepreneurship, 3rd ed., Pearson Education, Upper Saddle River, NJ. Westhead, P. and Wright, M. (1998), “Novice, serial and portfolio founders: are they different?”, Journal of Business Venturing, Vol. 13 No. 3, pp. 173-204. Corresponding author Harry Matlay can be contacted at: [email protected]

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Collaborative business relationships Helping firms to acquire skills and economies to prosper Nitha Palakshappa Department of Commerce, Massey University – Albany, Auckland, New Zealand, and

Mary Ellen Gordon Market Truths Ltd, North Otago, New Zealand Abstract Purpose – This paper aims to describe in depth case studies demonstrating that many small companies that participate in collaborative relationships are not realising the knowledge and skill acquisition benefits that policy makers envision when they formulate public policy that promotes creation of collaborative business relationships. Design/methodology/approach – Hamel’s theory of inter-partner learning is built upon to explain the possible reasons why firms fail to derive learning-related benefits from participation in collaborative relationships, and the implications for public policy, for firms participating in collaborative relationships, and for future research are discussed. Findings – Key findings reveal that small companies are not realising the intended benefits of collaboration. Many New Zealand firms that participate in alliances are not using them to develop new skills and competencies. Research limitations/implications – Learning was neither an objective nor an outcome of most of the collaborative business relationships investigated in this research. The cases studied were selected from a large database of collaborative business relationships involving New Zealand firms, so there is no reason to believe that these findings are unique to the particular relationships examined; however, it would be useful to investigate the extent to which the findings generalise to other collaborative relationships in New Zealand and in other countries. Practical implications – Policy makers should carefully consider the types of collaborative relationships that they promote as not all relationships generate public benefits. Firms should consider collaborative relationships as a possible option for acquiring new skills and, if they wish to learn through participation in such a relationship, then they should make this a specific objective. Originality/value – The paper shows that the adoption of a qualitative approach allows a more insightful examination of collaborative relationships and learning. Keywords Strategic alliances, Cluster analysis, Joint ventures, Public policy, Small enterprises, New Zealand Paper type Research paper

Journal of Small Business and Enterprise Development Vol. 14 No. 2, 2007 pp. 264-279 q Emerald Group Publishing Limited 1462-6004 DOI 10.1108/14626000710746691

Introduction Collaborative business relationships including strategic alliances, joint ventures, clusters, and consortia are popular mechanisms for dealing with resource constraints, accelerating technological advancement, and heightened levels of competition in the global marketplace. Companies enter into such relationships in the hope of accessing resources, skills, or markets, and in doing so minimising the effect of their weaknesses

or building or maintaining competitive advantages. These motives may be greatest for small firms who may lack the internal resources to respond to threats and take advantage of opportunities, and for companies based in countries with small domestic markets since internationalisation is an even greater imperative for them than for companies based in countries with larger domestic markets. Perhaps as a consequence of this, public policy makers in countries with small home markets, such as New Zealand, have tended to focus on the potential of collaborative business relationships to deliver economic benefits; whereas public policy makers in countries with larger domestic markets, such as the United States, have tended to focus on the potential anti-competitive effects of such relationships. Previous research (e.g. Gishlick and McCall, 2002; Hunt and Arnett, 2001) has examined whether collaborative business relationships really do reduce competition, and therefore whether public policy discouraging collaborative business relationships is justified. In this paper, we examine whether collaborative business relationships really do produce the promised benefits for firms and through them for economic development, and therefore whether public policy encouraging collaborative business relationships is justified. We do this by applying Hamel’s (1991) determinants of inter-partner learning to in-depth case studies of six international collaborative relationships involving New Zealand firms. Literature review Collaborative business relationships as mechanisms for skill and resource enhancement Simonin (1997) classifies the benefits of collaborative business relationships into two categories: tangible and intangible. He cites generating additional profits, improving market share and sustaining competitive advantage as examples of tangible benefits and learning specific skills and developing competencies as intangible benefits. Traditionally, the tangible benefits of collaboration have received the greatest attention from researchers; however recently an increasing number of researchers have turned their attention to the intangible benefits of collaborative business relationships. Learning through collaborative relationships helps firms secure global market share (Glaister and Buckley, 1996) and competitive advantage (Inkpen, 1996). Developing core competencies reduces a firm’s dependence on its partner, and enables it to leverage knowledge gained through a collaborative relationship in other markets or areas of operation (Hamel, 1991, Simonin, 1997). Berdrow and Lane (2003) refer to this process as knowledge harvesting. This is consistent with a resource-based view of the firm perspective, in which knowledge gained as a result of participating in collaborative business relationships contributes to a firm’s overall stock of knowledge (Dierickx and Cool, 1989) and can be used to strengthen the competitive capabilities of the firm (Lyles and Salk, 1996). Conversely, failure to learn in a collaborative relationship may make a firm increasingly dependent on its partners in that relationship and weaken its overall competitive position (Hamel, 1991). One of the first studies to highlight the importance of intangible benefits such as learning in collaborative business relationships was Hamel’s (1991) in-depth qualitative study of nine international alliances. The primary goal of this work was to understand the extent to which collaboration could lead to a redistribution of skills among partners. He found that firms do experience changes in their relative skill levels as a result of participation in alliances, and that asymmetries in the speed with which

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alliance partners learn new skills influence their relative bargaining power within the alliance and their relative competitive positions and competitive advantages outside of the alliance. As part of this work, Hamel (1991) also identified three important determinants of learning within collaborative relationships: intent, transparency and receptivity. Intent relates to a firm’s goals for an alliance and whether they seek to internalise partner skills or simply access partner’s skills in order to compensate for their own weaknesses. Hamel’s results suggested that internalisation intent is an important precondition for systematic learning. Transparency relates to the visibility of partner skills. This is described as being partially a function of the partner’s organisational culture, but is also influenced by the specific skills in question and also the structure of the collaborative relationship. Hamel’s (1991) results suggest that firms can more easily internalise partner skills when the partner organisation is transparent, and hence the skills are more visible, and also that asymmetric transparency leads to asymmetric learning. Receptivity relates to the openness of the organization itself to learning, and whether the firm perceives itself as a “student” or a “teacher” in the alliance relationship. Hamel’s (1991) results suggest that asymmetric receptivity also leads to asymmetric learning. Hamel’s (1991) findings regarding receptivity as a determinant of learning were later confirmed by Cummings and Teng (2003) in their study of R&D knowledge transfer. Other researchers have also studied factors that may contribute to or inhibit learning within collaborative relationships. Like many researchers before them, Beamish and Berdrow (2003) argue that for learning to provide real value there needs to be a conscious intent to learn. Similar to Hamel’s notion of intent, Hoffman and Schlosser (2001) focus on the desire to learn, and they and others (e.g. Barringer and Harrison, 2000; Lyles and Salk, 1996) also examine the capacity to learn. Shenkar and Li (1999) suggest that possession of complementary knowledge is a pre-requisite for the search for knowledge. Crossnan and Inkpen (1995) describe similarity in partner skills, concentration on getting a “home run” and equating learning with performance as key impediments to learning within alliances, and their findings reinforce the idea that learning is less likely if that is not a specific intention of firms participating in alliances. Public policy relating to collaborative business relationships In the absence of public policy created explicitly to apply to collaborative business relationships, regulators sometimes apply competitive guidelines developed for mergers and acquisitions (Gishlick and McCall, 2002). Some commentators (e.g. Gishlick and McCall, 2002) have questioned whether this is appropriate since such relationships do not reduce (and depending on the form of collaborative relationship, may actually increase) the total number of competitors. Others, such as Hunt and Arnett (2001) have argued that even when applied to mergers, antitrust policy places too much emphasis on the efficiency effects created when firms pool resources and too little on the potential for combined value creation. Arguably, this critique applies even more strongly in the context of collaborative business relationships since, as noted above, they are less likely to result in a reduction in the total number of competitors.

Preventing international technological “leakage” (Contractor, 1991) and reducing the probability of collusion among partners (Gishlick and McCall, 2002) have been cited along with the more traditional anti-trust arguments as justification for public policy constraints on collaborative business relationships. Public policy encouraging collaborative business relationships is typically premised on the view that this will lead to economic development. Public policy in New Zealand has tended to encourage rather than discourage formation of collaborative business relationships – particularly among small firms. New Zealand is a geographically isolated, export dependent, country in which a large proportion of firms are very small, and New Zealand Governments have attempted to use public policy to encourage firms to collaborate in the hope that it will help them to overcome weaknesses and disadvantages and access the skills and resources necessary to function competitively in the global marketplace. Akoorie and Enderwick (1992) describe New Zealand firms seeking to operate in the international arena as suffering from a “small firm effect” characterised by inadequate levels of resources. The commonly held view is that New Zealand firms need to strengthen their competitive advantages and develop core competencies (Crocombe et al., 1991), and that collaborative business relationships can help them do that. Over the years, New Zealand Governments have implemented various policy initiatives to directly or indirectly encourage formation of collaborative business relationships. One initiative involved the promotion of collaboration through networks and encouraged resource and information exchange (Chetty and Patterson, 2000). The promotion of joint action groups (JAGS) in New Zealand was another initiative designed to encourage organisations within a particular industry to work together to gain competitive advantage (Chetty and Patterson, 2000). Benefits were sought through size efficiencies and working on common projects. More recently, the New Zealand Government has implemented a program aimed at encouraging cluster formation by providing information and advice as well as financial grants to clusters with the potential to generate regional economic growth (Ministry of Economic Development, 2004). Training and upskilling are explicitly identified as target payoffs from cluster creation. There has been very little rigorous systematic evaluation of whether these programmes achieved the intended benefits for the participating firms or for the New Zealand economy as a whole; however, one study showed that collaborative business relationships were less likely to have achieved the participating firms’ objectives when they received assistance as part of one particular (Hard Network) initiative than when they did not (Gordon and Floyd, 1999). Methodology The cases examined in this paper are part of a larger study on the performance of collaborative business relationships in New Zealand. The University of Canterbury’s database of collaborative business relationships served as the sampling frame for identifying cases. This database, which was compiled in 1997, contains details on hundreds of domestic and international collaborative relationships. Six collaborative relationships were selected for in-depth study using theoretical sampling. All of the collaborative business relationships studied involve a New Zealand firm and an international partner (or partners), but vary on three other criteria that may be associated with learning intent or outcome: technology use within the alliance (high or

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low), strategic logic (cumulative, which refers to relationships in which partners contribute largely similar resources, or complementary, which refers to relationships in which partners contribute distinct types of resources), performance (met objectives and didn’t meet objectives). It’s important to emphasise that no attempt was made to select cases based on whether or not they involved relationships in which learning was either an objective or an outcome. Selection was random as far as learning is concerned. Therefore, there is no reason to believe that the relationships studied are any more or less likely than the rest of the international collaborative relationships New Zealand firms are involved in to have learning intents or outcomes. A case study methodology was considered appropriate as it permits the study of “real life” collaborations (Parkhe, 1993)and allowed a deeper exploration of each collaborative relationship than other methodologies would have allowed. Eisenhardt (1989) also advocates the use of case research as a strategy that focuses on understanding the dynamics present within the case. Yin’s (1994) guidelines for case study data collection have also been closely followed in this research. Specifically, multiple sources of evidence are used, a case study database has been created and a chain of evidence has been maintained. Data were collected from multiple alliance partners (depending on the number of organisations involved) and from multiple informants within each organisation (depending on the number of people from each organisation involved in the relationship) using a combination of in-depth interviews, semi-structured questionnaires, and perceptual mapping. Each interview lasted from one to two hours. This aided a deeper understanding of the relationship from the perspective of participating managers. In particular it facilitated a comparison of the perspectives of participants within and between the collaborating organisations. Secondary documents and archival records were used to support participant contributions. For example, information was collected and reviewed regarding the organizations involved in the relationship prior to the interviews. Subsequently, access was also gained to internal company documents. All interviews were transcribed, double-coded, and content analysed to highlight emergent themes. Case descriptions US Computer Alliance. This alliance is between a well-known multi-national computer manufacturer and a New Zealand company that is responsible for distribution of the manufacturer’s brand within the New Zealand market. In addition the New Zealand partner also takes responsibility for promoting and supporting them in the New Zealand market, and has set up a separate division for these activities to avoid conflicts of interest with other manufacturers’ brands it represents. The manufacturing partner’s market share is greater in New Zealand than in most other markets throughout the world, and consequently, the alliance is perceived as meeting its objectives by informants from both organisations. Japanese Chemical Alliance. The participants in this alliance are a small New Zealand speciality chemical firm and a very large Japanese trading house (owned by an even larger multi-national company). The Japanese partner was to represent the New Zealand firm’s products in the Japanese market and, eventually, in other international markets. While the relationship was still in existence at the time we conducted our research, neither party believed that it had achieved its objectives. Economic and

technical considerations had led to a change in the way the product was produced. The Japanese partner was dissatisfied with these changes and the way they were implemented, and the New Zealand firm was dissatisfied with what it regarded as the Japanese firm’s ineffectiveness in generating business. The Japanese firm had not been asked to promote the products in other markets, and its responsibilities even in Japan had been curtailed. German Conveyor Belt Alliance. This is an alliance in which a New Zealand firm distributes specialty conveyor belts built by a German manufacturer in the New Zealand market. The New Zealand firm is much smaller than its German partner, and while it represents only a small fraction of the German company’s sales, the manufacturer’s objectives for the alliance were being met and the time we conducted our interviews as were the distributor’s. US Highway Barrier Alliance. This alliance is between an American firm that manufactures moveable highway barriers and the New Zealand firm that represents these products in Australasia. The relationship began with a large and successful project, and while the relationship continues, it is not achieving its objectives in terms of generating additional joint business and a financial return for the partners. European Shipping Alliance. This is a consortium of the New Zealand subsidiaries of several major shipping firms based in the United Kingdom (UK) and in Europe. The focus of the group is on facilitating the shipment of cargo between New Zealand and Europe by sharing infrastructure (cargo capacity on ships, docking rights, etc.). The informants differ in their perception of the extent to which this relationship has been successful. UK Training Video Alliance. This was a contractual relationship between a New Zealand corporate training company and a video production company based in London. The New Zealand firm was previously given exclusive distribution rights for the London-based firm’s products in the New Zealand market. The relationship did not achieve its objectives and was terminated soon after our interviews were conducted. Findings Competitive collaboration None of the partners in any of the alliances studied entered with internalization of scarce skills as their prime motive for participating in their collaborative relationship. Only one of the New Zealand firms involved in the alliances we studied went into their alliance (highway barriers) with a learning intent, although even for them it was a secondary rather than a primary consideration. In addition to distributing its partner’s highway barriers, the company manufactured some of its own products for use in traffic management and other applications, and they believed that they could learn from the engineering expertise of their American partner and apply that knowledge to help them address traffic problems and other applications, and also to manufacture their own products. The nature of the agreement prevents the New Zealand firm from manufacturing the particular type of highway barrier produced by the American partner on their own; however they have been able to acquire important skills associated with the finishing, implementing and maintaining of the manufacturer’s product, and to use the knowledge they have gained working with the manufacturer on other projects. These benefits are one reason the relationship endures even though it has not been successful in generating the volume of business either partner hoped for.

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Furthermore, of the firms involved in the other alliances, none entered with the specific intent to learn. Their motives correspond much more closely to what Hamel describes as a substitution intent in which firms substitute their partner’s skills in a particular area where their own skills are lacking. The partners involved in the computer alliance place considerable value on each other’s skills. This is demonstrated by a clear division of responsibilities within the relationship – the New Zealand firm is a value-added distributor and the manufacturer could not easily provide the same level of service within the New Zealand market whereas the distributor lacks the skills and resources to integrate backward into computer manufacturing. A similar division of labour is evident in the conveyor belt and video alliances. The roles are reversed in the chemical alliance with the Japanese firm acting as the local distributor for the New Zealand manufacturer’s product. Distributors in these alliances did not intend to learn to produce the products themselves and the manufacturers did not intend to learn enough about the local markets to distribute their own products in these markets. The shipping alliance began long ago, but there was also no evidence of a learning intent associated with that either and, using Hamel’s terminology, the firms involved in it can best be described as having resource concentration intent. The shipping alliance however continues in spite of the fact that many participants in it do not view at as being particularly successful. The chemical alliance provides some support for aspects of competitive collaboration. The New Zealand firm entered this alliance because they recognized that they lacked an understanding of the Japanese market. Their original intent appeared to have been more substitution than learning in the sense that they entered with the view that their partner would provide this local knowledge rather than that they would acquire it from their partner. As one of the interviewees commented: If you have the name of a company that does US$102 billion turnover people assume that you are well connected . . . that gets you in the door – relationships form – they have probably been trading with the people that we have wanted to trade with for the last 15 years . . .

Nonetheless, even without a learning intent, they were able to learn enough to develop some relationships with other players in the market independent of their partner. That did alter the position of the partners relative to one another and did make the firms competitors, at least to some degree, as well as collaborators. Learning and bargaining power The strong linkage that Hamel (1991) describes between learning and bargaining power was not evident in the alliances that we studied, at least in part because there was so little learning intent. The highway barriers alliance was the one in which the greatest amount of learning occurred, yet in that, the license agreement that was in place prevented the New Zealand partner’s learning from enhancing their bargaining power within the alliance contradicting aspects of the relationship between learning and bargaining power. The chemical alliance provides some support for this relationship. As noted previously, the New Zealand partner did not enter this alliance with a learning intent, however because it experienced some learning anyway, it did gain some bargaining power relative to its Japanese partner. Firms involved in the alliances we studied did not show any indication of perceiving a linkage between inter-partner learning, bargaining power, and competitiveness, and

neither did any give an indication that they viewed alliances as a race to learn. Therefore, we conclude that those who do not perceive these linkages do not perceive alliances as races to learn. Intent as a determinant of learning With the exception of the shipping alliance, the primary objectives of the firms involved in these alliances can be described as substitution. Each firm was trying to substitute the partner’s knowledge or competencies for its own. In each of these alliances, local market knowledge held by one partner was exchanged for R&D, manufacturing, and branding knowledge embodied in finished products provided by the other partner. The exception to this is the shipping alliance, which can best be described as having a resource concentration objective since the participants in this relationship were pooling their cargo capacity and other resources. As stated previously, due to the way the cases were selected, there is no reason to believe that this distribution is significantly different from that for the entire population of collaborative international business relationships involving New Zealand firms. None of the partners in any of the alliances that we studied had internalization of partner knowledge or competencies as their primary objective. This is consistent with what Hamel proposes, since the firms by and large viewed the alliances as ways to compensate for absent skills rather than ways to close skill gaps. Hamel (1991) contrasts firms who view competitiveness as competency-based with those who view it as product-based, and describes those with the latter view as perceiving alliances as “short-cuts to a more competitive product line.” This certainly describes the distributor partners in the five alliances that we studied which involved manufacturers. Their partners in the alliances that we studied seemed to view competitiveness as market-based and saw alliances as providing short cuts to market access and market share. While five of the six alliances that we studied involved partners with substitution intent, we only witnessed asymmetric learning in the highway barrier and chemical alliances and only in the highway barrier alliance can this be described as systematic. While asymmetric learning may have resulted in the other alliances if one of the partners did have internalization intent, our results suggest that asymmetric learning will not necessarily occur if both partners have substitution intents. Transparency as a determinant of learning The collaborative relationships we studied varied in transparency. In many cases it was evident that firms had clearly defined the activities of the relationship to limit the type of information and knowledge that their partner would have access to. In the case of computer distribution high levels of openness were evident in certain areas such as goal setting and financial information. This promoted the achievement of mutually agreed upon targets and aided the development of a positive relationship between the partners. This openness was not evident in the product development process, which was described as being characterised by secrecy, indicating that transparency supported the key tasks of the relationship but left no room for additional learning or acquisition of core competencies. In this case the overseas partner was given full and open access to the activities of the New Zealand firm. They were therefore able to examine performance in all key collaborative task areas. However, this transparency

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did not result in learning because the partner did not demonstrate either learning intent or receptivity. A similar situation could be seen in the conveyor belts case where the New Zealand firm has a close working relationship with their partner but does not gain access to production facilities or capabilities. Conversely, the overseas partner carefully monitors the performance of the New Zealand firm. By doing so, they gain considerable local market knowledge and an understanding of sales fluctuations. In this case transparency was once again evident but there was no intent to learn. Transparency was relatively higher in the highway barriers case where the New Zealand firm was able to actively participate in the design, manufacture and installation of the final concrete barriers. The US firm sends personnel to New Zealand when necessary but has not shown a high level of interest in building local market knowledge. This was evident early on in the relationship when the two firms had to sign an agreement with a government organisation. At this time the US firm declined to sign the complicated and lengthy document. This resulted in the New Zealand firm undertaking negotiations and assuming more responsibility for the project than previously intended. Complicated inter-partner dynamics may have reduced the level of transparency in the remaining cases. In the video alliance, there were strong interpersonal differences between individuals at the two companies. This made the New Zealand partner more protective of local market information and the video production company more protective about information related to release dates for new videos and financial information. In the chemical alliance, strained relations, compounded by cultural differences, led to reduced transparency. Changes to world-wide supply and demand combined with some technical difficulties meant that the process originally planned for extracting this product was no longer economically viable. The New Zealand firm responded by developing alternative sources of supply, and from its own cultural perspective viewed this response as pro-active. Reflecting a lack of transparency however, it did not inform its Japanese partner of this change until after it had been implemented. The Japanese partner had been promoting the product based on the original extraction process, and from its own cultural perspective believed that the change would cause it to “lose face” with its customers. Hamel (1991) found that Japanese firms tend to be less transparent than western firms, and as consequence of what it perceived as its partner’s breach of trust, the Japanese partner in this alliance then became even less transparent in terms of providing information about the local market. This caused the New Zealand firm to lose faith in the ability of the Japanese firm to uphold its part of the alliance, and consequently they made product information less transparent to their Japanese partner. The structure of the shipping alliance made particular things such as ship cargo capacity, shipping volumes, market shares, and customer identities extremely transparent to all of the firms participating in the alliance. This is also consistent with Hamel (1991) in the sense that the activities involved in this alliance are inherently transparent even if other aspects of the participating firms’ businesses were not transparent to partner firms. Although the relationship was designed to encourage transparency among the activities of members, this was not always the case. Internal

competition and mistrust have impacted on the level of overall transparency within the alliance. This was demonstrated in many comments made in the interviews: Even though we are in a collaborative agreement we are still in competition . . . [and] there is a reluctance to divulge too much commercial information within the conference.

Overall however, our findings suggest that asymmetric transparency pre-ordains asymmetric learning. In three of the four alliances involving New Zealand distributors (videos, computers, and conveyor belts), the distributors’ activities were more transparent to their manufacturer partners than the partners’ activities were to the distributors. This was a function of the nature of the activities, but it did not lead to asymmetric learning. Receptivity as a determinant of learning In the alliances that we studied, firms tended to demonstrate a strong willingness to learn in the activity areas in which they were already contributing, but showed little evidence of being receptive to acquiring the skills and competencies being contributed by their partners. The local firm in the computer distribution alliance was highly valued by its partner for its distribution skills and exceptional level of service and continually worked to improve in these areas. A similar level of receptiveness with respect to the skills they were already contributing was evident in the conveyor belts collaboration, where the local firm mastered skills associated with preparing pre-manufactured belting for installation. The greatest level of receptiveness to learning – particularly with respect to areas outside of its direct contribution to the alliance – was demonstrated in the highway barriers case where the New Zealand firm approached the relationship with enthusiasm and a specified intention to learn. Comparability of skills and facilities may also have impacted on the levels of receptivity described. For instance, the computer distribution partnership involved firms with a greatly disparate skill-set and a lack of parallel facilities. This dissimilarity in skills could also be seen in chemical mining, conveyor belting, training videos and, to some extent, highway barriers. The collaboration that exhibited the highest degree of parallel facilities and skills was the container shipping alliance. The determinants of sustainable learning In the majority of the collaborative relationships that we studied, the learning that occurred was specific to the activities an alliance partner was already contributing rather than extending into activities performed by partners or the transformational type of learning described by Berdrow and Lane (2003). Therefore, participation in these alliances did not enable firms to reduce their dependence on their alliance partners. Two alliances that departed from this somewhat were the chemical and highway barrier alliances. In the chemical alliance, the New Zealand firm did make enough contacts in Japan to conduct some business there without the help of their alliance partner. The New Zealand company in the highway barriers alliance could not replicate its partner’s products due to the nature of their licensing agreement; however, they did acquire skills that could be used on other projects independent of their alliance partner.

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Discussion Learning in collaborative relationships None of the firms we studied entered their alliances with internalization of skills and competencies as their primary intent. The lack of internalization intent significantly limited their potential to learn from their alliance partners and to leverage that learning outside of their alliances. It also leads us to conclude that intent takes precedence over Hamel’s other determinants of learning. While there were transparency asymmetries present in the alliances that we studied, these did not lead to the differences in learning predicted by Hamel’s proposition. We believe that this is because transparency asymmetries only become relevant when at least one of the partners has a learning intent. The firms in the alliances that we studied showed relatively little receptivity to learning, so in that sense, it was not possible to use these cases to examine whether receptivity asymmetry leads to differential learning; however, we believe that effect is also only likely to appear when at least one firm in an alliance has a learning intent. Most of the learning that did take place in the alliances that we examined was confined to improving skills that a particular firm was already contributing to a relationship, so knowledge was not being transferred, transformed or harvested (Berdrow and Lane, 2003), but rather simply being substituted (Hamel, 1991) between partners. The two exceptions to this were the highway barriers and chemical alliances, where some knowledge transfer did take place between partners; however it’s important to emphasize that in the former, learning was a secondary objective, and in the latter, it wasn’t an objective at all, and in neither of these alliances were the primary alliance objectives met. The New Zealand firm involved in the highway barriers alliance accessed engineering expertise, and has had limited success in transferring that expertise to other projects yet has not achieved its sales volume objectives for the original alliance. The New Zealand firm in the chemical alliance also failed to achieve its original objectives in terms of penetrating the Japanese market with the help of its partner; however it was able to learn enough through that experience to make some inroads into the Japanese market on its own. Implications for firms The New Zealand firms participating in the alliances that we studied entered them with substitution, or in one case, resource concentration intent, and as discussed previously, there is no reason to believe that their intent would be significantly different from that of the population of New Zealand firms participating in international collaborative business relationships. The theoretical sampling process used ensured that some of the alliances studied had achieved their primary objectives and some had not, so we can’t draw any conclusions about the extent to which intent influenced non-learning related objectives. None of these firms entered with a learning intent, and none, with the exception of the chemical company, acquired enough skills as a result of participating in their alliance to reduce their dependence on their partner or to increase their bargaining power relative to their alliance partner(s). In fact, with the exception of the chemical company and the shipping alliance, each of which involved proprietary resource access (to minerals and ports and ships respectively), it would have been much easier for the international partner to replace the New Zealand firm than the reverse and that situation did not change over the life of the alliances.

For example, the New Zealand firm participating in the videos alliance suffered considerably when its exclusive distribution agreement was dropped. It could not replace the product itself, and had developed no experience in the compilation of training videos during the collaboration. In this case, the achievement of tangible firm-level objectives such as sales and profitability were severely affected. Other collaborations could also face long-term difficulties. In the conveyer belt alliance, the focal firm bases its entire operations on its partner’s requirements. It carries no other lines of belting products, and has acquired transaction-specific expertise in the cutting and installation of this particular brand of conveyor belts. Firm-level objectives are met in this collaboration, but no transferable skills have been developed. These findings suggest that many New Zealand firms that participate in alliances are not using them to develop new skills and competencies, even if the alliances are helping them to achieve other, more tangible, objectives such as gaining market share. From the firm perspective, the lack of learning taking place within alliances may not be a concern if the alliances are serving other useful purposes and if skills and competencies are being developed in other ways. On the other hand, it may be that firms are simply not taking advantage of opportunities to develop skills and competencies through their alliances because they lack awareness of the potential to do this. In situations where that is the case, it is important to make learning a specific objective for alliances and to ensure that steps are taken to ensure that organisations are receptive to opportunities to learn from their partners. Similarly, by understanding the linkage between learning, bargaining power, and competitive advantage, firms can take steps to reduce the likelihood of unintentional transparency to alliance partners resulting in reduced bargaining power relative to those partners. Implications for public policy It’s important to emphasise that none of the alliances studied was formed directly as a result of any public policy initiative, however the fact that so little learning resulted in these alliances calls into question the idea that using public policy to encourage alliance formation will enable firms to acquire skills and that in turn will translate into economic development. While the firms involved in these relationships were enhancing existing skills, they experienced only limited acquisition of new skills, and the firms involved had not been able to translate these into tangible benefits for themselves, much less the broader economy. Part of this may be due to the nature of the collaborative relationships. Alliances were selected based on their use of technology, their strategic logic, and their performance and not on the specific functions performed, yet in half of them the contribution of the New Zealand firm was distribution in the domestic market. This appears to be reasonably representative of the types of alliances New Zealand firms participate in. A survey of the collaborative activities of 1,612 New Zealand firms showed that they are significantly more likely to contribute marketing, sales and distribution to collaborative relationships than they are to contribute R&D or manufacturing (Gordon and Floyd, 1999). While distribution is an important function, as an alliance contribution, it may be less well-suited to the development of new skills and competencies – particularly highly valued skills and competencies – than functions such as R&D and manufacturing. The nature of the activities involved in these alliances also suggest

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that collaborative business relationships may not deliver the benefits public policy makers have in mind when they formulate policies aimed at promoting their creation. As noted previously, public policy makers in small countries such as New Zealand may view alliances as a way for small firms to acquire skills and for firms to internationalise, yet most of the New Zealand partners in the alliances we examined were acting as distributors for international manufacturers. While skills are required to perform this function and the companies involved were chosen because they possessed these skills, as shown from the previous discussion, such an arrangement may mean that partner skills are not very transparent even to firms that enter into relationships such as these with a learning intent. In half of the alliances that we studied (computers, conveyor belts, and videos), the New Zealand firm was neither learning about a new market nor developing competencies in areas outside of its role within the alliance, which in all of these examples was distribution. Similarly, the firms involved in the shipping alliance were not gaining new skills or competencies because their intent was simply to concentrate resources. The use of New Zealand firms provides an interesting research setting given that many firms enter alliances to overcome perceived disadvantages associated with size and distance, a view that has been mirrored in public policy in small countries such as New Zealand. In Hamel’s (1991) terminology, this would be termed a substitution intent, and that is indeed what we found the New Zealand firms involved in the collaborative relationships we studied to have. As Hamel’s propositions predict and our case analyses show however, learning is limited in alliances formed with substitution intent. If the firms involved in these collaborative relationships are not enhancing their own competencies, it seems even less likely that the economy as a whole is receiving flow-on benefits. These findings suggest that economic development benefits do not flow automatically from the creation of collaborative business relationships. This suggests that public policy makers seeking such benefits either need to consider other ways of achieving them or to become much more targeted regarding the types of collaborative business relationships that they attempt to foster. For example, the New Zealand Government currently has a program in place to encourage formation of clusters, yet the application for grants from this program (New Zealand Trade and Enterprise, 2004) ask questions about objectives for jobs and sales, but not about skills and competency development. If governments wish to use collaborative relationships as a means of helping firms to acquire skills and competencies, our results suggest that they need to ensure that the firms involved have a learning intent and are receptive to learning. Our results also suggest that policy makers should carefully consider the types of collaborative relationships that they promote. As discussed previously, all of the alliances we studied involved a New Zealand firm and an international partner, yet four of the six focussed on the domestic market, and in three of these, the New Zealand firm’s contribution was to provide New Zealand distribution to its international partner. This limited the partner’s transparency, and the New Zealand firm’s potential for learning new skills even if learning intent and receptivity to learning had been present. Our discussion focused on international alliances since we were building on Hamel’s work which was undertaken in that context. Some of the public policy initiatives

described previously focus on different types of collaborative relationships, such as those involving two or more New Zealand firms rather than a New Zealand firm and an international partner. While these may increase transparency and therefore the potential to learn, public policy makers need to consider the extent to which firms participating in such relationships have different skills and competencies and therefore offer opportunities to learn from each other or if these relationships are simply examples of resource concentration with limited learning potential since participating firms share similar strengths and weaknesses. This seems likely in many cases, since the survey of New Zealand collaborative relationships discussed previously found that partners were making similar (as opposed to unique) contributions in 74 per cent of relationships (Gordon and Floyd, 1999). Lane and Lubatkin (1998) highlight the importance of selecting an appropriate “teacher” when forming a collaborative relationship, and from both a firm and a public policy perspective, it would be advantageous for firms to choose partners from whom they could learn and acquire new skills. However, firms cannot form collaborative relationships unilaterally, and need to have skills and resources of their own that make them attractive partners. Public policy therefore may be better served by encouraging already strong firms to collaborate and by helping weaker firms to first develop their own capabilities to make them more attractive partners in the future than by encouraging firms to use collaborative relationships to compensate for their weaknesses. Implications for future research We found little evidence of learning intent in the collaborative relationships we studied. As discussed previously, the cases selected were part of a larger study, and learning intent did not appear to be any more evident among the other relationships that are part of that larger study than in the alliances described in this paper. Therefore, we believe it would be useful to measure the prevalence of learning intent among firms participating in collaborative relationships and to investigate whether there are systematic differences in intent across countries, industries, or types of collaborative relationships. Based on our findings, we believe that learning intent must be present for differences in receptivity or transparency to lead to learning differences; however it would be helpful for this to be formally investigated in a larger study. There is surprisingly little formal research evaluating whether collaborative business relationships formed, at least in part, as a result of public policy initiatives produce benefits for the firms involved and for economic development. This research is important since our results indicate that some of the anticipated benefits may not be realised. Research should compare firms who collaborate on their own, firms that collaborate as a result of public policy initiatives, and firms that do not collaborate on tangible measures such as market share and intangible measures such as competencies to see how these are affected by collaboration, and whether there are differences between organically formed relationships and those formed as a result of policy initiatives. Research should also investigate whether or not any firm-level benefits translate into broader economic benefits, and if so, how cost-effective collaboration-based economic development initiatives are compared to other forms of economic development assistance.

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References Akoorie, M.E.M. and Enderwick, P. (1992), “The international operations of New Zealand companies”, Asia Pacific Journal of Management, Vol. 9 No. 1, pp. 99-117. Barringer, B.R. and Harrison, J.S. (2000), “Walking a tightrope: creating value through interorganizational relationships”, Journal of Management, Vol. 26 No. 3, pp. 367-403. Beamish, P.W. and Berdrow, I. (2003), “Learning from IJVs: the unintended outcome”, Long Range Planning, Vol. 36 No. 3, pp. 285-303. Berdrow, I. and Lane, H.W. (2003), “International joint ventures: creating value through successful knowledge management”, Journal of World Business, Vol. 38 No. 1, pp. 15-30. Chetty, S.K. and Patterson, A. (2000), “Developing internationalisation capability through industry groups: the experiences of a telecommunications joint action group”, Working Paper Series No. 29, Department of Commerce, Massey University, Auckland. Contractor, F.J. (1991), “Between markets and collusion: the implications of joint ventures for public policy and regulation”, The International Trade Journal, Vol. 6 No. 1, pp. 1-28. Crocombe, G.T., Enright, M.J. and Porter, M.E. (1991), Upgrading New Zealand’s Competitive Advantage, Oxford University Press, Auckland. Crossnan, M.M. and Inkpen, A.C. (1995), “The subtle art of learning through alliances”, Business Quarterly, Vol. 60 No. 2, pp. 68-78. Cummings, J.L. and Teng, B-S. (2003), “Transferring R&D knowledge: the key factors affecting knowledge transfer success”, Journal of Engineering and Technology Management, Vol. 20 Nos 1-2, pp. 39-68. Dierickx, I. and Cool, K. (1989), “Asset stock accumulation and sustainability of competitive advantage”, Management Science, Vol. 35 No. 12, pp. 1504-14. Eisenhardt, K.M. (1989), “Building theories from case study research”, Academy of Management Review, Vol. 14 No. 4, pp. 532-50. Gishlick, H.E. and McCall, C.W. (2002), “Management strategy and unsettled public policy toward joint ventures: a case study”, American Business Review, Vol. 20 No. 1, pp. 62-70. Glaister, K.W. and Buckley, P.J. (1996), “Strategic motives for international alliance formation”, Journal of Management Studies, Vol. 33 No. 3, pp. 301-32. Gordon, M.E. and Floyd, C. (1999), “Collaborative business relationships in New Zealand”, International Marketing: An Asia-Pacific Perspective, pp. 495-500. Hamel, G. (1991), “Competition for competence and interpartner learning within international strategic alliances”, Strategic Management Journal, Vol. 12, pp. 83-103. Hoffman, W.H. and Schlosser, R. (2001), “Success factors of strategic alliances in small and medium-sized enterprises – an empirical survey”, Long Range Planning, Vol. 34 No. 3, pp. 357-81. Hunt, S.D. and Arnett, D.B. (2001), “Competition as an evolutionary process and antitrust policy”, Journal of Public Policy & Marketing, Vol. 20 No. 1, pp. 15-26. Inkpen, A.C. (1996), “Creating knowledge through collaboration”, California Management Review, Vol. 39 No. 1, pp. 123-40. Lane, P.J. and Lubatkin, M. (1998), “Relative absorptive capacity and interorganizational learning”, Strategic Management Journal, Vol. 19 No. 5, pp. 461-77. Lyles, M.A. and Salk, J.E. (1996), “Knowledge acquisition from foreign parents in international joint ventures: an empirical examination in the Hungarian context”, Journal of International Business Studies, special issue, pp. 877-903.

Ministry of Economic Development (2004), Regional Partnerships Programme Review, available at: www.med.govt.nz/irdev/reg_dev/rpp/background/background-07.html New Zealand Trade and Enterprise (2004), web site available at: www.nzte.govt.nz/common/ files/cdf-appform.pdf Parkhe, A. (1993), “‘Messy’ research, methodological predispositions, and theory development in international joint ventures”, Academy of Management Review, Vol. 18 No. 2, pp. 227-68. Shenkar, O. and Li, J. (1999), “Knowledge search in international cooperative ventures”, Organization Science, Vol. 10 No. 2, pp. 134-43. Simonin, B.L. (1997), “The importance of collaborative know-how: an empirical test of the learning organization”, Academy of Management Journal, Vol. 40 No. 5, pp. 1150-74. Yin, R.K. (1994), Case Study Research: Design and Methods, Sage, Thousand Oaks, CA. Further reading Bonoma, T.V. (1985), “Case research in marketing: opportunities, problems, and a process”, Journal of Marketing Research, Vol. 22 No. 2, pp. 199-208. Corresponding author Nitha Palakshappa can be contacted at: n.n.palakshappa@ massey.ac.nz

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Allan Butler Centre for Rural Policy Research, University of Exeter, Exeter, UK

Matt Reed ESRC Centre for Genomics in Society, University of Exeter, Exeter, UK, and

Phil Le Grice Duchy College, Callington, UK Abstract Purpose – Vocational training by those involved in small land-based businesses can lead to innovation as transferred knowledge may be applied to make marginal changes to enterprises or, in some cases, a major reorganisation of resources within a business. The purpose of this paper is to explore how knowledge is disseminated in personal business networks and how this is used in a very traditional industry. Design/methodology/approach – A synthesis of three interrelated concepts, those of knowledge, social network structure and trust in relationships, provides the basis for a tripartite model of knowledge transfer. Through conducting in-depth interviews, data are collected on each aspect of the model to map the structure of personal business networks, to provide qualitative data on the type of relationships that exist within these and to whom knowledge has been transferred. Findings – The emphasis on innovation through loose ties or the role of the outsider may not be an appropriate model for small land-based business. With the pre-dominance of strong ties and low flows of information, these businesses are unlikely to change either quickly or easily. Radical changes to business structure imply a more costly and focused intervention than the current emphasis on project and programme based support for rural businesses. Research limitations/implications – Creating a snapshot of knowledge transfer occurring in small land-based businesses provides valuable insights into the flows of information within a business and how training is deployed. However, a longitudinal study would deepen understanding of how cumulative knowledge transfer is practically implemented. Originality/value – Applying social network analysis to small businesses to examine knowledge transfer is in itself innovative, particularly as the research draws upon a peer-group of businesses enabling some comparisons to be made. Keywords Knowledge transfer, Vocational training, Social networks, Trust, Small enterprises, United Kingdom Paper type Research paper

Journal of Small Business and Enterprise Development Vol. 14 No. 2, 2007 pp. 280-293 q Emerald Group Publishing Limited 1462-6004 DOI 10.1108/14626000710746709

Introduction Land-based businesses are often perceived as laggards in the adoption of new technologies, business practices and adaptation to the requirements of the marketplace, whilst being recipients of government programmes either to increase their market orientation or to improve their adoption of technological innovations. In the context of the UK, such state intervention has changed over the last few decades with farms and other land-based business being treated less as special cases. With

support for agriculture and allied industries moving away from maintaining production to the provision of public goods, the requirement on land-based business is to adapt to market signals rather than react to policy incentives. In order to facilitate this transition from farm to business, the emphasis has shifted from the solely technical towards the strategic (Philipson et al., 2004). This approach of treating “farms as firms” neglects however the particular features of businesses that are based around families, rooted in a shared multi-generational project and may well be geographically and socially isolated. At a policy level, often rather simplistic models of the diffusion of learning and business decision making are adopted as the guide. This paper examines how the knowledge gained through a vocational training scheme is disseminated through land-based businesses, which operates in an EU designated Objective 1 area of the UK. By adopting a social network approach, important actors within businesses are mapped, identifying the key decision makers and the manner in which the knowledge gained is used. In doing so, important conclusions are drawn about the use of knowledge in these businesses and the way in which new knowledge is used in a very traditional sector. The literature on knowledge transfer within agriculture tends to be split into two divergent paths. The first examines the processes of cognition within the learning environment (Engel and Salomon, 2002; Roling, 2002); while the second focuses on the social environment in which an individual makes his or her decisions about learning within a particular learning processes (Curry and Winter, 2000; Long, 2001; Juntti and Potter, 2002). Whilst the emphasis on individual psychological processes of the first approach are important in an understanding of education, they have less direct bearing on policy than a concern with the wider benefits and consequences of rural knowledge transfer. The second path argues that decisions that individuals’ make regarding their personal learning are crucial not just to the prosperity of their businesses but to the levels of knowledge transfer in agricultural communities more widely and business viability. At the level of the individual farm business, Warren (2003) argues that the ability of a business to survive and develop is influenced strongly by its capacity for innovation. Therefore, a rational approach is for a farmer to weigh up the costs and benefits of training and decide whether it is in his or her personal interest (Learning and Skills Development Agency, 2002). That decision to participate in vocational training with the intention of improving profitability, efficiency or the adoption of new technology is likely to be strongly correlated to a farmer’s previous training and education experiences (Kilpatrick, 1998a, b, Kilpatrick, 2002). For rural communities these decisions are important because increasingly their viability is seen to rest on their collective ability to adapt to the on-going globalisation of agriculture, tourism and resource management. High levels of human capital are no less important for rural areas than they are for urban ones, although they are likely to be configured very differently. Given the importance of outcomes from knowledge transfer in rural communities, it is necessary to understand how vocational training acts as a potential source of knowledge to other members of farm households and other land-based businesses. Levin and Cross (2004) suggest a synthesis between three interrelated concepts knowledge, social network structure and trust in relationships – as a way of modelling such knowledge exchange. Using this conception, a tripartite model of knowledge

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transfer is created and it is hypothesised that each of its elements has to be understood for knowledge transfer between participants and others to be mapped. To examine this hypothesis, social network methodology is employed to construct participants’ personal business networks and the flow of knowledge within these. The tripartite of knowledge transfer Knowledge On a personal level, the extent of an individual’s knowledge is a combination of explicit and tacit knowing (Polanyi, 1967). Nahapiet and Ghosal (1998) extend these notions of knowledge further by adding a shared dimension depicting knowledge within an organization rather than that kept by an individual. Therefore, shared explicit knowledge is information in text books and manuals provided by an organization for people to learn from. Improving the skills base of farmers and others involved in agricultural related businesses by acquiring knowledge through formal learning imparts shared explicit knowledge enabling an individual to gain human capital. In terms of vocational training, shared explicit knowledge encompasses many activities in the agricultural and land-based sectors, although these tend to be dominated by technical and husbandry events (Butler and Le Grice, 2005). Shared tacit knowledge on the other hand, remains relatively hidden and may only be accessible by an individual through sustained interaction (Spender, 1994). Moreover, the transfer of information to a participant is only part of the process of knowledge transfer since he or she has to put into practice the knowledge that has been acquired. Who the participant talks to and trusts as well as the power relationships within a network may impinge on the quality of any outcomes resulting from knowledge transfer. Social network structure The structural characteristics of knowledge transfer can be captured through social network analysis. Through the formal modelling, investigation and measurement of social networks illuminate structural properties of networks (Adler and Kwon, 2002). In Granovetter’s (1973) study of people seeking jobs he theorised that weak ties, characterised by infrequent contact between individuals, were more likely to be sources of new information. Conversely, strong ties connect those seeking knowledge with those close to the source of new information thereby transferring knowledge that is already known. Weak ties are not only instrumental in finding a job (Lin, 1988) but it has also been demonstrated that innovation stems from such sources (Granovetter, 1985) as does the spread commercial rumours (Lai and Wong, 2002). Furthermore, individual may seek explicit knowledge from individuals known to them that possess further explicit or even tacit knowledge, some of which may be transferred through passive conversations without predetermined intentions (Lin, 1999). Strong ties, on the other hand, are relationships based on trust “that can reduce resistance and provide comfort in the face of uncertainty” (Krackhardt, 1992, p. 218). Trust in relationships The relational characteristic of knowledge transfer in social networks refers to the trust associated with those giving or indeed those destined to receive knowledge. As such, networks are not only about who you know, who you talk to, but perhaps more importantly, who you trust. Mayer et al. (1995, p. 712) define trust as “the willingness of

a party to be vulnerable to the actions of another party on the expectation that the other will perform a particular action important to the trustor, irrespective of the ability to monitor or control that party”. McAllister (1995) demonstrates empirically that trust has two dimensions based on cognition: choosing who to trust and affect enabling people to make the emotional investment in trust relationships. These elements are demonstrated in Lyon’s (2000) research on trust that is created in the networks among farmers, traders and agricultural input suppliers in Ghana: “Many of those interviewed . . . were able to trust a person in a certain transaction as they had seen the person to be trustworthy before. Common statements included: I have studied her character; I know what is in her head; I have read his face; I can tell by their speech and actions; I know how she talks.” (Lyon, 2000, p. 672). Constructive talk in relationships therefore builds trust and helps individuals to anticipate the strategies of others (Ostrom, 2000) while helping to define how those people will act (Dietz, 2003). Considerable evidence exists that trusting relationships lead to greater exchange with people more willing to give useful knowledge and more willing to listen to and absorb other’s knowledge (Levin and Cross, 2004; Stobart, 2004). Trust in the relational aspect of knowledge transfer will determine who are the likely beneficiaries of information beyond the immediate participant of vocational training in agriculture, and whether these beneficiaries of the knowledge are able to listen, absorb and if necessary offer additional information that may be useful. Structurally, some of these will hold different positions in an individuals’ business and social networks, with some stronger, others in more central positions and as such these will influence to whom knowledge is passed. Knowledge transfer through Objective 1 vocational training The European Union’s cohesion policy provides structural funds to regions (“Objective 1”) where the gross domestic product (GDP) is below 75 per cent of the Community average. In the UK, Cornwall and the Isles of Scilly were designated as an Objective 1 region in, 2000, alongside parts of Merseyside South Yorkshire and Wales, in recognition that declining traditional industries have caused serious economic and social problems, as well as poor rates of GDP. To explore the tripartite model of knowledge transfer, case studies of participants involved in vocational training within the Objective 1 area of Cornwall, Southwest England, were conducted to capture the transfer of information in different personal networks. Each individual had taken up training under the Objective 1 Vocational Training Scheme (VTS). This scheme is equivalent to the English Rural Development Programme (EDRP) VTS that operates outside of Objective 1 regions. However, within Objective 1 areas, such as Cornwall, this DEFRA (Department of the Environment, Food and Rural Affairs) administrative arrangement is unavailable. Consequently, to avoid the possibility that an area in need of assistance with industrial restructuring being further compromised by not having access to the ERDP VTS, Duchy College secured Objective 1 funding to provide training for agricultural and land-based small and medium sized enterprises (SMEs) in Cornwall. As such, the system of training and the opportunities available in the county is analogous to that available in the rest of England, with the exception that its funding is channelled through Objective 1 administration. Cornish residents in farming and other land-based businesses therefore have access to a programme of training events, programmes and group extension

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activities. These are aimed at developing their expertise and skills in technical and business related activities relevant to their business and are subsidised at a rate equivalent to that in the ERDP VTS. The Objective 1 VTS transfers both shared explicit and tacit knowledge by various means. Shared explicit knowledge moves through short course based routes on traditional agricultural subjects designed to improve farm business profitability but more importantly by focusing on new opportunities through marketing, sales and business management. A mixture of explicit and tacit knowledge flows through discussion based groups, such as the Cornwall Pig Discussion Group; some travels by way of partnerships with external groups funded to deliver events and workshops, such as farm conservation led by FWAG (Farming and Wildlife Advisory Group). More tacit knowledge is imparted through the use of individual experts who have personal experience, such as in a BVD (Bovine Viral Disease) seminar. The transfer of information to the participant is only part of the process as the farmer or land-based worker has to put into practice the knowledge that he or she has acquired. The duration of many courses, discussion groups or seminars are a day or less, delivered face to face on farms around Cornwall. Such forms of training modes are strongly preferred by farmers, particularly if conducted in slack times of the farm year (Curry, 1996). Of key importance to this paper is how knowledge gained through such training is transferred from the participants of vocational training to others involved their businesses, households; that is their personal business network. Tracing knowledge using social networks methodology Applying a social network analysis enables the tripartite model of knowledge transfer to be traced through the networks of individuals that have embarked on some form vocational training. Flows of knowledge can be analysed amongst different interacting and independent individuals within a group without a single actor forming the focal point. A particular case of social network analysis is that of the ego network, also referred to as personal networks (Feld, 1997; McCarty, 2003) personal communication networks (Warriner and Moul, 1992) or personal communities (Wellman, 1993, 1996, Wellman et al., 1997, Suitor and Keenan, 1997). This type of network is characterised by having an individual at its Ptolemaic centre of sociability, support and identity (Wellman et al., 1997). In the personal business networks described in this paper, the flows of communication, in the form of knowledge, may be informal relations, such as family within a household, family beyond the household, friends and neighbours; or formal relations such as civic relationships, work based relationships and those with other structured organization (Putnam, 1998, Stone, 2001). Structurally, the shared knowledge, whether explicit or tacit, gained through vocational training will flow through trusted weak and strong ties in personal networks of people in the agricultural community. This study gathered data through eighteen face-to-face interviews with the VTS participants from small land-based businesses by asking respondents about there business contacts to reveal a respondent’s personal business network. This represents only a subset of a participant’s total network, which McCarty et al. (1997) report ranges between 250 and 5,000 individuals, but it nevertheless elucidates those relationships that are important in the transfer of VTS knowledge within the social network around which the farm or business functions. It is expected that some personal business

networks will show deep, narrow ego-networks that VTS knowledge is exchanged with only a few but very trusted relationships. These may allow individual tacit knowledge to be transferred as well, particularly from one generation to the next. Other networks will be wider, using individuals for different purposes, including transferring VTS knowledge, in addition to providing the weak ties from which new information can be gleaned. An advantage of using an ego network approach is that VTS participants can be randomly sampled but this must be balanced against the possibility of mono-source bias since respondents provide all the necessary information (Balkundi and Kilduff, 2005). Wellman et al. (1988) correctly argues that ties are usually asymmetrically reciprocal in that they differ both in content and intensity. Nevertheless, the alternative of visiting each individual named by the VTS participant is prohibitive since this breaches both the confidence of the interview and the trust between the interviewer and interviewee. To determine the structural elements of a personal business network, VTS participants were asked to ascribe which members of the network were known to each other. This assumes that relationships are of equal weight in both directions. The mapping of ego networks excludes the Ptolemaic individual focusing on the direct links between the ego’s contacts (Scott, 2000). This enables structural measures such as density and centrality to be calculated using the social network software UCINET 6. Briefly, density, measures the completeness of a network, and ranges from a maximum of one if all individuals named by the ego are known to each other, and zero if the coverse is true. The density of the VTS participant’s network may be important in determining whether knowledge gained through training is transferred to others that have roles in their work or business. On the other hand, centrality measures the number of ties that individual network members have with each other thereby identifying the most important or prominent actors in a network (Everett and Borgatti, 2005). In the personal business networks of VTS participants, it is likely that certain individuals will be structurally better placed to receive information than others. From a relational perspective, VTS participants were asked about the frequency of contact with each named network member and the longevity of their relationship. Sustained long-term relationships with regular contact are more likely to be strong ties. To validate this assumption, VTS participants were required to determine the importance of each network member to their business (1 ¼ very important, 2 ¼ quite important, 3 ¼ not important). Asking respondents directly about the closeness of their relationships elicits a more accurate depiction of the trust in their personal networks and requires no a priori assumption concerning the nature of network in which individuals are involved. The degree of closeness that a respondent subjectively reports will determine whom the participant views as critical to their business, and this is supported by quantitative measures of length of relationship and frequency of contact. It is hypothesised that those named by respondent as being very important are likely to be the conduits of talk regarding the vocational training in which the VTS participant has undertaken. Family ties may be important but equally other relationships, such as friends, neighbours and business colleagues may also be significant although serving different roles for the respondent (Phillipson et al., 2001).

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Results The networks revealed by the interviewing process vary in size and structure. As Table I summarises, the number of people named in any one network ranges from 20 for the first network descending to only four in the last (the networks are ordered by size). These networks represent the core business networks of people who have participated in training and only one VTS participant was reluctant (network 18) to discuss his business network during the interview process resulting in the smallest size. The extent that VTS participants discussed their educational experience within their personal network is not dependent on network size. For example, in network 1 the farmer only spoke to 10 per cent of the individuals he named whilst smaller networks, such as those of 13 and 14, the farmers discussed their training experience with over 60 per cent of their respective networks. Similarly, the density of each network is not related to its size although there is a weak tendency that the smaller a network the more tight-knit. The structural dimensions of size and density do not illuminate how knowledge is transferred, as each network is uniquely configured reflecting the familial and business ties of the VTS participant. Centrality on the other hand, provides a link between the purely structural elements of networks and the relational ties through which knowledge flows. The 18 interviews elicited 208 relational ties. In all cases, family ties played some role in the business whether this was formal (e.g. book-keeping), informal (e.g. discussant of business ideas and issues) or more frequently, a combination of both. Structurally, centrality gives the position that that individual holds in the VTS participant’s personal business network. The higher the degree of centrality the more Number of people Number in network Percentage of network Density of talked to about training talked to about named in networka (%) training network Network

Table I. Structural elements of knowledge transfer in personal networks

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Mean

20 19 17 15 15 14 14 14 13 12 10 9 8 6 6 6 6 4 12

2 5 10 11 9 8 5 5 2 6 1 4 5 4 3 2 2 1 5

10.0 26.3 58.8 73.3 60.0 57.1 35.7 35.7 15.4 50.0 10.0 44.4 62.5 66.7 50.0 33.3 33.3 25.0 40.9

Note: aDensities were calculated using UCINET 6 social network software

0.268 0.164 0.301 0.352 0.333 0.571 0.385 0.505 0.41 0.727 – 0.611 0.143 0.333 0.733 0.6 0.867 0.333 –

Ranking of network density 15 16 14 10 11 6 9 7 8 3 – 4 17 11 2 5 1 11 –

connected is an individual with others in the network. Examining the degree of betweenness by comparing means suggests that familial relational ties are predominantly most central to a network, with a statistically significant greater mean of 9.6 as compared to 1.4 for business relations and 2.6 for non-business friendships. Indeed, VTS participants report that 59 per cent of family members are regarded as closest to their business, which is 93 per cent of all kin named. This affirms the role that family play in decision-making is often fundamental (Tigges and Ziebarth, 1998, Meert et al., 2005, Aldrich and Cliff, 2003), although family ties do not necessarily confer positive relationships and business experiences. These structurally strong ties, which in the eyes of VTS participant’s are also closest in terms of trust, are more likely to be a conduit of discussion. Furthermore, it is these ties that enable the transfer of knowledge from VTS training to be discussed and transferred (see Table II). The extent that weaker ties play is less certain. Given the methodology of focusing on the most important individuals to a business, it is probable that weak ties, which potentially provide additional information, are under-represented in the sample. However, by examining the frequency that VTS participants talk to members in their networks does illustrate the importance of weak tie relationships. Scott (2000) observes that members of networks are more likely to be “gate keepers” or “brokers” if the betweenness measure is relatively low. Therefore, as Table III illustrates, in terms of this sample it is members of the VTS participants’ networks that

Closeness to business Not close Reasonably close Close Mean

All relations not spoken to regarding VTS traininga

Relations spoken to regarding VTS traininga

All relationsb

1.0453 3.3861 1.5290 3.5951

0.0561 0.9529 8.5558 3.5951

0.8879 2.5566 6.6893 3.5951

Notes: The degree of betweenness is a measure of centrality calculated using UCINET VI social network software; acomparing the means of the degree of betweenness for the closeness of name to the business regarding whether they were spoken to about VTS training or not, this is statistically significant (F ¼ 2:564, df ¼ 2, p , 0:05); bcomparing the means of the degree of betweenness regarding closeness of name to business, this is statistically significant (F ¼ 3:686, df ¼ 2, p , 0:05)

Frequency of contact Daily More than once a week More than once a month but less than once a week Less than once a month Mean

All relations spoken to regarding VTS traininga

All relationsb

13.1491 1.5506 1.0768 0.6266 5.1322

10.9950 0.9408 2.4776 1.9189 3.5951

Notes: aComparing the means of the degree of betweenness for the frequency of contact with those spoken to about VTS training, this is statistically significant (F ¼ 4:569, df ¼ 3, p , 0:05); b comparing the means of the degree of betweenness regarding the frequency of contact with those named in the networks, this is statistically significant (F ¼ 5:800, df ¼ 3, p , 0:05)

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Table II. Degrees of betweenness, closeness to business and VTS training

Table III. Degrees of betweenness, frequency of contact and VTS training

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are less frequently spoken to, that is less than once a month, and not party to talk on vocational training that provide the potential channel for additional in-flowing information (betweenness mean of 1.9189). These weak ties in participants’ personal business networks tend to be farm representatives, friends advising on market prices, or those providing a professional service to the business, such as marketing or accountancy, for example. Turning to the relational characteristics of knowledge transfer in networks, the knowledge gained from vocational education will, in most cases, be discussed beyond the participant through talking to trusted individuals. Examining these relational aspects using bivariate analysis splits network members into: (1) individuals that the participant has talked to regarding knowledge gained through vocational training; and (2) individuals that these matters were not discussed with. Similar to the structurally aspects of networks discussed above, the strength of ties and the trust that this embodies is important to VTS participants. In particular, 42 per cent of kin relationships are discussants with regards to vocational training, which represents 84 per cent of all kin relationships. Furthermore, the degree of formality regarding the kin relation’s involvement in a business does not necessarily obviate whether knowledge gained on training is transferred. For instance 70 per cent of kin that were formally involved in the business were talked to about the VTS participant’s training; this rose to 88 per cent of those kin that had no business involvement. Of the business relationships external to the family (for example, sales representatives, buyers, etc.), only 28 per cent were the recipient of knowledge transferred from the VTS participant. The recipients of knowledge transferred from training have specific discussant roles in a business. Twenty-eight percent of all individuals with which VTS training was transferred were named as discussants (see Table IV) with a further 23 per cent receiving the knowledge in passive and less focused conversations by way of generalised chat. Critically, new knowledge gained by the VTS participant is not transferred to individuals in his or her network from which advice and further

Actors role in personal business community

Table IV. Actors role in ego’s personal business communities

Professional advice Business partner/employee/employer Discussion Financial services General chat Input supplier or service provision Sales outlets All roles

Talked with actors Did not talk with about VTS funded actor about VTS eventa (%) funded eventa (%) Mean time knownb 11 12 28 5 23 15 6 1

25 3 17 9 12 22 12 1

11 years, 1 month 26 years, 5 months 20 years, 1 month 8 years, 11 months 24 years, 7 months 12 years 9 years, 2 months 16 years, 4 months

Notes: aThe association between role of actor and whether a discussant about VTS event is statistically significant (x 2 ¼ 21:29, df ¼ 6, p , 0:05); bmeans are significantly different (F ¼ 8:61, df ¼ 6, p , 0:05)

information is sought, with 77 per cent of this type of relation excluded. These advisors, sales representatives or suppliers tend to be least close in terms of intimacy and trust. Discussants of vocational training, on the other hand, tend to be very close to the business thus affording a higher degree of trust. This trust is bound up with the longevity of the relationships with those known for longer timescales being kinship that are partners in the farm business or friends that frequently provide more general conversations. Discussion Analysing the networks of individuals who have participated in vocational training demonstrates how knowledge travels and how best this can be transformed into action. Furthermore, the networks provide examples of how each element of the tripartite model of knowledge transfer needs to be aligned for the training to meet its goals. In most cases, knowledge gained through attending VTS funded events, does not lead directly to significant changes in businesses but once discussed it may be acted upon to make marginal adjustments to make business enterprises more competitive. The effectiveness of this process may depend on the receptiveness of those closest to the business, particularly kin. If more than one member of the business network attends the training then change is perhaps more likely. However, in a minority of cases, knowledge, determination and support can induce significant changes. For example, one VTS participant (network 13 in Table I) used the knowledge gained through attending a specific training courses funded by the VTS to transform himself from employee to sole-trader status. Capturing his personal business network community reflected a business in its embryonic stage – less than two weeks into its inception. Key to his network is his Wife who is formally responsible for the paperwork of the business. Her role is much greater as she knows all the others in the participant’s network. Structurally, she is the central actor in his personal business network and as such she is the primary discussant. Therefore, his wife not only provides important business skills but also acts as a strong supportive tie. Two other key players in the participant’s decision to enter into business are his former manager, through whom contacts for work are gleaned, and his course administrator. Both of these he considers friends as well as respecting their professional positions. While these three have different structural and relational roles, they singularly provide conduits for discussing his training as part of trusted relationships and have assisted him transfer his knowledge into practice. It is likely, that if the newly formed business develops, the distinction between who is close to the business, and who is less important will clarify. The presence of weak ties, while more difficult to detect, enables farm businesses to access new information and opportunities, whilst strong ties provide the stability to facilitate changes in business practices and the development of new enterprises. It is clear that in the networks of VTS participants it is the strong, familial ties that are more likely to provide consultative, channels for discussion and provide emotional support. As such, balance between strong and weak ties is crucial. Networks that are not in balance may impinge upon the functionality of the transfer of knowledge within the small land-based business setting. To a certain extent, this reflects Warriner and Moul’s (1992) conclusion that kin are more likely to be turned to discuss specific farming measures than non-kin although strong ties of kin may “result in more consultation while tending to inhibit innovation” (Warriner and Moul, 1992, p. 287).

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Dysfunctional family relations further inhibit the potential for knowledge transfer. As a wife of one participant described her husband’s and his brother’s relationship: “one wants to do and one tells to do”. In this case, any innovation gained from training was stifled by a domineering brother. The examples of a recently formed business and the family in the midst of an argument highlight one of the weaknesses of the methodology that presents a “snapshot”. Personal business networks evolve and change: new individuals enter and some leave. Kinship ties tend to be strongest and are more likely to persist over time (Feld, 1997). Therefore, the long longevity and strength of kinship bonds is not unexpected since these provide support and frequent contact necessary for the persistence of ties (Wellman et al., 1997) and reflects the spatial modality of farmers. Suitor and Keenan (1997) suggest that over the period of a decade only one third to one quarter of ties persist. Thus, this is clearly pertinent to future research in to the personal networks, including those of farmers, that longitudinal data, types of change and types networks should be considered (Suitor et al., 1997). Conclusion Social network methodology is often used in corporations as a tool in order to improve efficiency and/or innovation. Applying it to small and family businesses is in itself innovative, particular as the research draws on a peer-group of businesses that enabling some comparison. Broadly, three conclusions are apparent: the first about the methodology itself; the second about rural businesses and innovation: and the final one about the policies that regard changing the disposition of land-based businesses. The term network is frequently used a metaphor in the description of business and social activity but it is rarely measured or mapped. In doing so, many of the common sense assumptions have been re-affirmed about these particular networks while at the same time others have been challenged. For example, although it is assumed that rural business networks are tightly knit (network density) it has been demonstrated that they are in fact highly variable (See Table I). If advice and policy to small land-based business is to be more effective, rooting conceptions about how the businesses operate in empirical observation should be helpful. Whilst the method is only a snapshot, it does provide valuable insights into the flows of information within a small business and how training is deployed. The emphasis on innovation through loose ties or the role of the outsider may not be an appropriate model for small land-based business. As can be seen in Table IV these are networks in which the newest members, on average, have been involved for over eight years. The chance of a weak link appearing towards the core of these businesses is low and as such the flow of information inward through these routes is low. With the pre-dominance of strong ties and low flows of information these businesses are likely not to be able to change either quickly or easily. This is not the same as saying that such businesses cannot or do not adapt or that they participants are not entrepreneurial. Rather that they are not the fleet of foot business organisations that might be typical of other industrial sectors. Equally, given these characteristics they would appear to be highly robust forms of business, able to weather severe economic downturns and to perpetuate themselves. The premise of UK rural business policy created around land-based businesses beginning to behave like other firms looks unrealistic in the light of these findings.

Providing funds for training has been a pillar of rural development funding and is likely to be so in the coming Rural Development Regulation (2007-2013). It is clear from this study that knowledge can stimulate business change but a simple correlation between “knowledge in” and adaptation does not exist. This study provides pointers that to improve the injections of knowledge into small land-based businesses requires more focussed intervention than is currently emphasised on programme based support for rural businesses. References Adler, P.S. and Kwon, S. (2002), “Social capital: prospects for a new concept”, Academy of Management Review, Vol. 27, pp. 17-40. Aldrich, H.E. and Cliff, J.E. (2003), “The pervasive effects of family on entrepreneurship: towards a family embeddedness perspective”, Journal of Business Venturing, Vol. 18, pp. 573-96. Balkundi, P. and Kilduff, M. (2005), “The ties that lead: a social network approach to leadership”, The Leadership Quarterly, Vol. 16 No. 6, pp. 941-61. Butler, A. and Le Grice, P. (2005), “Provision, participation and penetration: objective 1 vocational training in Cornwall”, in Lobley, M. and Butler, A. (Eds), CRR Annual Review, Centre for Rural Research, University of Exeter, Exeter. Curry, N. (1996), “Some constraints on the delivery of agricultural training in Britain”, Journal of Agricultural Education and Extension, Vol. 3 No. 3, pp. 133-40. Curry, N. and Winter, M. (2000), “The transition to environmental agriculture in Europe: learning processes and knowledge networks”, European Planning Studies, Vol. 8, pp. 107-21. Dietz, T. (2003), “The Darwinian trope in the drama of the commons: variations on some themes by the Ostroms”, conference paper in Honour of the Work of Elinor and Vincent Ostrom, George Mason University, Arlington, VA. Engel, P. and Salomon, M. (2002), “Cognition, development and governance: some lessons from knowledge systems research and practice”, in Leeuwis, C. and Pyburn, R. (Eds), Wheelbarrows Full of Frogs: Social Learning in Rural Resource Management, Van Gorcum, Assen, pp. 49-65. Everett, M. and Borgatti, S.P. (2005), “Ego network betweenness”, Social Networks, Vol. 27, pp. 31-8. Feld, S.L. (1997), “Structural embeddedness and stability of interpersonal relations”, Social Networks, Vol. 19, pp. 91-5. Granovetter, M. (1973), “The strength of weak ties”, American Journal of Sociology, Vol. 78, pp. 1360-80. Granovetter, M.S. (1985), “Economic action and social structure: the problem of embeddedness”, American Journal of Sociology, Vol. 91, pp. 481-510. Juntti, M. and Potter, M. (2002), “Interpreting and reinterpreting agri-environmental policy: communication, trust and knowledge in the implementation process”, Sociologia Ruralis, Vol. 42, pp. 217-32. Kilpatrick, S. (1998a), “Education and training: impacts on farm management practice”, CRLRA discussion paper, Launceston. Kilpatrick, S. (1998b), “How does education and training impact on management practice”, CRLRA discussion paper, Launceston. Kilpatrick, S. (2002), “Learning and building social capital in a community of family farm businesses”, International Journal of Lifelong Education, Vol. 21, pp. 446-61.

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Krackhardt, D. (1992), “The strength of strong ties: the importance of Philos in organisations”, in Nohria, N. and Eccles, R. (Eds), Networks and Organizations: Structure, Form, and Action, Harvard Business School Press, Boston, MA, pp. 216-39. Lai, G. and Wong, O. (2002), “The tie effect on information dissemination: the spread of a commercial rumour in Hong Kong”, Social Networks, Vol. 24, pp. 49-75. Learning and Skills Development Agency (2002), Attracting New Learners: International Evidence and Practice, Learning and Skills Development Agency, London. Levin, D.Z. and Cross, R. (2004), “The strength of weak ties you can trust: the mediating role of trust in effective knowledge transfer”, Management Science, Vol. 20, pp. 1477-90. Lin, N. (1988), “Social resources and social mobility: a structural theory of status attainment”, in Breiger, R. (Ed.), Social Mobility and Social Structure, Cambridge University Press, Cambridge. Lin, N. (1999), “Social networks and status attainment”, Annual Review of Sociology, Vol. 25, pp. 467-87. Long, N. (2001), Development Sociology: Actor Perspectives, Routledge, London. Lyon, F. (2000), “Trust, networks and norms: the creation of social capital in agricultural economies in Ghana”, World Development, Vol. 28, pp. 663-81. McAllister, D.J. (1995), “Affect- and cognition-based trust as foundations for interpersonal cooperation in organizations”, Academy of Management Journal, Vol. 38, pp. 24-36. McCarty, C. (2003), “Structure in personal networks”, Journal of Social Structure in Personal Networks, Vol. 3, pp. 1-19. McCarty, C., Bernard, H.R., Killworth, P.D., Shelley, G.A. and Johnsen, E.C. (1997), “Eliciting representative samples of personal networks”, Social Networks, Vol. 19, pp. 303-23. Mayer, R.C., Davis, J.H. and Schoorman, F.D. (1995), “An integrative model of organizational trust”, Academy of Management Review, Vol. 20, pp. 709-34. Meert, H., van Huylenbroeck, G., Verimmen, T., Bourgeois, M. and van Hecke, E. (2005), “Farm household survival and diversification on marginal farms”, Journal of Rural Studies, Vol. 21, pp. 81-97. Nahapiet, J. and Ghosal, G. (1998), “Social capital, intellectual capital, and the organizational advantage”, Academy of Management Review, Vol. 23, pp. 242-66. Ostrom, E. (2000), “Collective actions and the evolutions of norms”, Journal of Economic Perspectives, Vol. 14, pp. 137-58. Phillipson, C., Bernard, M., Phillips, J. and Ogg, J. (2001), The Family and Community Life of Older People: Social Networks and Social Support in Three Urban Areas, Routledge, London. Polanyi, M. (1967), The Tacit Dimension, Routledge & Kegan Paul, London. Philipson, J., Gorton, M., Raley, M. and Moxey, A. (2004), “Treating farms as firms? The evolution of farm business support from productionist to entrepreneurial models”, Environment and Planning C – Government and Policy, Vol. 22, pp. 31-54. Putnam, R.D. (1998), “Forward”, Housing Policy Debate, Vol. 9, pp. v-viii. Roling, N. (2002), “Beyond the aggregation of individual preferences: moving from multiple to distributed cognition in resource dilemmas”, in Leeuwis, C. and Pyburn, R. (Eds), Wheelbarrows Full of Frogs: Social Learning in Rural Resource Management, Van Gorcum, Assen, pp. 25-47. Scott, J. (2000), A Social Network Analysis, 2nd ed., Sage Publications, London.

Spender, J-C. (1994), “Knowing, managing and learning: a dynamic managerial epistemology”, Management Learning, Vol. 25, pp. 387-412. Stobard, J. (2004), “Personal and commercial networks in an English port: Chester in the early eighteenth century”, Journal of Historical Geography, Vol. 30, pp. 277-93. Stone, W. (2001), “Measuring social capital: towards a theoretically informed measurement framework for researching social capital in family and community life”, Research Paper No. 24, February, Australian Institute of Family Studies, Melbourne. Suitor, J. and Keenan, S. (1997), “Once a friend, always a friend? Effects of homophily on women’s support networks across a decade”, Social Networks, Vol. 19, pp. 51-61. Suitor, J., Wellman, B. and Morgan, D. (1997), “It’s about time: how, why, and when networks change”, Social Networks, Vol. 19, pp. 1-7. Tigges, L.M. and Ziebarth, A. (1998), “Social relationships in locality and livelihood: the embeddedness of rural economic restructuring”, Journal of Rural Studies, Vol. 14, pp. 203-19. Warren, M. (2003), “SWARD: participatory knowledge transfer at work”, Journal of Agricultural Education and Extension, Vol. 9, pp. 43-50. Warriner, G.K. and Moul, T.M. (1992), “Kinship and personal communications network influences on the adoption of agricultural conservation technology”, Journal of Rural Studies, Vol. 8, pp. 279-91. Wellman, B. (1993), “An egocentric network tale”, Social Networks, Vol. 15, pp. 423-36. Wellman, B. (1996), “Are personal communities local? A Dumptarian reconsideration”, Social Networks, Vol. 18, pp. 347-54. Wellman, B., Carrington, P.J. and Hall, A. (1988), “Networks as personal communities”, in Wellman, B. and Berkowitz, S.D. (Eds), Social Structures: A Network Approach, Cambridge University Press, Cambridge. Wellman, B., Wong, R., Tindall, D. and Nazer, N. (1997), “A decade of network change: turnover, persistence and stability in personal communities”, Social Networks, Vol. 19, pp. 27-50. Further reading Butler, A., Reed, M. and Le Grice, P. (2005), “Delimiting knowledge: personal business networks”, paper presented at ESRS Conference, Keszthely, August. Myhre, B.A. and McRuer, D. (2000), “Human error – a significant cause of transfusion mortality”, Transfusion, Vol. 40, pp. 879-85. Corresponding author Allan Butler can be contacted at: [email protected]

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Small business owners: too busy to train? Elizabeth Walker and Janice Redmond

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School of Management, Edith Cowan University, Joondalup, Australia

Beverley Webster Division of Learning, Development and Diversity, Faculty of Education, University of Hong Kong, Hong Kong, and

Megan Le Clus School of Management, Edith Cowan University, Joondalup, Australia Abstract Purpose – The reason often cited for the poor relationship between small businesses and their uptake of vocational education and training is that small business owner-managers claim that they are too busy to engage in training or any type of learning activity and that most training is of little value to them. The aim of the research is to examine the relationship between these factors. Design/methodology/approach – Using qualitative research methods the study collected data of the knowledge, attitudes and needs of small business owner-managers, both before and after participation in a training program. Findings – This study has indicated that small business owners are interested in skills development and training opportunities, provided that they are directly applicable to the current situation in their business, and as long as the delivery process is carefully structured in terms of location, time of day, and length of session. Practical implications – The success of a human resource management training program offers both an incentive for other educators to continue to pursue small business participation and useful guidelines for the implementation and the development of new programs for the small business sector. Originality/value – The approach taken in this research has offered important insights into the value of training and how it is evaluated by small business owner-managers. This is important as owner managers are the primary decision makers about whether or not training takes place. Keywords Small enterprises, Training, Human resource management, Skills, Adult education Paper type Research paper

Journal of Small Business and Enterprise Development Vol. 14 No. 2, 2007 pp. 294-306 q Emerald Group Publishing Limited 1462-6004 DOI 10.1108/14626000710746718

Introduction Poor managerial competencies have often been linked to small business failure (Gaskill et al., 1993; Jennings and Beaver, 1997; Perry, 2001). However small business[1] is vital to all economies and within the Australian context, small business represents a significant employer of labour as well as providing employment for the owners of the business. Of the 1,179,300 small businesses in Australia, an estimated 1,591,500 people were business operators (ABS, 2004). Consequently, small enterprises represent a significant component of the private sector workforce in Australia. It is also acknowledged that small business owner-managers, compared to owner-managers of larger businesses, have lower formal education levels and participate less in skills development and training activities (Bartram, 2005; Billett, 2001) and that there is a lack of emphasis on the relationship between successful

business operation and management training (Billett, 2001; Westhead and Storey, 1996; Wooden and Baker, 1995). An educated and skilled labour force is considered to be essential to the success and growth of small business and for businesses to gain some competitive advantage in the global economy (Cosh et al., 1998; Huang, 2001). The influence of the human resource capabilities of the small business owner-manager is therefore critical in this process. Recently, Hiltrop (2005, p. 122) has asserted that a number of studies have provided growing evidence that “indicate overwhelmingly that good management fosters organisational success, whereas less effective people management practices foster failure and distress.” A key to gaining small business interest in training per se may be to establish sufficient evidence of the relationship between participating in training, increased people management skills and improved business performance. Hiltrop (2005) has suggested that the level of business performance achieved will be directly related to the extent that the owner-manager is able to implement the management practices required to manage people and their contribution to the success of the organisation. Therefore, the better skilled owner-managers are at human resource management, the better potential they will have to contribute to the success of their business. Whereas it could be assumed that all small business owner-managers want their businesses to be successful and strive towards that goal on a daily basis, the reality is that many small business owner-managers are poorly equipped to deal with the continual and relentless issues that face business today. Indeed many small business owner-managers have few managerial competencies when they start their businesses and do not actively seek opportunities to further develop their managerial skills (Webster et al., 2005). To facilitate greater participation by owner-managers in training activities Ehrich and Billett (2004) have recommended the development of pedagogic principles that are suited to the changing skills development needs of small businesses. Of particular interest to the business owner-manager will be the impact that training will have on the business, not just in terms of the bottom-line, but also for its relevance and application to day-to-day operations. Storey (2004) and Westhead and Storey (1996) have also highlighted that there is not enough emphasis placed on the link between management training of small business owner-managers and business performance. This is despite owner-managers recognising the importance of developing and maintaining management skills (Loan-Clarke et al., 1999; Smith and Whittaker, 1996). Literature review While it has been found that small business owner-managers are reluctant to participate in formal training and development, they do acknowledge that human resource management is important to their businesses (Webster et al., 2005). Unfortunately, there are few empirical studies on the relationship between small businesses and human resource management practices. One of the challenges facing small and medium enterprise (SME) researchers according to Mazzarol (2004, p. 1) is that “the majority of small firms are led by owner-managers who are strategically myopic” and “lack the long term vision that is required for owner managers to identify the future direction of their business”. It is therefore important to know why many

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small business owner-managers do not embrace lifelong learning for their business and personal development. Current training practices of small businesses The training needs of small businesses have been widely researched (Billett, 2001; Gibb, 1997; Matlay, 2000; Storey, 2004; Storey and Westhead, 1997; Webster et al., 2005) but significant gaps in the knowledge still exist. For example, the literature shows that despite the importance of small businesses to the economy, little attention has been given to the effectiveness of training programs for these businesses (Huang, 2001) or to the study of other training and development practices (Chandler and McEvoy, 2000; Heneman et al., 2000; Kotey and Sheridan, 2004). Small business training and development can be complex and resource intensive (Billett, 2001; Westhead and Storey, 1996). In fact, Billett (2001) has found that the real price of training is higher in small firms than large businesses. This is then compounded by the fact that most businesses, but especially small businesses, are time poor (Beresford and Saunders, 2005; Billett, 2001; Gibb, 1997; Webster et al., 2005) which leads to the widespread misconception that small business is too busy to train. In recent years, increased attention has been given to human resource management (HRM) practices in small businesses (de Kok and Uhlaner, 2001; Mazzarol, 2004). Whilst this is a step in the right direction the reality is that small businesses are faced with many challenges in their attempt to develop and implement training and HRM practices and procedures. Challenges identified include: time and resources (Klass et al., 2000); firm size (Heneman et al., 2000); and cost (Arthur, 1995). More significantly, according to Klass et al. (2000) small businesses may not recognise the complexity of human resource training and expertise, and therefore rely on what they have vicariously learnt from previous work experience. Small businesses, training and human resource management Although some owner-managers of small businesses consider their human resource practices and problems as a high priority (Hornsby and Kuratko, 1990) and acknowledge that they can play a significant role in developing competitive advantage, one of the biggest difficulties faced by them is “gaining competitive edge from the improved capability of people” (Ulrich and Lake, 1990, p. 40). Reid and Adams (2001) support the concept that employees should be regarded as valuable assets and that there should be greater emphasis on commitment, adaptability and recognition of employees in small businesses. One opportunity for small business to demonstrate these values is by providing employees with training that is of benefit to both the employer in the first instance but is of equal value to the employee as they will have acquired a new competency. In return, overall competitive advantage may be realised, however, before this can occur, the owner-manager may be presented with two additional challenges. First, more time and resources may need to be invested in order to implement what has been learned in the training. Second, and perhaps of more concern to small business, are the challenges associated with the retention of employees with increased skills and knowledge (Barrett and Mayson, 2004; Klass et al., 2000; McElwee and Warren, 2000). This second

issue can cancel out any gains for the employer and also the possibility of increasing the expectation on the part of the employee of more training and training being seen as a right rather than at the benevolence of the employer. Decision making about training participation When owner-managers are confronted with the decision to take time off themselves or release another staff member to train, several issues are often considered including: training relevance, delivery method, small business sector focus, cost, timing, and the training environment. Each of these is important but arguably the delivery method will have the greatest impact on the final decision and the outcome of the training. Adult learning, “the process of adults gaining knowledge and expertise” (Knowles et al., 2005, p. 174), is central to the context of training and development for small businesses. This training method is compatible with the humanistic workplaces where individuals have control over their own learning and it also acknowledges the need for organisational performance. Knowles et al., 2005 confirmed that adults have three key “need to know” factors prior to learning which are: (1) how the learning will be conducted; (2) what will be learned; and (3) why it will be valuable. It would thus appear that when training is offered that can provide appropriate responses to these questions, small business owner-managers would be more likely to respond positively as, not only will they be aware of what is in it for them but also, they would be able to use this knowledge to improve their business performance. Strategic human resource management and small businesses Strategic management is rare in most small businesses due to the “just-in-time” nature of commerce today. Jennings and Beaver (1997, p. 63) suggest that “the root cause of either small business failure or poor performance is almost invariably a lack of management attention to strategic issues.” Whether small business owner-managers respond to training needs in a strategic way is debateable and little is known about this area (Bartram, 2005). In addition, according to Marlow (2000) little is known about how, or whether, small business owners use their own, or their teams, management skills and experiences, as a strategic part of developing the business. In most cases, there is little evidence of businesses translating human resource awareness into action, and therefore human resource management strategies are not generated. Barrett and Mayson (2004) have suggested that although the literature on strategic HRM is more commonly associated with large firms, it may be useful to extrapolate this in order to better understand the role of HRM training in small businesses. One of the most significant differences between large and small organisations is that in large firms, HRM applications tend to be based on formal management procedures whereas similar applications in small businesses tend to be informal (Barrett and Mayson, 2004; Hornsby and Kuratko, 1990; Kotey and Slade, 2005; Marlow, 2000; Mazzarol, 2003). Thus, many small businesses trying to balance formal HRM policies and practices (used by larger firms), with the informal culture of smaller firms, can get into

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difficulties with this strategy, due to the resource constraints of small businesses (Cassell et al., 2002). For example, small businesses are often hardest hit when there is competition for new staff and in retaining existing skilled staff. This is because of factors such as; larger businesses having the ability to pay more and offer financial and non financial incentives that are difficult for small businesses to match; uncertainty regarding continuous workflow; perceived difficulty of finding appropriate staff; ability to manage staff and not knowing how to terminate unsuitable staff (Barrett and Mayson, 2004; Klass et al., 2000; McElwee and Warren, 2000; Storey, 2004). All of these issues have the potential to be an additional burden on small business if the owner-manager is not skilled in human resource management. Because of these issues there is a the need for smaller firms to develop effective HRM practices (Audretsch and Thurik, 2001). One of the most significant issues emerging from the current literature concerns the growth aspirations of the small business. According to Mazzarol (2003) and Fraza (1998) the faster the growth, the more likely the business is to experience human resource problems and one of the main problems is finding and retaining high quality employees. Mazzarol (2003) warns that as a firm grows and the number of employees increases, so the complexity of human resource management intensifies and therefore, developing formal human resource policies and practices becomes of greater importance to the long term success of the small enterprise. Further, research has shown that the informal nature of human resource management in small businesses contributes to difficulties in recruiting and retaining employees (Barrett and Mayson, 2004). The literature is showing a clear need for small business to participate in human resource management training to assist with success and growth. Yet the literature is also suggesting that small businesses are reluctant to participate in formal training or learning activities. In addition, there is a lack of empirical research and evaluation of training specifically relating to human resource management for small businesses. The results presented here are an evaluation of the competencies learnt from a training program developed and delivered specifically for small businesses on the topic of human resource management. Methodology Aim The aim of the research was to examine the relationship between small business owner-managers, their current knowledge of human resource management and the value they placed on the training they received. The study therefore measured, both before and after the training program, the knowledge, experiences, attitudes and needs of SMEs from the small business owner-manager perspective. Program design The workshop series was designed to assist and support small business owner-managers who were seeking to develop better human resource management skills by increasing their general awareness of issues relating to: recruiting, selecting, retaining, training and managing employees. One of the critical success elements of the workshops was the interactive opportunities provided to the participants to engage

with each other and be able to relate their own personal experiences in dealing with human resource issues. This interaction in a non threatening environment is a key adult learning requirement. The workshops were held in venues specifically selected, both in terms of location and character, as appropriate for small business training, in that they were in situ and utilised local facilities, as opposed to traditional educational establishments. This was arranged to heighten the focus of the training as being relevant to small business and to demonstrate that the deliverers of the training understood the needs of small businesses. The two locations were chosen because of their close proximity to the owners operating base to reduce travelling distances, which would take precious time away from the business. Marketing of the workshops also emphasised the small business focus and an adult learning interactive approach that would provide opportunities for networking and the sharing of experiences. The time of day is also important to small business owner-managers who are often unwilling to participate in training during the busy periods in their day. Therefore two session times, a lunchtime and an evening session per location were made available for each workshop. This allowed the businesses to choose an appropriate time for each workshop and attend the later session if work commitments had meant they had to miss the earlier session. For similar reasons the sessions were also conducted over a fortnightly period. This structure was designed to limit the amount of time the participants had to commit to training, and also provided important opportunities for participants to reflect and put the knowledge gained during each session into practice where possible. The overall design was selected in order to facilitate expansion in the participant’s businesses by delivering current and targeted human resource skills that would help them when they employed their first staff or when employing additional staff. Research design The research was conducted in three stages. Prior to the commencement of the program, each participant was interviewed by telephone. The aim of the first interview was to determine current human resource issues as identified by the owner-managers. In the second stage, participants attended six fortnightly human resource training workshops and were required to complete an evaluation after each session. The final stage involved a follow-up interview with all of the participants approximately four weeks after the completion of the program. The purpose of the follow-up interview was to give participants the opportunity to provide feedback on the workshop sessions, to determine their learning outcomes, and to identify future training needs. Sample The program was conducted with financial assistance from a federal government agency and a local government authority, which enabled the workshops to be conducted in one discrete geographical area in metropolitan Western Australia. This was the first time that such a program had been conducted in this area using this particular methodology for this specific topic so there was no way of knowing exactly how many small business owners would seek to do the training. Initial expressions of interest were solicited via local newspaper advertisements and through local chambers

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of commerce and business associations. All enquiries were screened using the broad criteria of having been in business for more than two years and either having, or about to employ staff. This was to ensure that the participants had some common understanding of the general process of managing a small business. In total 80 small business owners completed the six session program. The participants covered most industry categories and ranged in the size of their businesses from no employees (but looking to recruit within the following three months) to businesses employing over 20 staff, with the mean number of staff being eight. There were more women than men (65 per cent: 35 per cent) which possibly indicates that human resources is still seen as something of a “soft” management skill. Results and discussion Before the program The pre program interviews gained background information on the participants and assessed their current human resource competencies and their current HR situation in their business and ascertained why they wanted to participate in the workshops. Their current HR competencies were important to know in order to be able to structure the workshops to cater for their requirements. The interviews revealed that the majority of participants had little or no prior experience or skills in formal human resource management. Only one participant, who was studying human resource management at the time of the study, had any formal qualifications in human resource management or a related discipline. For the majority of small business owner-managers, the main reason for participating in the workshops was to gain general skills in dealing with staff, due to having experienced “staffing” issues in the past. As had already been revealed in the literature, most small business do not operate in a strategic way and therefore the assumption was made that the information the participants would be seeking would be operational. It should also be noted here that many of the small business owner-managers regarded employees as “staff” and the term “human resources” was a phrase used by big business not small businesses. Most staffing concerns were the result of a reactive rather than a proactive issue. Some specific skills were also mentioned such as a better understanding of the recruitment processes and the legal requirements that are necessary for human resource management and dismissal procedures. Other participants expressed an interest in skills related to retaining good employees, and motivating employees on a daily basis. Dealing with current staff problems Although the majority of participants had few current staffing problems there continued to be concern about the issues outlined above. The participants stated these were persistent and recurring themes for small business staff management. Generally the participants did not know how to deal with these recurring problems. While verbal one-on-one communication appeared to be the most commonly used method for dealing with these ingrained problems and issues in the workplace, a tendency to “put up” with the problems and hope they “go away” was also used as a strategy by some small business owner-managers. Obtaining assistance from external

sources was not mentioned as an option for dealing with these issues. The use of these strategies and the continuing problems with these issues demonstrate both the practice of informal human resource methods by small business and the strong dependence on the relationship between the employer and the employee to resolve issues in the workplace. Another example of the informal methods used in small business was that, aside from a general “welcome” package in some instances being provided to new employees, no formal staff policies relating to the HR issues were provided to employees. Advantages of doing the program Participants saw the following advantages in participation: . gaining a better understanding of human resource management, training, and related issues; . gaining skills so that they could recruit, interview, manage, and retain staff confidently, and, when needed, dismiss employees using correct procedures; and . networking and talking to other people about their small business and human resource management related experiences. After program completion At the completion of the program, participants were interviewed again by telephone. The purpose of this “post” interview was to determine the effectiveness of the training program and to identify the need for future training opportunities. Overall all participants acknowledged that they were now more informed and confident about human resource issues and the daily management of human resource operations of their small business. For example, one participant noted that: This program was a whole lot of value. It was a valuable experience, it was facilitated well, and it really opened up my eyes to the world of staffing.

The increased confidence and knowledge was demonstrated in the way the participants openly discussed many of the aspects of the workshops and could see how important it was to start at the beginning of the HRM process, that is, by recruiting the right person in the first instance. Many participants expressed similar views as the business owner below: I now know how to identify suitable candidates for my business. I feel confident that I will be able to find the best person for the job, whereas before it was a bit hit and miss and I was always rushing the process as being a retail business there was always the issue of having to have someone, anyone really, to be in the shop.

What was of initial interest to most participants was the difficult issue of terminating staff. During the post interviews many expressed a much greater sense of understanding and therefore control over the situation having worked though scenarios in the workshops. As one participant stated: I’ve been a boss for 15 years and having to sack someone is the worst feeling, even when you know that they have done something wrong. I now feel I know how to put some strategies

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into place, like addressing issues when they first come up and not let things drift, and putting things in writing so that giving someone the flick is the last resort.

Another important issue raised by the participants was that the structure and time format of the course allowed the majority of the participants the opportunity both to reflect on their learning between sessions and to put the knowledge they had gained into the everyday practice of their business. For example, following the first session on the value of employees, several participants stated they now recognised the importance of developing a values statement by reflecting on what they had learnt and then constructing their own. In a similar manner, following the second session on appropriate recruitment and selection, several participants had implemented their learning by starting to write job descriptions and to develop job advertisements. A further workshop was on retaining and motivating staff and one participant acknowledged that: With this new information I’ve been given, I can now sit down with my employees and re-write our procedures and policies, whereas before I did it the way I thought things should be done, without consulting the people actually doing the jobs. I guess I didn’t place much value on their potential contribution.

In this context, transferring new knowledge into practice was encouraged by the fortnightly format and the two hour time limit of the training sessions. Participants also had the opportunity to ask questions the following week and it was acknowledged that this “follow through” approach was beneficial and suitable for their training needs. For example, one participant stated: The information we received was concise and well structured. The format was suitable because I didn’t want this important information all crammed into one or two days. I needed time to reflect. Also my business is constant, there are lots of things I would like to do but the reality is there are also things that I have to do, so the structure gave me some time to process the information.

In regard to the two hour session, all participants agreed that this was “long enough” and did not take too much time away from their business. The time period also facilitated enough time to gain an understanding of each topic, without being too “overloaded” with information. All participants acknowledged that they had gained an overall understanding of the human resource issues that affect and influence their day to day operations. Participants also acknowledged that discussing the issues in peer groups and recognising that everyone has similar problems was a key learning point. The legal aspects of business, in particular employee termination were keys issues that many participants stated they were keen to participate in further training in. Other participants said that they would like to attend refresher courses on similar material, thus supporting the argument that small business is not too busy to train. The results have demonstrated that small business owner-managers who recognise and act on their need for further training, and in this instance the topic was human resource management, are able to make significant gains in both their knowledge and confidence to deal with operational issues in their business. In achieving these outcomes the research has highlighted the need for small business owners to recognise

and act upon their needs for management training in general and to have a broader understanding of their importance. Conclusion The key finding of the research was that given certain conditions and business requirements, small business owner-managers are not too busy to train. Two factors appear to influence the small business owner-managers’ attitudes toward training and development, which are the relevance of the training and the delivery process. Small business owner-managers will participate in training opportunities if they are directly applicable to current situations in their business, and if the delivery process is carefully structured in terms of location, time of day, and length of session. This confirms the work by Loan-Clarke et al.(1999, p. 306) who after surveying 551 UK small businesses and found that “small businesses not only recognise the potential benefits of MTD [management training and development] but are prepared to support their belief with cash”. If there is a down side to this particular type of skills development training for small businesses, it is that the process was found to be most often an operational rather than a strategic decision by the owner-managers to become involved. This confirms existing research that small business by nature does not have long term strategic plans in place to manage their resources. To enhance participation in training by small business it is suggested that the location of the training venue needs to be in close proximity to the businesses operating base, as travelling long distances inevitably takes precious time away from the business. In addition, the time of day is also important. Business owner-managers are unwilling to participate in training if it removes them from their business during the busy periods in their day. This recognition was a factor in structuring the sessions over a fortnightly period. This structure was designed to limit the amount of time the owner-managers were required to commit to participate in the training, and also provided important opportunities for participants to put the knowledge gained during each session into practice. They were then able to come to the following session with any questions or feedback. This structure was integral to the quality of the learning process, especially for adult learners and when providing for the many small businesses who are resource poor. It is acknowledged that this particular delivery method is neither new nor revolutionary and is in fact what advocates of just-in-time training for small business have been arguing for. However, the Vocational Educational and Training sector in Australia has been slow to pick up on this and therefore it is hoped that this piece of research adds more evidence to the just-in-time delivery argument. The fact that 80 small businesses completed this program, demonstrates that there is willingness on the part of small business owner-managers to learn and to implement new ways of managing business, so long as certain conditions exist. In relation to the actual content of this particular program, the initial findings were that these small business owner-managers had recognised that they had little knowledge of human resource issues prior to the training. They initially expressed a strong need to learn more about recruiting, retaining and dismissing staff using correct procedures. However, following the workshops, all participants acknowledged that

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they felt more competent and informed about human resource issues, particularly in recruitment and selection, retaining good staff, legal requirements and procedures, job advertisements, motivating employees and developing vision statements for their small business. These results highlight the need for small business owners and their staff to recognise their human resource training needs, and to have a broader understanding of the importance of their training and development needs. This paper provides much needed evidence of the capacity of appropriate training to provide positive outcomes for small business, in this instance in relation to human resource management. The next stage, currently being undertaken, is a longitudinal study on this particular cohort, to determine whether any longer term behavioural changes on the part of owner-managers who participate in human resource training occur and whether or not this type of training is able to assist small businesses in regard to operational performance. Note 1. The Australian Bureau of Statistics define a small business as a business employing less than 20 people, independently owned, displays close owner/manager control, and where principle decision making is made by owner/managers (ABS, 2004). References Arthur, D. (1995), Managing Human Resources in Small and Mid-Size Companies, American Management Association, New York, NY. Audretsch, D.B. and Thurik, A.R. (2001), “What is new about the new economy? Sources of growth in the managed and entrepreneurial economies”, Industrial and Corporate Change, Vol. 10, pp. 267-315. Australian Bureau of Statistics (2004), Characteristics of Small Business, AGPS, Canberra. Barrett, R. and Mayson, S. (2004), “What are the problems? HRM in small firms”, paper presented at the 17th Annual SEAANZ Conference, Brisbane, September. Bartram, T. (2005), “Small firms, big ideas: the adoption of human resource management in Australian small firms”, Asia Pacific Journal of Human Resources, Vol. 43 No. 1, pp. 137-54. Beresford, R. and Saunders, M.N.K. (2005), “Professionalization of the business start-up process”, Strategic Change, Vol. 14, pp. 337-47. Billett, S. (2001), “Increasing small business participation in VET: a hard ask”, Education þ Training, Vol. 43 Nos 8/9, pp. 416-25. Cassell, C., Nadin, S., Gray, M. and Clegg, C. (2002), “Exploring human resource management practices in small and medium enterprises”, Personnel Review, Vol. 31 No. 6, pp. 671-92. Chandler, G. and McEvoy, G. (2000), “Human resource management, TQM, and firm performance in SMEs”, Entrepreneurship Theory and Practice, Vol. 25 No. 1, pp. 43-58. Cosh, A., Duncan, J. and Hughes, A. (1998), “Investing in training and small firm growth and survival: an empirical analysis for the UK”, DfEE Research Report RR36, London. de Kok, J. and Uhlaner, L. (2001), “Organization context and human resource management in the small firm”, Small Business Economics, Vol. 17, pp. 237-91. Ehrich, L. and Billett, S. (2004), “Learning new practices in small business: engagement and localised support”, Education þ Training, Vol. 46 Nos 8/9, pp. 501-9. Fraza, V. (1998), “No small feat”, Industrial Distribution, Vol. 87, September, pp. 48-9.

Gaskill, L.R., Van Auken, H.E. and Manning, R.A. (1993), “A factor analytic study of the perceived causes of small business failure”, Journal of Small Business Management, Vol. 31 No. 4, pp. 18-31. Gibb, A. (1997), “Small firms’ training and competitiveness: building upon the small business as a learning organisation”, International Small Business Journal, Vol. 15 No. 3, pp. 13-20. Heneman, R., Tansky, J. and Camp, S. (2000), “Human resource management practices in small and medium-sized enterprises: unanswered questions and future research perspectives”, Entrepreneurship Theory and Practice, Vol. 25 No. 1, pp. 11-16. Hiltrop, J.M. (2005), “Creating HR capacity in high performance organisations”, Strategic Change, Vol. 14, pp. 121-31. Hornsby, J. and Kuratko, D. (1990), “Human resource management in small business: critical issues for the 1990s”, Journal of Small Business Management, Vol. 8 No. 1, pp. 73-92. Huang, T.C. (2001), “The relation of training practices and organizational performance in small and medium enterprises”, Education þ Training, Vol. 43 Nos 8/9, pp. 437-44. Jennings, P. and Beaver, G. (1997), “The performance and competitive advantage of small firms: a management perspective”, International Small Business Journal, Vol. 15 No. 2, pp. 63-75. Klass, B., McClendon, J. and Gainey, T. (2000), “Managing HR in the small and medium enterprise: the impact of professional employer organizations”, Entrepreneurship Theory and Practice, Vol. 25 No. 1, pp. 107-24. Knowles, M.S., Holton, E.F. and Swanson, R.A. (2005), The Adult Learner: The Definitive Classic in Adult Education and Human Resource Development, Elsevier, Burlington, MA. Kotey, B. and Sheridan, A. (2004), “Changing HRM practices with firm growth”, Journal of Small Business and Enterprise Development, Vol. 11 No. 4, pp. 474-85. Kotey, B. and Slade, P. (2005), “Formal human resource management practices in small growing firms”, Journal of Small Business Management, Vol. 43 No. 1, pp. 16-40. Loan-Clarke, J., Boocock, G., Smith, A. and Whittaker, J. (1999), “Investment in management training and development by small businesses”, Employee Relations, Vol. 21 No. 3, pp. 296-310. McElwee, G. and Warren, L. (2000), “The relationship between total quality management and human resource management in small and medium-sized enterprises”, Strategic Change, Vol. 9, pp. 427-35. Marlow, S. (2000), “Investigating the use of emergent strategic human resource management activity in the small firm”, Journal of Small Business and Enterprise Development, Vol. 7 No. 2, pp. 135-48. Matlay, H. (2000), “Training and small firms”, in Carter, S. and Jones-Evans, D. (Eds), Enterprise and Small Business, Prentice-Hall, Englewood Cliffs, NJ, pp. 323-36. Mazzarol, T. (2003), “A model of small business HR growth management”, International Journal of Entrepreneurial Behaviour & Research, Vol. 9 No. 1, pp. 27-49. Mazzarol, T. (2004), “Strategic management of small firms: a proposed framework for entrepreneurial ventures”, paper presented at the 17th Annual SEAANZ Conference, Brisbane, September. Perry, S.C. (2001), “The relationship between written business plans and the failure of small businesses in the US”, Journal of Small Business Management, Vol. 39 No. 3, pp. 201-9. Reid, R. and Adams, J. (2001), “Human resource management – a survey of practices within family and non-family firms”, Journal of European Industrial Training, Vol. 25 No. 6, pp. 310-20.

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Smith, A. and Whittaker, J. (1996), “Management development in SMEs: what needs to be done?”, Journal of Small Business and Enterprise Development, Vol. 5 No. 2, pp. 176-85. Storey, D. (2004), “Exploring the link among small firms between management training and firm performance: a comparison between the UK and other OECD countries”, International Journal of Resource Management, Vol. 15 No. 1, pp. 112-30. Storey, D. and Westhead, P. (1997), “Management training and small firm performance: a critical review”, Working Paper No. 18, Warwick Business School Centre for SMEs, Coventry. Ulrich, D. and Lake, D. (1990), Organizational Capability: Competing from the Inside Out, John Wiley & Sons, New York, NY. Webster, B., Walker, E.A. and Brown, A. (2005), “Australian small business participation in training activities”, Education þ Training, Vol. 47 Nos 8/9, pp. 552-61. Westhead, P. and Storey, D. (1996), “Management training and small firm performance: why is the link so weak?”, International Small Business Journal, Vol. 14 No. 4, pp. 13-24. Wooden, M. and Baker, M. (1995), “Small business and the dollars and sense of training”, Australian Training Review, Vol. 18, pp. 4-5. Further reading Webster, B., Walker, E.A. and Turner, J. (2005), “Smart training for the older entrepreneur”, Proceedings of the 50th World Conference of ICSB, Washington, ICSB, 15-18 June. Corresponding author Janice Redmond can be contacted at: [email protected]

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Human resource management in growing small firms

HRM in small firms

Rowena Barrett Department of HRM, De Montfort University, Leicester, UK, and

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Susan Mayson Department of Management, Monash University, Caulfield East, Australia Abstract Purpose – The purpose of this paper is to begin the process of exploring the intersection between entrepreneurship and HRM by developing an understanding of the nature of HRM in growth-oriented small firms. Design/methodology/approach – A survey of 600 small Australian businesses, conducted by CPA Australia in March 2002 to explore employment issues, is analysed by the authors. Findings – The analysis shows that growth-oriented small firms are more likely than non-growing ones to use formal HRM practices where that means that they are written down, regularly applied or assured to take place. Research limitations/implications – The data are a single snapshot of small firms in time (March 2002) and therefore, while non-growing small firms can be identified amongst the sample, it is not correct to assume either that they have not grown in the past to reach their current size (with the exception of the single person firms) or that they will not grow in the future. Moreover it is not known whether the growth, which the growing small firms indicate they undertook, was or is sustained. Practical implications – The result suggests that small firms seeking growth should reconsider their HRM practices in light of their business plans to ensure that there is a good “fit”. Originality/value – The authors examine small firms in Australia, which are much smaller than their international counterparts, to see whether conclusions from overseas studies are relevant. Keywords Human resource management, Entrepreneurialism, Small enterprises, Australia Paper type Research paper

Introduction Despite the growing number of international studies of HRM in small firms there are only a few Australian studies (see for example Kotey and Sheridan, 2001; Kotey and Slade, 2005; Mayson and Barrett, 2005; Mazzarol, 2003; Wiesner and McDonald, 2001). This is problematic as Australian small firms are considerably smaller than those in Europe and the US (less than 20 people compared with less than 200 or 500) and therefore conclusions do not necessarily represent the Australian case for reasons of size as well as business context. Further, there is not a great deal of consistency across the studies in terms of the HRM practices under examination. The result is succinctly summarized by Katz et al. (2000) in their introduction to a special edition of Entrepreneurship Theory and Practice on HRM in small firms, when they say “Let’s face it: we can’t define what they are very well; we study many different samples; we operationalize our terms differently, and we steal theory from everyone” (p. 8). The authors would like to acknowledge Judy Hartcher at CPA Australia for kindly allowing us to reanalyse their data.

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Scholars identify a dearth of research at the intersection of HRM and entrepreneurship. For example, Heneman and Tansky (2003) start their editorial to a special issue of Human Resource Management with the statement “Small and medium sized enterprises (SMEs) have been treated as second class citizens by authors in the human resource management literature for too long” (p. 299). This statement is based on finding only 17 articles on HRM and small firms in academic journals between 1984 and 1999 (as reported in Heneman et al., 2000). Williamson (2000) shows a similar lack of coverage in a slightly different review of academic journals. Heneman and Tansky (2003) like Baron (2003), Ciavarella (2003) and Katz et al. (2000) suggest that closer ties between HRM and entrepreneurship can offer new knowledge for both disciplines. The purpose of this paper is to use a study undertaken in the Australian context to address these gaps and extend our understanding of the nature and type of HRM practices in small firms. More specifically the purpose of this paper is to assess whether growing small firms (which are growing through expansion or diversification) use formal HRM practices when they are compared to small firms that are not growing. “Formal” HRM can mean that the procedure or practice is: . written down (for example, a list of skills and qualifications for jobs); . regularly applied within an organization (for example, yearly performance reviews); or . assured to take place (for example, employer sponsored training) (de Kok and Uhlaner, 2001). As such this paper makes a contribution to entrepreneurship research where entrepreneurship is accepted to be the creation of new economic activity (for example Shane and Venkataraman, 2000; Stevenson and Jarillo, 1990; Venkataraman, 1997) and therefore entrepreneurship is (sometimes) growth and vice versa (Davidsson et al., 2002). In this paper data collected by CPA Australia’s Small Business Survey Program on Employment Issues (March 2002) is used to examine the differences between HRM practices in growing and non-growing small firms. However, prior to doing this, in the next section of the paper we address the literature on the nature of HRM in small firms and the more specific issue of HRM for growth-oriented small firms. HRM in small firms HRM theory and practice can contribute to understanding issues faced by the entrepreneurial firm, for example human resource acquisition and deployment in start up and highly innovative ventures, the contribution of HRM practices to the survival of new ventures, and the role of resource acquisition, allocation and development, including human resources on the speed and direction of growth in high growth firms (Baron, 2003; Chaganti et al., 2002; Heneman et al., 2000; Katz et al., 2000; Morris, 2001; Williamson, 2000). However, the most commonly found HRM practices in small firms reflect operational needs and pragmatic concerns: record keeping; staffing activities, such as recruiting and selecting staff; and, to a lesser extent, motivation and retention activities such as compensation and reward practices (Deshpande and Golhar, 1994; Duberley and Walley, 1995; Heneman and Berkely, 1999; Hornsby and Kuratko, 2003; Kotey and Sheridan, 2001; McEvoy, 1984).

There are a range of studies indicating small firms are characterized by informal HRM practices (see for example Benmore and Palmer, 1996; Heneman and Berkely, 1999; Hornsby and Kuratko, 1990; Kotey and Slade, 2005; Marlow, 2000; Marlow and Patton, 1993; Nguyen and Bryant, 2004; McEvoy, 1984; Ram, 1999), although some suggest that there is a greater sophistication in HRM practices than would be expected (see for example de Kok and Uhlaner, 2001; Duberley and Walley, 1995). Hornsby and Kuratko (2003), in a replication and extension of their 1990 study, concluded that HRM practices in smaller ventures (firms with less than 150 employees) have stagnated or even regressed over the last decade despite threats within the regulatory and external environments of small firms that should see a greater emphasis on HRM in small firms. They argue staffing and reward practices remain important HRM issues for small firms but more research is needed as is “a greater application of HRM practices in smaller firms” (Hornsby and Kuratko, 2003, p. 89). The literature on strategic HRM, while more commonly associated with the study of large firms, may contribute to a deeper understanding of the role of HRM in small firms. Strategic HRM provides firms with the internal capacity to adapt and adjust to their competitive environments by aligning HRM policies and practices, for example, recruitment and selection, training and development and reward systems with business strategies (see for example Delery and Doty, 1996; Lengnick-Hall and Lengnick-Hall, 1988; Wright et al., 2001; Wright and Snell, 1998). The resource based view of the firm suggests that human resources can be a source of competitive advantage (Barney, 1991). Writers argue that a firm’s ability to develop distinct and unique “bundles” of inter-linked HRM practices aligned with business strategy are a source of sustainable competitive advantage (Boxall, 1996; Delaney and Huselid, 1996; Dyer and Reeves, 1995; Huselid et al., 1997; Lado and Wilson, 1994). While the informal and ad hoc nature of planning in small firms in terms of business strategies and HRM contributes to the difficulty of developing a strategic approach to HRM (Gibb and Scott, 1985; Hannon and Atherton, 1998), a number of writers argue that a strategic approach to managing employees is vital for the success of all firms (Dyer, 1993; Pfeffer, 1994; 1998), including small ones (Deshpande and Golhar, 1994; Heneman et al., 2000; Hornsby and Kuratko, 2003; Rutherford et al., 2003). This is particularly the case in growth oriented small firms as these are the firms most likely to make significant contributions to economic performance. In growth-oriented small firms formal HRM policies and practices are necessary to cope with the increase in complexity resulting from greater numbers of employees if growth is to be sustained (Arthur, 1995). Despite this, recruitment and selection is an area where small firms exhibit poor HRM practice. McEvoy’s (1984) study of 84 small businesses with an average of 75 employees, showed that while employers identified finding competent workers a major problem, their recruitment practices were “unimaginative” (newspaper ads, and walk-ins) and their selection techniques were confined to application blanks and face to face interviews. Heneman and Berkely (1999) found that firms in their study (n ¼ 117) used attraction practices that were convenient, inexpensive and directly controllable by the firm, while others found that there is frequently a reliance on word of mouth and other informal recruitment processes in small firms (see for example, Carroll et al., 1999; Cassell et al., 2002; Gilbert and Jones, 2000; Kotey and Sheridan, 2001; Marchington et al., 2003). Marlow and Patton (1993) suggest small firm employers believe these to be effective means of

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ensuring new recruits “fit in”. Others found that selection procedures such as face to face interviews, reference checks, job try outs and application blanks were chosen for ease of use and convenience (see also Deshpande and Golhar, 1994; Gilbert and Jones, 2000; Kotey and Sheridan, 2001; McEvoy, 1984). However, as small firms grow, managers exhaust their informal staffing contacts (for example, family members, referrals and walk ins) and need to develop more formal methods to recruit employees to sustain growth (Williamson, 2000). Small firms’ ability to attract, motivate and retain employees by offering competitive salaries and appropriate rewards is linked to firm performance and growth. Small firms tend to opt for informal practices. McEvoy (1984) found that only 29 per cent of his sample used salary surveys to set compensation levels and 33 per cent used job evaluation as a basis of determining compensation. He also found that recognition and reinforcement, pay rises or job security were commonly used reward systems (McEvoy, 1984). More recently, Hornsby and Kuratko (2003) found that the availability of quality staff and the provision of employee benefits remain important staffing issues for small firms. Performance appraisal practices in small firms tend to be informal (Cassell et al., 2002) and continuous and often used for monitoring and control rather than development purposes (Gilbert and Jones, 2000). However, McEvoy (1984) found that performance review meetings in his sample served the dual purpose of providing feedback for developmental purposes as well as a forum for discussing compensation matters: that is they are used for evaluation or monitoring of performance. Although training is identified as an important HRM issue for many small firms, research shows formal training is less likely to be provided in these firms (Storey, 2004). Storey and Westhead (1997) provide two explanations for this: first the “ignorance” explanation where training is not provided because the benefit of training is underestimated by the small firm employer/manager; and second, the “market” explanation where the cost of training is too high for small firms (Storey, 2004; Storey and Westhead, 1997). In other studies, Kotey and Sheridan (2001) and Gilbert and Jones (2000) found that induction training was implemented on an informal basis and internal and external training was not linked to employee performance appraisals (see also Marlow, 2000). Heneman et al. (2000) argue that in growing small firms there is a pressure on the small business owner/manager to delegate responsibility for HRM although Matlay (1999) and Mazzarol (2003) suggests this will depend on the owner/manager’s management style and personality. Indeed Scase (1995) argues that those small business owners who are unable to change their style act as a barrier to firm growth (see Penrose, 1959). As such there is consistency here with the ideas underpinning the staged growth models of small firms which concentrate on the stages through which small firms transition (see Churchill and Lewis, 1983 or Scott and Bruce, 1987 for example). These models suggest that transitioning depends on internal capabilities and managerial capacity. The ability to overcome the “managerial capacity problem” (Barringer et al., 1998) depends in part on the owner/manager’s recognition of the importance of HRM to the firm’s performance (see also Cassell et al., 2002). But Ardichivili et al.’s (1998) study of 576 US start-ups over a 10 year period showed the delegation of HRM issues lagged well behind the delegation of accounting, production

and information systems. Hornsby and Kuratko (2003) argue that managerial incompetence in handling HRM issues is a major source of firm failure. In comparison to larger firms, implementing HRM is costly in terms of time and money for small firms (McEvoy, 1984; Reid et al., 2002). Their idiosyncratic needs mean that they are unable to achieve economies of scale and they rarely have the managerial resources and expertise in the area (Chandler and McEvoy, 2000; Hornsby and Kuratko, 1990; Klaas et al., 2000; Kotey and Sheridan, 2001; McEvoy, 1984; McLarty, 1999). Small firms typically do not have a designated HRM (or employment) specialist and access to specialist HRM advice is costly (Gilbert and Jones, 2000; Kotey and Sheridan, 2001). Research (for example, Hornsby and Kuratko, 2003; Marlow, 2000) suggests there is considerable scope for appropriately skilled external advisors to help small business with HRM matters, and the literature suggests that small business operators tend to turn to those they trust for this: usually their accountant or lawyer (Harris, 2000; Jay and Schaper, 2003). While advice can be expensive, it can also be an investment against the cost of HRM recruitment and selection “mistakes” or defending an unfair dismissal case for example, which may arise from poor HRM practices and policies (Heneman et al., 2000). However, using an accountant for HRM assistance or advice can be problematic as the primary role for accountants is to provide financial and accounting services and, perhaps, advice on regulatory and reporting requirements, but not specialist HRM advice (see Harris, 2000). So while the formalization of HRM policies becomes desirable as firms grow, the ability for this to occur in small firms depends on the recognition of the owner/manager of the need for delegation and then the possibility of delegating that task. Further the formalization of HRM is also dependent on the awareness of legislation and legal requirements on HRM and employment matters (for example, unfair dismissal, occupational health and safety, equal employment opportunity etc.) and recognition of the impact on their business should they not comply. The implementation of formal HRM practices is an important contributor to small business success but as Heneman and Berkley (1999, p. 53) indicate the “liability of smallness” presents unique challenges for HRM in small firms (see also Deshpande and Golhar, 1994; Klaas et al., 2000). In the next section of the paper we outline the methodology and details of the CPA Australia data on which we base our analysis of HRM practices in growing and non-growing small firms. In particular the question we are interested in answering is “do growth-oriented small firms use formal HRM practices?” Data and methodology The data in this paper was gathered in March 2002 by CPA Australia as part of their small business survey program. The full report is available at: www.cpaaustralia.com. au, and while the report uses the term “small business”, for simplicity and consistency we use the term “small firm” in this paper. By telephone, CPA Australia surveyed a random sample of 600 small firms (defined as independently owned and employing less than 20 people) and 105 CPA accountants on a range of employment issues. Only the small firm data is analysed in this paper. Questions focused on attitudes to employment and sought to gain information about the motivating factors behind employment decisions in small firms.

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Table I. Small firms surveyed by CPA Australia by location and region

Table I shows the spread of the small firm sample surveyed by Australian states and metro/rural and regional location. Seventy per cent of firms operated in the services sector and 81 per cent operated from one location only. Eighty five per cent of the small firms employed staff, although 49 per cent of the small firms surveyed employed one or two people in total (including owners/managers). The mean number per employing business of full-time staff was 3.16; 0.97 for part-time staff, 1.82 for casuals, 0.56 for contractors and 0.03 for labour hire staff. Quite clearly the firms surveyed are predominantly very small. However this is consistent with the size of small firms in Australia generally, where 96 per cent of all Australian businesses employ less than 20 people (ABS, 2002) and of these some 56.3 per cent employ no-one while only 10.9 per cent employ between 5 to 19 employees (ABS, 2005). There were no significant differences in employment profiles by the firm’s location, industry and years in operation. Forty five per cent of all the small firms surveyed had been in operation for less than 10 years, although 30 per cent had been running for more than 20 years. The breakdown between male and female business operators reflects the picture at the national level with 64 per cent of the businesses operated by men and 36 per cent by women. Seventy four per cent of these operators had equity in the business and the operators were predominantly aged less than 50 years old: 33 per cent under 40, 34 per cent in the 40-49 year range, 22 per cent in the 50-59 year range and only nine per cent were over 60 years of age. The majority of small firms (55 per cent) had sales of less than A$500,000 (approximately £200,000) in the last year, although some 18 per cent had sales of over A$1 million (approximately £400,000). The key findings from the survey in relation to HRM practices were that while 48 per cent of respondents who employed staff (n ¼ 461) had employed a new staff member (either full-time or part-time) in the previous 12 months, the use of outside help for recruitment was not widespread (21 per cent used outside help) however some 53 per cent used a written job description and 75 per cent listed the skills and qualifications sought. In terms of HRM practices in the small firms employing staff: 59 per cent offered flexible hours; 45 per cent paid for off-site training or work-related education; 35 per cent had an incentive scheme and 57 per cent used incentive schemes or bonuses to reward performance; 32 per cent offered job sharing or part-time work; 28 per cent had salary packaging: and 20 per cent allowed staff to work from home. Employee performance was primarily rewarded by praise and recognition (82 per cent),

New South Wales Victoria Queensland South Australia Western Australia Tasmania/Australian Capital Territory/Northern Territoryb Total

Metropolitan (per cent)

Rural/regionala (per cent)

Total (per cent)

17.5 17.5 10 7.5 7.5 7.5

10 7.5 5 5 5 0

27.5 25 15 12.5 12.5 7.5

67.5

32.5

Notes: n ¼ 600; a half regional and half rural; b treated as metropolitan

100

bonus or incentives (57 per cent), a salary increase (51 per cent), additional time off (27 per cent), promotion (24 per cent) or a special training seminar, workshop or conference (22 per cent). HRM in growth-oriented small firms In the previous section of the paper we argued that growing small firms should exhibit greater formalization in their HRM practices than non-growing small firms if they are to gain or maintain a competitive advantage. Using the CPA Australia data we identified growing small firms by the owner/manager’s positive response to the following question “Have you employed any new permanent full-time or part-time staff in the last 12 months?” and then their reason for doing so as either being “Because your business expanded?” or “You decided to diversify the business?”. Some 98 small firms were categorized as growing small firms compared to 238 non-growing small firms. The 159 respondents who did not employ anyone were not asked these questions in the telephone survey. The profile of the growing and non-growing small firms in terms of their location, ownership characteristics (gender, age and education) and industry sector indicates that growing small firms were more likely to be metro based (70 per cent) than rural (30 per cent) and they were also more likely to operate in the services sector. Unsurprisingly, growing small firms were significantly more likely to operate from more than one location (p , 0:01) than non-growing small firms. Statistically significant differences in ownership characteristics existed between growing small firms and non-growing small firms in terms of the age of the owner ( p , .05), specifically that owners of non-growing small firms were more likely to be over 60 years of age than owner of growing small firms (10 per cent compared to 5 per cent) whereas the owners of growing small firms were more likely than non-growing small firms to be under 40 years (49 per cent compared to 31 per cent were under 40 years of age). Furthermore the owners of growing small firms were more likely than the owners of non-growing small firms to have trade and/or tertiary qualifications (74 per cent compared to 53 per cent) (p , 0:01). There were no statistically significant differences in the length of time the firms had been running, the owner’s gender, or whether family members were employed in the firm. Family members were employed in 52 per cent of growing and 57 per cent of non-growing small firms but this family labour was paid in the majority of cases: 80 per cent in non-growing firms and 82 per cent in growing small firms. Our analysis of the CPA Australia data showed that in growing small firms the recruitment and selection practices (see Table II) were more likely to be used than in non-growing small firms. However, there was no statistically significant difference in terms of satisfaction with the last person employed: 83 per cent of non-growing small firms were satisfied with that person as were 93 per cent of growing small firms. Other HRM practices, where there are statistically significant differences between growing and non-growing small firms, are shown in Table III. Firm performance outcomes The CPA Australia survey did not collect data on HRM outcomes such as absenteeism or staff turnover. One question addressed total sales and our analysis showed that non-growing small firms were more likely to have lower total sales than growing small

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Table II. The last time you employed new full-time or part-time staff, did you . . .

Table III. As an employer, do you . . .

firms. Specifically, t-tests revealed that non-growing small firms were significantly more likely than growing small firms to have total sales of under A$200,000 (approximately £80,000) (38 per cent compared to 21 per cent) while growing small firms were more likely than non-growing small firms to have total sales of over $5 million (approximately £2 million) (10 per cent compared to 0.5 per cent) (p , 0:001). Discussion The argument is that growing small firms should exhibit more formalized HRM practices if they are to gain or maintain a competitive advantage. Our analysis of the CPA Australia small firm employment data shows that this is the case. The growing small firms, where growth is defined as employing new staff because of expansion or diversification, rather than simply replacement of staff, were more likely to use formal recruitment practices than non-growing small firms. Further growing small firms were also more likely than non-growing small firms to use formal selection practices: a list of skills and qualifications desired and a job description. The literature suggests there is a need for growth oriented small firms to more carefully recruit, select, motivate and retain employees if firm growth is to be

Get outside help with recruitment? Have a list of skills and qualifications being sought? Have a written job description for the position being filled?

Growing small firms (per cent)

Non-growing small firms (per cent)

23.5 * 80.6 *

15.2 67.8

59.2 *

42.6

Growing small firms (per cent)

Non-growing small firms (per cent)

49.0 * * 43.9 * * 46.9 * * 69.4 * *

29.8 25.1 18.9 31.1

35.7 * 72.5 * *

22.7 48.7

31.6 *

18.1

34.7 * * 66.3 * * 3.1 * 26.9 *

14.3 42.4 0 16.3

Note: *p , 0:01

Have an incentive scheme? Offer job-sharing or part-time work? Offer salary packaging? Pay for off-site training or work-related education? Offer additional time off to reward performance? Offer bonuses or incentives to reward performance? Offer special training, seminars or conferences to reward performance? Offer promotions to reward performance? Offer increases to salary to reward performance? Have an employee share plan? Have a succession plan? Notes: *p , 0:05; * *p , 0:01

sustained. Our analysis shows that growing small firms are more likely than non-growing small firms to use a range of rewards for performance to engender employee commitment including: additional time-off; bonuses and incentives; training; and promotions. In particular, the use of promotions suggests growing small firms have some sort of formalized organizational structures enabling promotions. Growing small firms are also more likely than non-growing small firms to pay for off-site training or work-related education for employees. The use of training and promotions are indicative of more formalized HRM in growing small firms. While growing small firms are more likely than non-growing ones to have an employee share plan, the incidence of such is very low. Similarly the number of small firms with a succession plan is also low (21 per cent), however growing small firms are more likely than non-growing ones to have such a plan in place, indicating some thought for the future of the firm. Again, although the incidence of both types of plans is low, our analysis does suggest that growing small firms have more formalized planning practices than non-growing small firms. The CPA Australia survey did not ask questions about the incidence of a business or strategic plan and therefore we could not examine whether the HRM practices in growing small firms were the result of a strategic approach to HRM or not. In de Kok and Uhlaner’s (2001) study of HRM in 16 small Dutch companies (with an average employment of 17.6 persons), weak support was found for the relationship between formalized HRM practices in growth firms. They concluded that while there was a presumption that formal HRM policies are beneficial to firms there is a need to more fully “test” this connection. Our analysis of the CPA Australia data tells us that growing small firms are more likely than non-growing small firms to have higher total sales, and while we might like to attribute that better performance to a more careful approach to managing HR, we are unable to do so statistically. Conclusion and suggestions for future research This research contributes to an understanding of the nature of HRM in growing small firms in Australia, where small firms are considerably smaller than their European and US counterparts. This research helps to understand whether more formal organizational systems and routines are more likely to be used (or not) to nurture human capital in growing small firms. In so doing this research, consistent with recent calls in the literature (see Baron, 2003; Katz et al., 2000; Heneman and Tansky, 2003), contributes to a better understanding of issues at the intersection of entrepreneurship and HRM research (see also Barrett and Mayson, 2006). Our analysis of the CPA Australia data indicates that growing small firms are more likely than non-growing small firms to have formal HRM practices where that means they are either written down, regularly applied or assured to take place (de Kok and Uhlaner, 2001). Our analysis indicated formal practices of each sort were more likely to be used by growing small firms. This is an interesting conclusion given that the firms in this sample had an average size of 6.54 people. Although this study deals with very small, small firms, such small firms make up the majority of the Australian business population and our conclusion suggests that increasing size, off even a small base, is related to formalisation of HRM policies. However, we do not know the causal ordering of this relationship.

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The data used in this paper did pose limitations on the form of analysis that could be undertaken and the relationships that could be explored. The data was not collected by the authors and therefore we were limited in the questions we could explore, however this analysis acts as a preliminary to our larger scale survey of small business and their HRM practices. Another limitation of the data is that it is a single snapshot of small firms in time (March 2002). While we are able to identify non-growing small firms amongst the sample it is not correct to assume that they have neither grown in the past to reach their current size (with the exception of the single person firms) nor that they will not grow in the future. Moreover we do not know whether the growth, which the growing small firms indicate they undertook, was or is sustained. Despite the smallness of the firms in this sample our analysis of the data does support the argument that growing small firms are more likely than non-growing small firms to use formalized HRM practices. However, we are unable to determine, using this data, whether these firms have a distinct competence in aligning HRM systems and practices with business strategy to enable superior organizational performance, despite the fact that the growing small firms were more likely to have higher total sales. We suggest that case study research could be fruitfully undertaken to explore these issues. Moreover our analysis suggests that growing small firms are more likely to operate in the services sector and in metropolitan locations, (which is not surprising given the structure of the Australian economy) and that the owners of growing small firms are more likely to be under 40 years of age and have trade and/or tertiary qualifications. We therefore suggest that future research should differentiate between small firms, for example concentrate on a particular sector, firms in a particular location, or firms owned and operated by particular groups of people, as small firms, and small growth oriented ones are not a homogeneous group. In so doing a greater understanding of how growth oriented small firms handle HRM can be developed. References Ardichvili, A., Harmon, B., Cardozo, R., Reynolds, P. and Williams, M. (1998), “The new venture growth: functional differentiation and the need for human resource development interventions”, Human Resource Development Quarterly, Vol. 9 No. 1, pp. 55-70. Arthur, D. (1995), Managing Human Resources in Small and Mid-Sized Companies, American Association of Management, New York, NY. Australian Bureau of Statistics (2002), Small Business in Australia, Australian Government Printing Service, Canberra, Cat. No. 1321.0. Australian Bureau of Statistics (2005), Characteristics of Small Business (Main Features Reissued), ABS, Canberra, Cat. No. 8127.0. Barney, J. (1991), “Firm resources and sustained competitive advantage”, Journal of Management, Vol. 17 No. 1, pp. 99-120. Baron, R. (2003), “Editorial: human resource management and entrepreneurship: some reciprocal benefits of closer links”, Human Resource Management Review, Vol. 13 No. 2, pp. 253-6. Barrett, R. and Mayson, S. (2006), “Exploring the intersection of HRM and entrepreneurship”, Guest editors’ introduction to the special issue on HRM and entrepreneurship, Human Resource Management Review, Vol. 16 No. 4, pp. 443-6.

Barringer, B., Jones, F. and Lewis, P. (1998), “A qualitative study of the management practices of rapid-growth firms and how rapid growth firms mitigate the managerial capacity problem”, Journal of Developmental Entrepreneurship, Vol. 3 No. 2, pp. 97-122. Benmore, G. and Palmer, A. (1996), “Human resource management in small business: keeping it strictly informal”, Journal of Small Business and Enterprise Development, Vol. 3, pp. 109-18. Boxall, P. (1996), “The strategic HRM debate and the resource-based view of the firm”, Human Resource Management Journal, Vol. 6 No. 3, pp. 59-75. Carroll, M., Marchington, M., Earnshaw, J. and Taylor, S. (1999), “Recruitment in small firms: processes, methods and problems”, Employee Relations, Vol. 21 No. 3, pp. 236-50. Cassell, C., Nadin, S., Gray, M. and Clegg, C. (2002), “Exploring human resource management practices in small and medium sized enterprises”, Personnel Review, Vol. 31 No. 6, pp. 671-92. Chaganti, R., Cook, R. and Smeltz, W. (2002), “Effects of styles, strategies and systems on the growth of small businesses”, Journal of Developmental Entrepreneurship, Vol. 7 No. 2, pp. 175-92. Chandler, G. and McEvoy, G. (2000), “Human resource management, TQM and firm performance in small and medium-sized enterprises”, Entrepreneurship Theory and Practice, Vol. 25 No. 1, pp. 43-58. Churchill, N. and Lewis, V. (1983), “The five stages of small business growth”, Harvard Business Review, Vol. 61 No. 3, pp. 30-50. Ciavarella, M. (2003), “The adoption of high-involvement practices and processes in emergent and developing firms: a descriptive and prescriptive approach”, Human Resource Management, Vol. 42 No. 4, pp. 337-56. Davidsson, P., Delmar, F. and Wiklund, J. (2002), “Entrepreneurship as growth: growth as entrepreneurship”, in Hitt, M., Ireland, R.D., Camp, S.M. and Sexton, D. (Eds), Strategic Entrepreneurship: Creating a New Mindset, Blackwell, Oxford, pp. 328-42. de Kok, J. and Uhlaner, L. (2001), “Organisation context and human resource management in the small firm”, Small Business Economics, Vol. 17 No. 4, pp. 273-91. Delaney, J. and Huselid, M. (1996), “The impact of human resource management practices on perceptions of organizational performance”, Academy of Management Journal, Vol. 39 No. 4, pp. 949-69. Delery, J. and Doty, D. (1996), “Modes of theorizing in human resource management: tests of universalistic, contingency and configurational performance indicators”, Academy of Management Journal, Vol. 39 No. 4, pp. 802-35. Deshpande, S. and Golhar, D. (1994), “HRM practices in large and small manufacturing firms: a comparative study”, Journal of Small Business Management, Vol. 32 No. 2, pp. 49-56. Duberley, J. and Walley, P. (1995), “Assessing the adoption of HRM by small and medium sized manufacturing organizations”, International Journal of Human Resource Management, Vol. 6 No. 4, pp. 891-909. Dyer, L. (1993), Human Resources as a Source of Competitive Advantage, IRC Press, Ontario. Dyer, L. and Reeves, T. (1995), “Human resource strategies and firm performance: what do we know and where do we need to go?”, The International Journal of Human Resource Management, Vol. 6 No. 3, pp. 656-70. Gibb, A. and Scott, M. (1985), “Strategic awareness, personal commitment and the process of planning in small business”, Journal of Management Studies, Vol. 22 No. 6, pp. 597-631. Gilbert, J. and Jones, G. (2000), “Managing human resources in New Zealand small business”, Asia Pacific Journal of Human Resources, Vol. 38 No. 2, pp. 55-68.

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Marlow, S. (2000), “Investigating the use of emergent strategic human resource management activity in the small firm”, Journal of Small Business and Enterprise Development, Vol. 7 No. 2, pp. 135-48. Marlow, S. and Patton, D. (1993), “Managing the employment relationship in the smaller firm: possibilities for human resource management”, International Small Business Journal, Vol. 11 No. 4, pp. 57-64. Matlay, H. (1999), “Employee relations in small firms”, Employee Relations, Vol. 21 No. 3, pp. 285-96. Mayson, S. and Barrett, R. (2005), “Human resource management in small firms: evidence from growing small firms in Australia”, in Heneman, R. and Tansky, J. (Eds), Human Resource Strategies for the High Growth Entrepreneurial Firm, Information Age Publishing, Greenwich, CT. Mazzarol, T. (2003), “A model of small business HR growth management”, International Journal of Entrepreneurial Behaviour & Research, Vol. 9 No. 1, pp. 27-49. Morris, M. (2001), “From the editor: the critical role of resources”, Journal of Developmental Entrepreneurship, Vol. 6 No. 2, pp. v-vii. Nguyen, T. and Bryant, S. (2004), “A study of the formality of HRM practices in small and medium sized firms in Vietnam”, International Small Business Journal, Vol. 22 No. 6, pp. 595-618. Penrose, E. (1959), The Theory of Growth of the Firm, John Wiley, New York, NY. Pfeffer, J. (1994), Competitive Advantage through People, Harvard Business School, Boston, MA. Pfeffer, J. (1998), The Human Equation, Harvard University Press, Boston, MA. Ram, M. (1999), “Managing autonomy: employment relations in small professional services firms”, International Small Business Journal, Vol. 17 No. 2, pp. 13-30. Reid, R., Morrow, T., Kelly, B. and McCartan, P. (2002), “People management in SMEs: an analysis of human resource strategies in non-family business”, Journal of Small Business and Enterprise Development, Vol. 9 No. 3, pp. 245-59. Rutherford, M., Buller, P. and McMullan, P. (2003), “Human resource management problems over the life cycle of small to medium sized firms”, Human Resource Management, Vol. 42 No. 4, pp. 321-35. Scase, R. (1995), “Employment relations in small firms”, in Edwards, P. (Ed.), Industrial Relations: Theory and Practice in Britain, Blackwell, Oxford, pp. 569-95. Scott, M. and Bruce, R. (1987), “Five stages of growth in small business”, Long Range Planning, Vol. 20 No. 3, pp. 45-52. Shane, S. and Venkataraman, S. (2000), “The promise of entrepreneurship as a field of research”, Academy of Management Review, Vol. 25 No. 1, pp. 217-26. Stevenson, H. and Jarillo, J. (1990), “A paradigm of entrepreneurship: entrepreneurial management”, Strategic Management Journal, Vol. 11, pp. 17-27. Storey, D. (2004), “Exploring the link among small firms, between training and firm performance: a comparison between UK and other OECD countries”, International Journal of Human Resource Management, Vol. 15 No. 1, pp. 112-30. Storey, D. and Westhead, P. (1997), “Management training in small firms: a case of market failure?”, Human Resource Management Journal, Vol. 7 No. 2, pp. 61-71. Venkataraman, S. (1997), “The distinctive domain of entrepreneurship research: an editor’s perspective”, in Katz, J. and Brockhaus, J. (Eds), Advances in Entrepreneurship, Firm Emergence and Growth, JAI Press, Greenwich, CT.

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Wiesner, R. and McDonald, J. (2001), “Bleak house or bright prospect? Human resource management in Australian SMEs”, Asia Pacific Journal of Human Resources, Vol. 39 No. 2, pp. 31-53. Williamson, I. (2000), “Employer legitimacy and recruitment success in small businesses”, Entrepreneurship Theory and Practice, Vol. 25 No. 1, pp. 27-42. Wright, P. and Snell, S. (1998), “Towards a unifying framework for exploring fit and flexibility in strategic human resource management”, Academy of Management Review, Vol. 23 No. 4, pp. 756-72. Wright, P., Dunford, B. and Snell, S. (2001), “Human resources and the resource based view of the firm”, Journal of Management, Vol. 27 No. 6, pp. 701-21. Further reading CPA Australia (2002), Small Business Survey Program: Employment Issues, CPA Australia, Melbourne, March. Corresponding author Rowena Barrett can be contacted at: [email protected]

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Training commitment and performance in manufacturing SMEs Incidence, intensity and approaches

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Dilani Jayawarna Centre for Enterprise, MMU Business School, Manchester, UK

Allan Macpherson HRM and OB Division, MMU Business School, Manchester, UK, and

Alison Wilson School of Education, Faculty of Humanities, Manchester University, Manchester, UK Abstract Purpose – This study sets out to examine management development activities within manufacturing SMEs, and their impact on performance. Unlike previous published studies that concentrate on formal training, this empirical analysis includes both formal and informal training. Performance is measured in terms of turnover, employee growth, and survival. It also includes consideration of the firm’s context on both training approach and performance. Design/methodology/approach – Survey responses from 198 manufacturing SMEs in the UK are analysed using descriptive statistics, multiple regression analysis, and ANOVA. Findings – Findings indicate that formal training is likely to be a targeted activity that contributes more significantly to performance than informal training. Also, the approach and influence of training are dependent on contingent factors. A model is proposed for a further detailed study of these contingent factors using a multivariate statistical analysis. Originality/value – For SME managers, while they may prefer informal training approaches, they would benefit from seeking a formal training intervention that directly addresses their specific needs. For business support policy, support options need to be flexible enough to provide idiosyncratic solutions. Generic training solutions are not welcomed by SMEs, and are unlikely to provide significant performance benefits. A greater understanding is required of the variety of contingent variables that moderates the relationship between choices of training approach, and between training and performance. Keywords Small to medium-sized enterprises, Training, Management development, Performance management, Business support services, United Kingdom Paper type Research paper

Introduction The contribution of small- and medium-size enterprises (SMEs) to a healthy economy has long been recognised and capability development of small firms remains critical to economic prosperity (Matlay, 1999). This concern for SME development is not new. Since the early 1970s in the UK, both academics and policy makers alike have started to pay attention to the role played by SMEs in economic growth, employment, and technological change (see for example, Bolton Report, 1971; Gibb and Scott, 1985;

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Storey, 1994; DTI, 2000). Despite this concern, and many initiatives to encourage small firms to grow, it is suggested that “one of the key reasons for low-levels of UK productivity is the “long-tail” of badly-managed and under-performing small firms” (Jones, 2003, p. 16). Management skill shortages still exist in the SME sector and management development and training in the sector remains a policy priority. Research has also shown that, because of the habit of promoting informal training over formal training, SMEs operating in the manufacturing sector are in a relatively disadvantaged position (Matlay, 1999). Both demand and supply factors provide explanations as to why SMEs are reluctant to invest in training (Centre for Enterprise, 1999). From the demand side, it is believed that one of the difficulties is the lack of quantifiable evidence that shows a link between training and performance (Marshall et al., 1993, 1995; Patton et al., 2000). It is suggested that by making such a link more explicit and informing managers of the benefits, demand and interest for training and management development within SMEs could be improved. It is also considered that the demand for training may be determined by the context of a business. Characteristics such as age, size, ownership and main industrial activities may ultimately determine the nature and extent of training demand (Hendry et al., 1991). Alternatively, from the supply side, training policy and delivery systems fail to understand and address the specific needs of SMEs (Perren et al., 1999). SME managers are thus making an informed choice and deciding not to invest in the training offered (Storey and Westhead, 1997). Whether the problem is in either supply or demand, the Labour Market Survey (2001) showed a clear relationship between business failure and a lack of planning or training by SMEs. Moreover, given that knowledge resources and their renewal are considered to be essential to the growth of firms (Penrose, 1959), it is clearly important to understand the links between training and performance. This is not a simple task. In particular, there are a multitude of other external and internal variables that put weight into the training-performance relationship (Storey, 2004). In this paper we investigate the training-performance link by exploring theoretical gaps in the SME training-performance literature. We note that the contribution of different approaches to training may be particularly relevant given the diversity in the sector, and the fact that smaller firms are considered to prefer informal rather than formal training approaches (Matlay and Hyland, 1997; Storey, 2004). Using multivariate analyses, we explore whether the incidence, intensity and approach to training are linked to the performance of the SME, and how contingent variables might influence the approach taken. Building on previous studies, this study seeks to provide both theoretical and practical contributions to the subject of SME development. Evaluating the training-performance relationship The general assumption is that those businesses that pay more attention to training and development will be more successful in the long run. This premise underpins a significant investment in SME training through European Social Funds (Devins and Johnson, 2003) and by national governments in many OECD countries (Storey, 2004). Although this claim is widely established, evidence to show that training and management development enhances SME performance is equivocal (Storey and Westhead, 1994; Storey, 2004). A large body of the SME training literature has

attempted to address this issue by empirically testing the relationship between training investments – both in terms of resources and time – and firm performance through individual and firm level data. Several recent reviews, however, have shown that the empirical evidence for training influence on firm performance is generally inconsistent and inconclusive (see, for example, Storey, 1994; Morgan et al., 2002; Heraty and Morley, 2003; Storey, 2004). On the other hand, those who provide a more positive link to the relationship found that training could facilitate a firm’s expansion (Cosh et al., 1998), existence (Marshall et al., 1995), profitability and productivity (Betcherman et al., 1997) and competitive advantage (Huang, 2001; Smith and Whittaker, 1999). Jennings and Banfield(1993, p. 3) claimed that “training can, and should be a powerful agent of change, facilitating and enabling a company to grow, expand and develop its capabilities thus enhancing profitability”. Huang (2001) suggests that firms with sophisticated training systems and strong management support for training have effective training programmes and are more successful in delivering training. For Hallier and Butts (1999, p. 82) “organisational performance can be held back through a neglect of training activity”. In their impact assessment study, Marshall et al. (1993) found that government funded training investments in SMEs have significant influence in setting proactive strategies to combat recession; 50 per cent of receiving companies as compared to 12 per cent of the control group increased employment opportunities, increased investments and had a perception of resultant increased profit. Therefore, the SME training literature has provided contradictory evidence. Although there are some clear examples of how training influences firm success, it is suggested that this contradictory evidence discourages both policy makers and SME managers in their attempts to be more proactive within the area of management development and training (Marshall et al., 1993; 1995; Patton et al., 2000). Cushion (1995; 1996) and Kerr and McDougall (1999) link this problem to the lack of effective evaluation of management training in SMEs. Issues such as short time horizons (Westhead and Storey, 1996), lack of appropriate and holistic measures for SMEs (Hannon, 1999; Cushion, 1995; 1996) and the difficulties in establishing causal links between training and performance (Storey, 1994) mitigate against effective evaluation of training outcomes. However, it is argued that checking correlations between key variables to establish patterns of behaviour is more important than determining causal relationship between training and performance (Centre for Enterprise, 1999). One of the primary focuses of this paper, therefore, is filling this gap through an in-depth analysis that uses practical measures to establish patterns of the training-performance relationship. In addition, when investigating the training-performance relationship, one important distinction of this research is that it clearly identifies the actual use of a variety of training interventions. Definitions of, and factors influencing, training approach Researchers in the field unanimously agree that SME training is essentially informal and reactive response to short-term issues (Hill and Stewart, 2000). Matlay and Hyland (1997), for example, found the take up of NVQs in small manufacturing firms was significantly influenced by this preference. To face external uncertainty, small firms prefer to take flexible routes (Westhead and Storey, 1996). Further, the Skill

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Assessment Report (2002) noted that resource-scarce SME managers believe informal approaches provide cost-effective solutions. Given the importance of informal training to the SME sector, it is perhaps surprising that existing research focuses almost exclusively on the effects and outcomes of formal training programmes. This presents a significant research gap. While highlighting the critical need for proper measures for training constructs, Kitching and Blackburn (2002) noted that the mismatch between firm practice and research focus is something that needs immediate attention. A broad definition of training includes any attempt, within or outside the organisation, to increase job-related knowledge and skills of either managers or employees (Kitching and Blackburn, 2002). Although this definition captures important parameters, the Skills Assessment Report (2002) also emphasises specifically the need to distinguish between formal and informal training approaches. Training in itself is a difficult concept to quantify, but Westhead (1998) believes that the practice of providing sweeping generalisations to cover a variety of cases that are in many ways dissimilar makes things even more confusing. Thus, unlike previous research, this study makes a clear distinction between formal and informal training practices. Formal training and development is defined as “initiatives which can be identified by both recipients and deliverers as an intervention which has a structured mode of delivery, where the aim is to impart new awareness or knowledge of a workplace process or activity” (Patton and Marlow, 2002, p. 261). We define informal training initiatives as ad-hoc, fragmented and flexible. Such initiatives depend on the environment of the organisation, the nature of the task in hand, the propensity of individuals to learn, and lack a formal structure and stated objectives. Training practices in the study are defined against these criteria. SME training research often considers the provision of training at individual level with staff/employee education and training receiving attention over management training and development. O’Dwyer and Ryan (2000) argue that SME training researchers should focus on management training and education, as it is an area that is critical for firm success, but receives no special attention. Therefore, this study considers management training at the firm level. However, in contrast to other firm level studies, this study does not take the amount of time or money spent on training as measures for training commitment. Reflecting the need to identify actual patterns of behaviour, we use the number and type of practical interventions undertaken by a firm as indicators for training investment. Finally, existing work rarely considers the factors that determine the level and provision of training. Hannon (1999) in a summary of the literature on training and management development processes in small businesses, refers to management within SMEs as situationally specific, and dependent on a variety of factors such as leadership roles, product or market conditions, business ownership and management structures. While much research in SME training has focused on claiming a relationship between training and firm performance, far less attention has been directed to understanding the association within the context of the organisation, its operating infrastructure and target market. Studies do not explain why some firms are more likely than others to invest in training. Some of the studies establish that organisational characteristics influence the training performance relationship, but they fail to elucidate the contextual

factors that influence the decision on training approach. The research studies that claim a mediating effect from sets of variables have not presented statistical interpretations of the significance of these moderating effects. Research hypotheses and methodology Given the foregoing discussion, it is suggested that incidence (whether the firm engages in training), intensity (the number of training initiatives) and training approach (formal or informal), may affect organisational performance. In addition, the decisions on training approach will be influenced by contingent factors. Therefore, it is possible to consider that: H1. those SMEs that do provide training will outperform (in terms of turnover growth, business survival and employment growth) those that do not provide training. H2. higher intensities of training interventions within SMEs will result in higher levels of turnover growth. H3. those SMEs that primarily invest in formal training will show higher levels of turnover growth than those that rely primarily on informal training. H4. the choice of training approach is a contingent measure. Several organisational characteristics will influence the choice of training approach and mediate its impact on organisational performance. As the aim of this study is to discover formal relationships and searching for general patterns of a population as a whole, it was found that the most appropriate methodology, and one that has been used extensively by other researchers in the field (see, for example, Huang, 2001; Westhead and Storey, 1996), was that of a postal questionnaire survey. Although explanatory power is poor, the utilisation of a survey as a research methodology has been promoted by several social research literatures claming that it provides more “robust” results using more “objective” judgements during data collection (Alferd and Settle, 1995). It further provides greater confidence and a high external validity for the findings. The questionnaire was designed following extensive consultation with members of the academic community, as well as personnel who worked with, and in, the SME sector. Closed and Likert style questions were utilised in order to be able to produce responses that could be easily analysed and compared. One of the main focuses of the questionnaire was the list of formal and informal approaches to training. Owner/managers were asked to state whether or not they had ever used a range of training techniques. These techniques were derived from the previous literature, in particular those that were identified by Small Firms Enterprise Development Initiative (SFEDI) as important training and development techniques for SMEs. Information was also gathered on the number of employees the respondent organisation employed, turnover, number of years of trading, responsibility for training and development, business ownership, product and customer types and industry details in order to contextualise the responses. The sample was drawn from membership lists from the Forum of Private Business and the Engineering Employers Federation. A thousand small businesses nationwide

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were randomly selected from this population to ensure representation of all size categories. The questionnaire and reminders were sent to these 1,000 companies of which 198 (response rate of 19.8 per cent) useable questionnaires were returned for analysis. The response rate is comparable with similar studies in the sector. The questionnaire data was analysed using SPSS. Multiple regression analysis, ANOVA, and simple descriptive statistics formed the major part of the data analysis. Regression analysis was performed to see the relationship between training and firm performance. All training techniques taken individually and grouped (formal, informal) were regressed on the dependent variable, turnover growth. ANOVA results were used to to demonstrate the significance of the moderating variables on the training-performance relationship. Measures employed The paper explores the combination of factors associated with the provision of seven types of formal training[1] and five types of informal training[2]. Respondents were given clear explanations, with examples, in order to help them classify their training approaches. A separate category in each of the formal and informal training sections asked for other methods of training they provide in addition to the ones listed. These were incorporated into the relevant group by the researchers after consulting the respondents. Thus, data collection on the incidences of both formal and informal training was clear and unambiguous[3]. Those respondents who have said no to both formal and informal training methods were included under the category NO training provision. To test the hypothesis that training can be associated with organisational performance, firm turnover growth (average turnover growth for the past 3 years) was taken as proxy to firm performance. Employment growth and business survival, measured in terms of staff number increase/decrease and number of years of existence, were also regressed against independent training variables as performance measures. When measuring the level of training associated with both informal and formal approaches, measures like training cost as a percentage of total sales (Cosh et al., 1998) and the number of employees being trained (Huang, 2001) were considered as unsuitable. This is because informal learning may be impossible to cost and individual learning efforts are unlikely to be recorded (Kitching and Blackburn, 2002). Therefore, three categorical variables were employed to classify the training provision in the respondent organisations. First, organisations were classified into 2 groups according to whether they had undergone any training in the past. This variable was named as the incidence of training. A value of 1 was attached to organisations that adopted any of the training methods (formal/informal) and a value of 0 to organisations that had not used any training method at all. The second variable was the intensity of training, defined as the number of training methods in use by a firm. The average value for all the formal and informal training was calculated for organisations that had any training in the past. The third variable was labelled as the approach to training meaning whether formal or informal training received priority. For this analysis, organisations that had some training in the past were again divided into two groups. The training approach was set equal to 1 if the preferred training approach was formal and to 0 otherwise[4]. Table I provides a summary of the demographic profile of the respondents. A typical sample firm had been in business for 28 years with 72 per cent of the sample trading for more than 11 years. This is an encouraging figure as previous research

Ave./freq.

(%)

Firm size (staff numbers) Average staff numbers Micro (,9) Small (10 to 49) Medium (50 to 249)

43 69 89 40

35 45 20

Firm age (years) Average age 0-10 11-20 .21

28 55 81 62

28 41 31

Turnover (millions) Average turnover ,1 M 1-3 M .3 M

2.4 65 59 74

33 30) 37

Ownership Owner managed Not owner managed

82 116

41 59

Industry High tech. Low tech.

82 116

41 59

findings suggest that less than 20 percent of SMEs last more than 6 years (Barnett and Storey, 2000). Results analysis Intensity and incidence of training While there are a number of possible measures of firm performance, several authors (for example, Jarvis et al., 2000) claim that firm turnover growth is reliable. In testing the association between training and firm performance, turnover growth was therefore taken as a performance measure and the dependent variable in the regression analysis. The age of a business has often been linked to performance, and Government policy objectives often include employment growth as a measure. Therefore, to provide a broader perspective on firm performance than is given in comparable studies, employee growth and business age were also included as performance variables. Measures were also included to control for multi-collinearity effects (Hair et al., 1984). First, to control for differences due to organisational size and the industry effect, the industry dummy (dependent on the level of advanced technology use in the manufacturing firms) and the measure of firm size were included in the analysis. Tables II and III presents the multiple regression analysis results for the incidence and intensity of training against the performance measure, firm turnover growth.

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Table I. Sample profile

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With respect to the turnover growth, we found a beta coefficient of 0.163 which is highly significant (p , 0:01) for the incidence of training. However, the relationship between the amount of training provided (intensity of training) and turnover growth was not statistically significant, although the patterns were in the predicted direction with firms that used more training initiatives reporting the highest turnover growth[5]. This supports the notion that it is not necessarily the amount of training provided to management team that increases the turnover growth of the firm, but whether or not a firm is willing to provide training to develop its management capabilities. The highly significant coefficient for the firm size variable, for both incidence and intensity of training, indicates that there is a main effect of firm size on performance. Specifically, those firms with more staff were typically better performers than firms with less staff. Because of this, it was assumed that the relationship between training provision (both incidence and intensity) and turnover growth might be contingent on firm size. To check this moderating effect, the regression analysis included an interaction term (incidence/intensity of training x firm size). As shown in Tables II and III, Model 2, although there is no relationship between the interaction term and

Dependent variables

Table II. Multiple regression analysis – incidence and intensity of training vs. performance (turnover growth)

Multiple R R-Square Adjusted R-Square df F statistics

Firm turnover growth (Model 1) Incidence of Intensity of training traininga 0.697 0.486 0.476 4 45.69 * * *

0.640 0.409 0.391 4 22.54 * * *

0.699 0.488 0.475 5 36.66 * * *

0.688 0.474 0.453 5 23.24 * * *

Notes: acases that do not provide training were excluded from the analysis; * * * p , 0:001; * *p , 0:01; *p , 0:05; while Model 1 incorporates training variable along with the control variables firm age, size and industry dummy, Model 2 provides results for the influence of the interaction term, training incidence/intensity £ firm size

Model 1 Incidence of Intensity of training training Beta T Beta T

Table III. Multiple regression analysis – incidence and intensity of training vs. performance (turnover growth): analysis of variance

Firm turnover growth (Model 2) Incidence of Intensity of training training

Firm size (no. of staff) Firm age (years of trading) Industryb Training variable Training variable £ firm size

0.63 11.27 * * * 0.00 0.03 0.01 0.21 0.16 2.91 * *

0.62 0.00 0.02 0.051

7.77 * * 0.058 0.27 0.60

Incidence of training Beta T 0.306 0.001 0.008 0.274 0.338

Model 2 Intensity of training Beta T

0.82 0.968 7.86 * * * 0.020 20.02 2 0.34 0.157 0.034 0.497 3.15 * * 0.59 3.78 * * * 0.868 20.35 2 3.51 * *

Notes: acases that do not provide training were excluded from the analysis; b0 ¼ low tech., 1 ¼ high tech.; * * * p , 0:001; * *p , 0:01; *p , 0:05; while Model 1 incorporates training variable along with the control variables firm age, size and industry dummy, Model 2 provides results for the influence of the interaction term, training incidence/intensity £ firm size

performance with regard to incidence of training, there is a strong but negative association when intensity of training is taken as the training measure. Therefore, our results indicate that: . There is a highly significant relationship between incidence of training and performance which is not moderated by firm size. This provides strong support for H1. . Firm size has a significant moderating influence on the intensity of training vs firm performance relationship. Consequently there is no evidence to support H2.

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Using employee growth and business survival measures as performance variables provided some mixed results. In terms of employee growth (difference in employee numbers between the start of the business and now), we found a very strong significant association for both incidence (t ¼ 5:12, sig: , 0:001) and intensity of training (t ¼ 2:81, sig: , 0:01). When business survival (measured in terms of number of years of firm existence) was regressed against incidence and intensity of training (with firm size, turnover and industry type as control variables), we found a positive but insignificant relationship for the incidence of training (t ¼ 1:341, sig: ¼ 0:181), while for intensity of training, this association was negative and insignificant (t ¼ 20:634, sig: ¼ 0:527). This provides further supportive evidence for H1, but it is equivocal with regards to H2 (see Table IV). Formal and informal approach to training Multiple regression analysis using two unordered sets of predictors were used to examine the relationship between formal and informal training on performance and to check whether firms investing predominantly in formal training outperform those relying on informal training. Analysis results are given in Tables V and VI. The regression results presented in Model 1 indicate that while formal training has a significant relationship (p , 0:05) to firm turnover growth, this relationship is insignificant and negative for informal training. As these results hold true even under the control conditions imposed by firm size, age and industry, we can confidently claim that formal training is associated with performance over and above informal training in small manufacturing firms. This provides strong support for H3. Furthermore, the very strong association found between turnover growth and firm size indicates that the relationship between the training approach and firm performance is contingent on the firm size. Model 2 provides the results of the Employment growth Beta Sig. Beta Incidence of training Intensity of training R square F

0.33 0.12 0.18 3.47 * * *

Notes: * * *p , 0.001; * *p , 0.01; *p , 0.05

0.000 * * * 0.008 * *

Business survival Beta Sig. Beta 0.048 2 0.098 0.007 0.64

0.32 0.28

Table IV. Multiple regression analysis: intensity and incidence of training vs. employment growth and business survival

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Table V. Multiple regression analysis – approach to training (formal and informal training averages) vs. performance (turnover growth)

regression analysis when two interaction terms – formal training £ firm size, informal training £ firm size – were included as control variables. As shown in Tables V and VI (Model 2), the training approach-performance relationship is contingent on firm size. While the firm size influence on formal training is positive and significant (p , 0:01), this influence is negative and significant (p , 0:05) for informal training. While this provides some supporting evidence to H4, further analysis is required to test the significance of other possible moderators. This is included in the next section. We also investigated the relationship between employment growth and firm survival against the chosen training approach. When employment growth was regressed against average values for formal and informal training, we found very strong significant associations. While formal training had a positive and significant association with employment growth of a company (t ¼ 5:48, sig: , 0:001), this association was negative, but significant when informal training was considered as the dependent variable (t ¼ 22:98, p , 0:01). This provides further support for H3. To clarify further the issue related to the most influential formal training method, a stepwise multiple regression analysis was performed, taking company turnover growth as the dependent variable and seven formal training techniques as independent variables. Starting with all the variables in the equation and sequentially removing insignificant ones, this method allows the most relevant subset of variables to be included in the equation. Three variables remained in the regression equation: in-house formal training by outside providers (t ¼ 5:62; p , 0:001), qualification courses run by universities and colleges (t ¼ 22:35; p , 0:05), and in-house formal training provided by company staff (t ¼ 2:61, p , 0:05). The R 2 of 0.37 (F ¼ 9:25, sig. P , 0:001)

Dependent variables

Performance: turnover growth (Model 1)

Performance: turnover growth (Model 2)

0.692 0.479 0.465 5 35.31 * * *

0.727 0.528 0.511 7 30.37 * * *

Multiple R R-square Adjusted R-square F statistics Note: * * *p , 0.001

Beta Table VI. Multiple regression analysis – approach to training (formal and informal training averages) vs. performance (turnover growth): analysis of variance

Model 1 T

Firm size 0.60 9.29 * * * Firm age 0.02 0.39 Industry 0.036 0.622 Formal training (ave.) 0.177 2.21 * Informal training (ave.) 20.028 20.396

Notes: * * *p , 0.001; * *p , 0.01; *p , 0.05

Beta

Model 2 T

Firm size 1.087 8.63 * * * Firm age 2 0.004 2 0.073 Industry 0.026 0.473 Formal training (ave.) 0.272 2.92 * * Informal training (ave.) 2 0.029 2 0.342 Formal training £ firm size 0.304 3.04 * * Informal training £ firm size 2 0.242 2 1.39 *

indicates that the resulting regression equation with the three remaining training methods explains 37 per cent of the variance in firm performance. The finding that qualification courses run at universities/colleges, as a formal training method, has a very strong negative association to company performance is in line with the findings from the Small Business Skill Assessment Report (2002). Here it was noted that although during the last few years there has been an increase in the rate of SMEs seeking higher education training, the perception of the significance of this training as a potential source of competitive advantage is very poor. Among the informal training methods, the association between coaching and networking as informal training mechanisms and turnover growth of a company was found to be positive, but insignificant. Training seminars were the only informal training method that had a significant positive contribution to firm performance (sig. , 0.05). These finding supports the research literature that suggests informal learning though networks is an important source of competitive advantage (for example, Almeida et al., 2003; Macpherson et al., 2004), and that targeted informal training (such as a seminar) may address a specific and current crisis that the firm is facing (Cassell et al., 2002). Moderators to SME training-performance relationship The study included six variables that could potentially influence the firm decision on the most suitable training approach. Differences in training approach are significant for four of the six organisational characteristics considered in the analysis. Three of these, firm size, level of technology and business structure have a significant influence over the training approach decision at p ¼ 0:001, p ¼ 0:007 and p ¼ 0:000 respectively, and were linked to formal routes of management development. The relationship between the business ownership (owner-managed and non owner-managed) and training approach remains significant at p ¼ 0:014, with the owner-managed business showing more interest for informal training than the non-owner managed companies. Also there is no significant influence on the training approach with regard to firm age and level of innovation. To substantiate these results concerning the performance impact between training approach and organisational characteristics, we divided companies that do provide training divided into two groups: “high performers” and “low performers”. This classification was made based on the mean value for the variable “turnover”. High performers were identified as those with a turnover more than 1.9 million (the sample average). This classification gave rise to 58 high performers and 79 low performers. Mean differences in organisational characteristics of high performers in the two training approaches were compared with the differences in the low performance group. As seen in Table VII, the mean difference in firm size, business ownership, level of technology and business structure of high performers using formal training versus informal training is significantly higher (p , 0:001) than the mean difference in these characteristics for low performers. Since the mean difference in age and level of innovation between firms using formal and informal training was significantly different, further comparisons were not relevant. Therefore, it is clear that the positive relationship we found between formal training and firm performance is moderated by a set of organisational characteristics. Companies with more staff, more structure, using

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332 Table VII. Organisational characteristic influence on training-firm performance relationship

Firm size (no. of employees) Firm age (years of trading) Ownershipa Business structureb Level of innovationc Technologyd

Mean difference in organisational characteristics by training approach High performers Low performers (n ¼ 58) (n ¼ 79) 27.5 22.25 0.26 0.39 0.48 0.29

12.23 10.45 0.056 0.04 2 0.22 0.014

Difference (high-low)

T stat.

þ15.27 – þ0.204 þ0.35 – þ0.276

9.56 * * * – 8.1 * * 12.5 * * * – 9.2 * *

Notes: * * *p , 0.001; * *p , 0.01; *p , 0.05; a owner managed vs. non-owner managed; b highly structured vs. low structured; c more innovative (customer specified products) vs. less innovative (standard products); d high tech vs low tech

advanced technology and which are non-owner managed are in a better position to receive more benefits from formal training. Firm size and level of innovation are not significant determinants of the formal training-performance relationship. Results presented in Table VII provide further evidence in support of H4. Discussion What is a particularly important contribution of this study is the finding that SMEs that conduct management training show a statistically significant advantage in terms of both employee and turnover growth, compared with those that either do not conduct training, or prefer to invest in informal training. It appears that the intensity of training (number of training interventions) is only relevant as the firm grows. This latter finding seems intuitive, since the number of training interventions required is likely to increase as staff numbers increase. It has been suggested in the literature (for example, Hill and Stewart, 2000; Kitching and Blackburn, 2002) that managers prefer informal to formal training interventions. However, while SME managers prefer an informal learning approach, this does not necessarily mean it is more effective. SFEDI (2004) note that it is important to distinguish between what is practiced (due to resource scarcity) and what is appropriate. In this research there is a clear and significant finding that formal training is associated with performance over and above that provided by informal training in small manufacturing firms. As with other studies, our findings are subject to criticisms of causal ambiguity (Storey, 2004). Also we must acknowledge that the measures of success used do not reflect the wide range of objective and subjective aspirations of SME owners (Curran and Blackburn, 2001). Nevertheless, the findings do add weight to the body of evidence on the training-performance relationship highlighted in earlier studies (for example, Cosh et al., 1998; Marshall et al., 1995; Betcherman et al., 1997; Huang, 2001; Smith and Whittaker, 1999). There are a number of potential reasons that formal training may provide additional benefits over informal training. Firstly, there may be a lack of suitable skills – such as coaching or communication – within the firm to make the most of informal development activity (Hendry et al., 1991; Mabey and Thompson, 1994). Secondly, the

owner-manager may be too busy to devote time to informal training. In this case when they recognise a staff development need they will utilise a formal approach that is cost effective in terms of their own time. In this case targeted formal interventions may be a chosen solution. This would accord with findings from Baldwin et al. (1995) who suggest that training targeted at a few key individuals is beneficial to SMEs’ performance. Thirdly, previous research has highlighted training and development being utilised as a response to a problem (Blackburn and Kitching, 1997, Patton and Marlow, 2002), where “selecting training was particularly tailored to an identified training need” (Cassell et al., 2002, p. 687). When we look further into the statistics, these latter two points seem particularly relevant. The most positively significant approaches within formal training were the use of outside providers for in-house courses, and the use of in-house designed and delivered courses. Taken together with the finding that it is the incidence and not the intensity of training that will be important, this suggests that both of these types of intervention are likely to be used to target a specific and identified need: the former when specific skills or knowledge are absent, but the failure to address the skill need is perceived to jeopardize the business; and the latter when there is an ongoing skills need in the business that warrants training investment. The identification of this particular approach to invest in organizational knowledge adds weight to the findings of Cassell et al. (2002) and Hendry et al. (1991) that training is undertaken as tactical solutions to problems; the demand for training is explicitly related to improving the way the business is operated (Patton and Marlow, 2002). The intensity of training is less relevant, since generic interventions provide benefits to the individual and not the firm (Westhead and Storey, 1999). Indeed, the most effective informal development initiative was shown in the findings to be attendance at training seminars. Given the difficulty of engaging SME managers who are under significant time pressures, attendance at seminars is likely to occur only when the information is considered relevant to a specific business issue. Thus, the most successful formal and informal interventions appear to be tactical solutions to crises, but, as such, they are likely to have a more direct effect on business performance. The idea that particular problems stimulate learning is highlighted in organizational learning theory (see, for example, Weick, 1995; Fiol and Lyles, 1985) and has been identified by Cope (2003) as a particularly important mechanism to achieve higher-level learning in smaller firms. Our findings are also consistent with studies that conclude more flexible, targeted and relevant business support mechanisms are required in order to engage SME managers in development activity (Perren et al., 1999, Macpherson, 2005). It seems that SME support programmes need to understand and address the particular crises that individual businesses are facing, and be flexible enough to provide idiosyncratic solutions. It is also interesting to note that the approach to training is moderated by contingent variables. In particular, this study highlights the influence of size (number of employees), structure, and uses of technology on the approach to training chosen. Similar to findings by Reid and Harris (2002), we also noted that business ownership was influential, with non-owner managed companies significantly more likely to engage in formal training. Thus, this study also extends our theoretical knowledge of the contingency influence on the training-performance relationship. Perhaps more

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importantly, it has managerial implications in terms of designing and choosing the most suitable training approach for a particular context. However, in this regard the findings are only preliminary and further research is necessary. There has frequently been a lack of coherence between the proposals made in theoretical studies and the focus of empirical work. While some researchers studied the association between training and organisational characteristics (for example, Reid and Harris, 2002) others have examined the link between the amount of effort (budget/time allocation) put on training and performance (Huang, 2001; Patton et al., 2000), and on management style (Sadler-Smith, 2004). Although these are complementary, none of the research considers these relationships within a multivariate framework. Thus, since our findings suggest that issues of structure, leadership and product/market seem to be influential in this relationship, we propose a model of contingent variables, Figure 1. Further research and analysis will be important to understand what factors are important for each of these categories and how each of these factors influences the approach and incidence of training. These relationships need to be explored and tested more comprehensively using statistical analysis within a multivariate framework.

Conclusions What is particularly important in this study is the finding that formal training is shown to be more significantly associated with performance than informal training. Moreover, while managers may perceive that informal training is more relevant, this study highlights the importance of targeted formal interventions to specific problems. We suggest that these findings are consistent with tactical approaches to training that address specific and identified training needs. By addressing particular crises or difficulties, SMEs managers are investing (either time or money) to provide access to specific knowledge resources that can contribute directly to business performance. This finding along with others, such as Perren et al. (1999), Cassell et al. (2002) and Patton and Marlow (2002), suggests that training support for SMEs needs to address specific challenges that SME managers face. Support mechanisms for SMEs, if they are to add value, need to be flexible enough to support idiosyncratic development needs, and not just provide generic solutions that do not accrue value to the firm (Jayawarna et al. (2006). Finally, the approach and effectiveness of training appears to be mediated

Figure 1. Conceptualising training and performance in SMEs

by a number of contingent variables, including market, structure and leadership. Further analysis is required to provide a deeper understanding of these effects. Notes 1. Formal training methods includes qualification courses run at Universities/Colleges, formal courses run by outside providers, distance learning courses, NVQs, formal in-house courses run by outside providers, formal in-house courses run by company staff and internet-based courses. 2. Informal training methods include appraisal, coaching, promotion on a temporary basis, informal training seminars/meetings and networking. 3. Measures for both formal (Cronbach alpha ¼ 0.675) and informal (Cronbach alpha ¼ 0.69) approaches to training were found to be reliable (Nunnally, 1967) 4. On the assumption that all businesses should use all training methods for business success, training approach indexes (TAI) were calculated; the number of training methods (in each approach) reported by the companies was divided by the theoretical number possible. If the TAI value for formal training is higher than for informal training approaches, the variable, training approach, was set equal to 1 and 0 otherwise. 5. The reasons for a significant F statistic (F ¼ 23.12) for the regression model and non-significant association between training intensity and turnover is because of the high association found between turnover and firm size (r ¼ 0.681; p ¼ 0.000). References Alferd, P.L. and Settle, R.B. (1995), The Survey Research Handbook, 2nd ed., Irwin, Chicago, IL. Almeida, P., Dokko, G. and Rosenkopf, L. (2003), “Startup size and the mechanisms of external learning: increasing opportunity and decreasing ability?”, Research Policy, Vol. 32 No. 2, pp. 301-15. Baldwin, J.R., Gray, T. and Johnson, J. (1995), “Technology use, training and plant-specific knowledge in manufacturing establishments”, Paper No. 86, Statistics Canada, Ottawa, December. Barnett, E. and Storey, J. (2000), “Managers’ accounts of innovation processes in small and medium-sized enterprises”, Journal of Small Business and Enterprise Development, Vol. 7 No. 4, pp. 315-24. Betcherman, G., Leckie, N. and McMullen, K. (1997), “Developing skills in the Canadian workplace”, CPRN Study No. W02, Renouf Publishing, Ottawa. Blackburn, R. and Kitching, J. (1997), “Management training for SMEs: a comparative study of three European regions”, paper presented at the 20th ISBA Small Firms Policy and Research Conference, Belfast. Bolton, J.E. (1971), “Report of the committee of enquiry on small firms”, HMSO, London. Cassell, C., Nadin, S., Gray, M. and Clegg, C. (2002), “Exploring human resource management practices in small and medium sized enterprises”, Personnel Review, Vol. 31 Nos 5/6, pp. 671-92. Centre for Enterprise (1999), Small Firms Training Impact Assessment: Phase One, Executive Summary, SFEDI Ltd, Sheffield. Cope, J. (2003), “Entrepreneurial learning and critical reflection”, Management Learning, Vol. 34 No. 4, pp. 429-50.

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Cosh, A., Duncan, J. and Hughes, A. (1998), “Investing in training and small firm growth and survival: an empirical analysis for the UK 1987-97”, DfEE Research Report RR36, HMSO, London. Curran, J. and Blackburn, R.A. (2001), Researching the Small Enterprise, Sage, London. Cushion, N. (1995), “Measuring the success of small management business training”, paper presented at 18th ISBA National Conference, University of Paisley, Paisley. Cushion, N. (1996), “Evaluation of management development in the small business sector”, paper presented at ISBA National Small Firms Policy and Research Conference, UCE Business School, Birmingham. Devins, D. and Johnson, S. (2003), “Training and development activities in SMEs”, International Small Business Journal, Vol. 21 No. 2, pp. 213-28. DTI (2000), White Paper on Small Business Research Initiatives, HMSO, London. Fiol, C. and Lyles, M. (1985), “Organizational Learning”, Academy of Management Review, Vol. 10, pp. 803-13. Gibb, A. and Scott, M. (1985), “Strategic awareness, personal commitment and the process of planning in the small business”, Journal of Management Studies, Vol. 22 No. 6, pp. 597-632. Hair, J.F., Anderson, R.E., Tatham, R.L. and Grablowsky, B.J. (1984), Multivariate Data Analysis, Macmillan, New York, NY. Hallier, J. and Butts, S. (1999), “Employers’ discovery of training: self-development, employability and the rhetoric of partnership”, Employee Relations, Vol. 21 No. 1, pp. 80-95. Hannon, P. (1999), “A summary of the literature on the way that management development processes in growth SMEs leads to demand: small firms enterprise development”, Small Firms Training Impact Assessment, Phase 1. Hendry, C., Jones, A., Arthur, M. and Pettigrew, A.M. (1991), “Human resource development in small to medium-sized enterprises”, Research Paper, No. 88, Department of Employment, Sheffield. Heraty, N. and Morley, M.J. (2003), “Management development in Ireland: the new organisational wealth?”, Journal of Management Development, Vol. 22 No. 1, pp. 60-82. Hill, R. and Stewart, J. (2000), “Human resource development and small organizations”, Journal of European Industrial Training, Vol. 24 No. 2, pp. 105-17. Huang, T. (2001), “The relation of training practices and organizational performance in small and medium size enterprises”, Education þ Training, Vol. 43 Nos 8/9, pp. 437-44. Jayawarna, D., Macpherson, A. and Wilson, A. (2006), “Managers’ perceptions of management development needs in manufacturing SMEs”, Education þ Training, Vol. 48 Nos 8/9, pp. 666-81. Jarvis, R., Curran, J., Kitching, J. and Lightfoot, G. (2000), “The use of quantitative and qualitative criteria in the measurement of performance in small firms”, Journal of Small Business and Enterprise Development, Vol. 7 No. 2, pp. 123-34. Jennings, P.L. and Banfield, P. (1993), “Improving competence in small firms”, paper presented at the 16th National Small Firms Policy and Research Conference, The Nottingham Trent University, Nottingham. Jones, O. (2003), “Competitive advantage in SMEs: towards a conceptual framework”, in Jones, O. and Tilley, F. (Eds), Competitive Advantage in SMEs, Wiley, Chichester, pp. 15-33. Kerr, A. and McDougall, M. (1999), “The small business of developing people”, International Small Business Journal, Vol. 17 No. 2, pp. 65-74.

Kitching, J. and Blackburn, R. (2002), “The nature of training and motivation to train in small firms”, Small Business Research Centre, Kingston University, London. Labour Market Survey (2001), Small and Medium Enterprise (SME) Statistics for the UK, HMSO, London. Mabey, C. and Thompson, R. (1994), Developing Human Resources, Butterworth-Heinemann and Institute of Management, Oxford. Macpherson, A. (2005), “Learning to grow: resolving the crisis of knowing”, Technovation, Vol. 25 No. 10, pp. 1129-40. Macpherson, A., Jones, O. and Zhang, M. (2004), “Evolution or revolution? Dynamic capabilities in a knowledge-dependent firm”, R&D Management, Vol. 34 No. 2, pp. 161-77. Marshall, J., Alderman, N., Wong, C. and Thwaites, A. (1993), “The impact of government assisted management training and development on small and medium-sized enterprises in Britain”, Environment and Planning, Vol. 11, pp. 331-48. Marshall, J.N., Alderman, N., Wong, C. and Thwaites, A. (1995), “The impact of management training and development on small- and medium-sized enterprises”, International Small Business Journal, Vol. 13 No. 4, pp. 73-90. Matlay, H. (1999), “Vocational education, training and organisational change: a small business perspective”, Strategic Change, Vol. 8 No. 5, pp. 277-89. Matlay, H. and Hyland, T. (1997), “NVQs in the small business sector: a critical overview”, Education þ Training, Vol. 39 No. 9, pp. 325-32. Morgan, A., Mayes, S. and Smith, E. (2002), “The age of business, its potential to learn and the need for support”, report for the Small Business Service, Trends Business Research, Newcastle upon Tyne. Nunnally, J. (1967), “Psychometric theory”, McGraw-Hill, New York, NY. O’Dwyer, M. and Ryan, E. (2000), “Management development issues for owner/managers of micro enterprises”, Journal of European Industrial Training, Vol. 24 No. 6, pp. 345-53. Patton, D. and Marlow, S. (2002), “The determinants of management training within smaller firms in the UK: what role does strategy play?”, Journal of Small Business and Enterprise Development, Vol. 9 No. 3, pp. 260-70. Patton, D., Marlow, S. and Hannon, P. (2000), “The relationship between training and small firm performance: research frameworks and lost questions”, International Small Business Journal, Vol. 1 No. 1, pp. 11-27. Penrose, E. (1959), The Theory of the Growth of the Firm, Oxford University Press, Oxford. Perren, L., Berry, A. and Partridge, M. (1999), “The evolution of management information, control and decision making processes in small growth orientated service sector businesses: exploratory lessons from four case studies of success”, Journal of Small Business and Enterprise Development, Vol. 5 No. 4, pp. 351-61. Reid, R.S. and Harris, R.I.D. (2002), “The determinants of training in SMEs in Northern Ireland”, Education þ Training, Vol. 44 Nos 8/9, pp. 443-50. Sadler-Smith, E. (2004), “Cognitive style and management of small and medium sized enterprises”, Organization Studies, Vol. 25 No. 2, pp. 155-81. SFEDI (2004), “Small business: skills assessment 2004”, research report, Sheffield. Small Business Skill Assessment (2002), “Sharing successful business practice”, research report, Small Firms Enterprise Development Initiative, Sheffield. Smith, A. and Whittaker, J. (1999), “Management development in SMEs: what needs to be done?”, Journal of Small Business and Enterprise Development, Vol. 5 No. 2, pp. 176-85.

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Storey, D.J. (1994), Understanding the Small Business Sector, Routledge, London. Storey, D.J. (2004), “Exploring the link, among, small firms, between management training and firm performance: a comparison between the UK and other OECD countries”, International Journal of Human Resource Management, Vol. 15 No. 1, pp. 112-30. Storey, D.J. and Westhead, P. (1994), Management Development in Small and Medium-Sized Enterprises with Growth Potential, Confederation of British Industry, London. Storey, D.J. and Westhead, P. (1997), “Management training in small firms – a case of market failure?”, Human Resource Management Journal, Vol. 7 No. 2, pp. 61-71. Weick, K. (1995), Sensemaking in Organizations, Sage, London. Westhead, P. (1998), “Factors associated with the provision of job related formal training by employers”, International Journal of Entrepreneurial Behaviour & Research, Vol. 4 No. 3, pp. 187-216. Westhead, P. and Storey, D.J. (1996), “Management training and small firm performance: why is the link so weak?”, International Small Business Journal, Vol. 14 No. 4, pp. 13-25. Westhead, P. and Storey, D.J. (1999), “Training provision and the development of small and medium sized enterprises: a critical review”, Scottish Journal of Adult and Continuing Education, Vol. 5 No. 1, pp. 35-41. Further reading Small Business Services (2002), Small and Medium-sized Enterprise Statistics for the UK 2002, SBS, Department of Trade and Industry, London. Corresponding author Allan Macpherson can be contacted at: a.macpherson@ mmu.ac.uk

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Using training and development to affect job satisfaction within franchising Stephen Choo

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Towers Perrin-ISR, Sydney, Australia, and

Christine Bowley Department of Consumer and Employment Protection, Government of Western Australia, Perth, Australia Abstract Purpose – A review of the literature on franchising has revealed a significant lack of academic research on employee training in franchise systems. Further, most research in this area tended to focus on training for franchises as part of the overall package. This study seeks to address the shortfall of research in this area by investigating the influence of training and development on an employee’s job satisfaction at one of Australia’s fastest growing franchises. Design/methodology/approach – This study collected data from 135 frontline staff at one of Australia’s largest bakery retail franchises. The data were gathered by means of a structured questionnaire, 16 items of which were devoted to an evaluation of the organisation’s training and development programmes and six items were dedicated to job satisfaction. Findings – There are several key findings for this study. First, the effectiveness and efficacy of a training program are dependent on evaluation of training quality, course design and learning experience. Next, employee satisfaction is found to be influenced by work environment, company values and job responsibilities. Practical implications – Findings from this study have important managerial implications for retail franchisers and individual franchisees on how to enhance the job satisfaction of employees by the provision of effective training and development programmes. Originality/value – This empirical study has made a major contribution in adding to the limited body of empirical knowledge on the influence of training and development on job satisfaction in retail franchising. It is hoped that this paper will encourage more academics to investigate the impact of training and development on job satisfaction and retention in franchising. Keywords Training, Job satisfaction, Franchising, Retail trade, Small enterprises, Australia Paper type Conceptual paper

Introduction A key advantage in purchasing a franchise is training and the acquisition of technical expertise (Price, 1993). In almost all franchise models, the franchisees will be required to hire and train their own staff. Franchise systems want their franchisees to understand and use the key management tools but they also need them to train their staff in using these tools (Sayler, 2003). Franchisers who place a high priority on quality training programs do so because they know that well-trained franchisees and employees have a direct impact on their bottom line (Larson, 2003). Training is shown to positively impact on employee’s productivity, which results in higher levels of customer and employee satisfaction. Evidence from McDonald’s suggests that low

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levels of training give rise to high levels of staff turnover and that the provision of good training has a positive effect on staff retention (Thomas et al., 2000). Although a number of surveys have measured employee training, serious gaps remain in the knowledge of such fundamental matters as to how much training takes place, who provides it, who gets it and whether the efficacy of the training has been achieved (Joyce et al., 2000; Lynch, 1998). A review of the literature on franchising has found a significant lack of academic research on employee training in franchise systems. Further, most research in this area has so far tended to focus on training for franchisees as part of the overall franchise package (Alden and Dant, 1990; Justis and Chan, 1991; Knight, 1984). To address this research gap, the authors set out to investigate the influence of training and development on an employee’s job satisfaction at one of Australia’s fastest growing franchises. Australia is facing a crisis in skilled labor shortages due to its strong economic growth over the past decade. In particular, the resources boom in Western Australia and Queensland has resulted in large mining companies offering significantly high salaries to entice people to seek employment with them. As a consequence, small and medium-sized enterprises (SMEs), including franchises, are facing enormous difficulties in recruiting and retaining staff. Effective people management is increasingly becoming a primary concern for small businesses striving for business success (Collins and Porras, 1991; Kotter and Heskett, 1992; Oakland and Oakland, 1998). This study has made a significant contribution in understanding how owner-managers of SMEs and franchises can utilize training and development to enhance employee satisfaction and perhaps job retention. This research has three main purposes. First, this study investigated how employees would evaluate the effectiveness of a training program. This finding presents serious managerial implications to both franchisers and franchisees on the overall design and delivery of their training to the frontline staff. Next, the key contributing factors to achieving an employee’s job satisfaction is being examined as the loss of talented employees, which is considered as a valuable resource, is detrimental to realising a franchise’s expansion plan (Sigler, 1999; Lowe and Gordon, 2002). Finally, we undertook an exploration of the relationship between the role of training and development and job satisfaction. In the next section, we present a brief review of the background literature on training and development. This is followed by the development of several testable hypotheses. Next, we describe the data collection methods and measures of the key constructs. Subsequently, we present the empirical results and their descriptive statistics. Finally, we conclude with a brief discussion and implications for academics and managers. Background Despite the importance of training in franchise systems, there has been little research in this area (Justis and Chan, 1991). The general literature on the use of training is sparse and conflicting, thus making it difficult to draw conclusions about the use of employee training (Colarelli and Montei, 1996). Despite the growing importance of small business research in the last decade, little attention has been devoted to the effectiveness of training programs conducted within this sector (Huang, 2001). This is surprising given that a lack of training has been attributed to shorter employment

tenure, frustration and job dissatisfaction (Pugh, 1984; Industrial and Commercial Training, 2002). Several studies have reported on the benefits of training. Organisations that are committed to employee training are realising the rewards of increased skill-sets, motivation, higher productivity and knowledge transfer of their employees (Oosterbeek, 1998; Pate and Martin, 2000). In particular, job-related training increases an employee’s ability to perform job-related tasks (Acton and Golden, 2003). Firms that provide training send a strong signal to employees regarding management’s commitment to customer service (Babakus et al., 2003). Training employees has also been found to result in facilitating the updating of skills, increasing professionalism and increasing employee commitment and satisfaction to the organisation (Bushardt and Fretwell, 1994; Bateman and Strasser, 1984; Cotton and Tuttle, 1986). A study by Burke (1995) found that participation in internal and external courses are beneficial for the organisations and their employees. Staff perceiving greater value in formal training courses are relatively more satisfied with their jobs, which leads to them feeling better about their organisation (Burke, 1995). Hypotheses development Evaluation of training The core elements of training generally include identifying needs, planning, delivery and evaluation. The influence of employee experiences on training effectiveness has hitherto received scant research attention. The evaluation of training is important in order to achieve greater returns on investment (Warr et al., 1999). Even though training has often been credited to improving profitability many organisations, especially small businesses, fail to adequately evaluate the success of their training programs (Santos and Stuart, 2003). However, evaluation is arguably the most difficult part of the training process to assess (Reid and Barrington, 1997). The Kirkpatrick Model (TKM)’s four-level hierarchy of reaction, learning, behaviour and results has been widely used as a guide for evaluating workplace training in the field of industrial or organisational psychology (Kirkpatrick, 1994). At the first level of TKM’s model, trainees’ reactions to a training program or components of it are often recorded in terms of satisfaction or enjoyment (Warr et al., 1999). Warr and Bunce (1995) suggest these three key participants’ reactions to capture: (1) enjoyment of the training; (2) its perceived usefulness; and (3) its perceived difficulty. This suggests that the quality of the trainer or trainer-trainee interactions is important in evaluating reactions. However, “the importance of the trainer is rarely recognised at all in the training literature” (Steiner et al., 1991, p. 271). This is surprising as the course design and the suitability of the trainer can impact on the success or failure of the training program. Evaluation at the second level of TKM is usually evaluated in terms of the amount of learning that has taken place (Warr et al., 1999). It can “be described as the extent to which participants change attitudes, improve knowledge and/or increase skill as a result of attending the program” (Brown and Sneider, 1998, p. 10). At this level, most research has hitherto focused on the extent to which trainees have reached targeted standards of competence, rather than the amount of learning that has occurred

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during the program (Sackett and Mullen, 1993). The third level is behaviour, which can be defined as “the extent to which behaviour is changed by a training intervention” (Rowden, 2005, p. 32). The final level, results, focuses on the impact of training on the bottom line of the firm (Parry, 1996). It is not our intention to investigate TKM’s third and fourth levels as these activities have proven highly complex to measure (Dionne, 1996). The focus on TKM’s first and second levels has resulted in several hypotheses: H1. An employee’s favorable learning experience has a positive affect on the evaluation of an organisation’s provision of training and development. H2. An effective course design has a positive affect on the evaluation of an organisation’s provision of training and development. H3. The quality of the trainer has a positive affect on the evaluation of an organisation’s provision of training and development. Job satisfaction Scholars in organisational studies have long been interested in why certain people are more satisfied with their jobs than others (Ellickson, 2002). Job satisfaction refers to an employee’s overall assessment of his or her work and work-related experiences, which is influenced by an individual’s values, ideals and beliefs (Baron, 1976; Chan et al., 2004). The measurement of job satisfaction is important as “organisations with satisfied employees lead to satisfied customers” (Rust et al., 1996, p. 63). Despite the widespread interest in job satisfaction among researchers and practitioners, there has been hitherto limited attention devoted to explaining variation in job satisfaction among franchised store employees. Research concerning the relationship between job satisfaction and job design has largely been determined through an instrument called the Job Diagnostic Survey. The Job Diagnostic Survey, developed by Hackman and Oldman in 1975, assessed employees’ perceptions of five job dimensions including skill variety, task identity, autonomy, feedback and task significance (Pierce et al., 1986). A study by Marchese (1998) found a strong relationship between job worth and job design, with salary strongly influenced by skill and responsibility. Job satisfaction is an important motivator for employee performance and has been found to inversely relate to turnover (Mak and Sockel, 1999; Rust et al., 1996). On the other hand, offering talented employees training to keep them current on their job functions and allowing them to learn new skills can be utilised to improve employee satisfaction within the organisation (Rice et al., 1991). Evidence suggests training is more likely to have a positive effect on employee satisfaction where employers develop formal, structured approaches to training that link skill formation to job tenure, career progression, recognition and reward (Heyes and Stuart, 1994). A popular approach to explaining job satisfaction so far has been the person-environmental fit paradigm (Ellickson, 2002; Kristof, 1996). This suggests that the more a person’s work environment is fulfilling one’s needs, values or personal characteristics, the greater the degree of job satisfaction. Several studies have found job satisfaction to result in increasing job performance (Iaffaldano and Muchinsky, 1985), minimising employee absenteeism (Steers and Rhodes, 1978) and reducing staff turnover (Mobley et al., 1979). Ramlall (2004) noted the importance of creating a working environment where employees are committed through improving job satisfaction. This is supported by Hackman and Oldham (1980) and Ramlall (2004) who

proposed that jobs including task variety and multiple talents improve job satisfaction and thus increase employee retention. Improvement in job design is a consequence of training. This results in the following hypothesis:

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H4. The higher an employee’s satisfaction with the organisation’s provision of training and development, the higher an employee’s job satisfaction. Research methodology Data for this study was collected in 2005 from frontline employees at one of Australia’s largest bakery retail franchises. Every effort was made to encourage a greater response rate. We received support from the organisation in the form of a personalised cover letter from the national group training and development manager, which accompanied each questionnaire sent to the respondents. A main challenge faced by the authors was deciding how many questionnaires to distribute. The organisation was unable to keep track on the total number of employees working at their 250 franchised stores as most of them were temporary part-time and casual employees. Therefore, we were heavily reliant on individual franchisees informing us on the number of questionnaires to be sent to their stores. The procedure yielded 135 responses. The average age of respondents was 21 years old. The final sample had 90 percent female and 10 percent male employees. A majority of the respondents were part-time sales assistants working up to 20 hours per week. The respondents had been working, on average, for about one year. Due to the limited sample size, the results do not statistically represent the population of sales assistants at the 250 franchised stores. However, as empirical research into the impact of training and job satisfaction in franchising is scarce, the authors hope that this preliminary study might encourage academics to embark on future research in this field. The data were gathered by means of a structured questionnaire of which 16 items were devoted to an evaluation of the organisation’s training and development programmes and six items were dedicated to job satisfaction at the bakery franchise. All these statements were based on previous research studies relating to the measured constructs (Kirkpatrick, 1994; Warr et al., 1999; Warr and Bunce, 1995; Sackett and Mullen, 1993; Pierce et al., 1986; Birdi et al., 1997). These statements required respondents to rate the importance of each statement on a five-point likert scale where 1 represented “strongly disagree” to 5 “strongly agree”. The data analysis consisted of three phases. The first phase began with conducting a descriptive and intercorrelation analysis of the 16 training evaluation and six job satisfaction variables to determine their order of importance. In phase two, a confirmatory factor analysis was performed on these 26 statements in order to determine the robustness and reliability of the resulting set of factors. An item factor-loading of at least 0.50 was required for an item to be included on a factor. To test the reliability of the resulting factors, an alpha coefficient was computed on each factor. Finally, the last phase consisted of testing the last hypothesis (H4) by the use of a regression analysis. Results The respondents were asked to evaluate their satisfaction on the most recent organisation’s training and development program they had completed or were completing to aid recall. These questions generated 50 responses as the rest had not

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been selected to participate in the organisation’s training and development program. The means, standard deviations and intercorrelations among the evaluation variables are displayed in Table I. The reliability of this scale was assessed by Cronbach’s alpha, which yielded a reliability coefficient of 0.92. The ability to accomplish all the objectives of the course was ranked as the most important variable. This was followed closely by their ability to apply what they have learnt on a regular basis in their job and having the knowledge and skills to successfully complete the programmes. This suggests that the content of the programmes should be job specific and the modules must be achievable from the each trainee’s perspective. These franchised store staff also regarded a set of variables that relate to the quality of the trainer. They include the trainer being helpful, well-prepared, patient in allowing them to complete all the modules of the program and supportive. A third set of variables was attributed to the design of the course curriculum. They include the objectives of the program being relevant to their job, the requirements of the program were well communicated, the overall standard of the program, the completion of each module of the program was well communicated, assessments used in the program were fair, the activities in the program provided sufficient practice and feedback and the adequacy of activities in stimulating their learning. The remaining set of variables that scored marginally positive was related to their perception of the efficacy of training, which included having their expectations exceeded or finding the overall program challenging. It is also observed that a high degree of significant correlation exists among the 16 variables. In particular, helpful trainer was found to be highly correlated to well-prepared trainer (r ¼ 0:92, p , 0:01) and supportive trainer (r ¼ 0:88, p , 0:01). Job satisfaction is approached, like in extant studies, as a multi-dimensional construct. In our study, we have adapted the classic Herzberg (1966)’s extrinsic and intrinsic dimensions of job satisfaction after close consultation with certain franchisees and sales assistants. The use of Cronbach’s alpha yielded a reliability coefficient of 0.73. The respondents were generally found to be experiencing high job satisfaction while working at the franchised bakery stores. The means, standard deviations and intercorrelations among the variables on job satisfaction are displayed in Table II. Having a comfortable work environment was ranked as the most important variable. This was followed closely by having co-workers as friends. Judging by the extremely high scores of these two variables, it would suggest that employers should invest heavily on creating a comfortable and friendly work environment as it has a tremendous positive impact on their employees’ job satisfaction. The next set of variables is attributed to how employees demonstrate their job satisfaction. They included the willingness to put in a great deal of effort beyond what is normally expected in order to help the bakery successful and the pride of telling others that they work for the organisation. This was followed by two variables that indicated the importance of having organisational values aligned with individual employee’s values and managers acknowledging their staff when a job is well performed. It is observed that a high degree of significant correlation exists among the six variables, which ranges from r ¼ 0:21 at p , 0:05 to r ¼ 0:53 at p , 0:01. A factor analysis was performed to identify underlying structure of employees’ evaluation of training and job satisfaction among the list of variables studied. Factors were extracted from a principal components analysis, followed by a varimax rotation.

0.58 * * 0.92 * *

0.91 0.58 * * 0.64 * *

4.44

0.92 0.18 1.09 0.05

3.38

3.10 20.01

0.19

0.34 * 0.18

0.11

0.34 *

0.01

0.29 *

0.30 *

0.09

0.26

0.27

7

8

0.66 * * 0.37 * *

20.02

0.25

0.15

0.15

0.12

0.32 *

0.35 *

0.35 *

0.16

0.39 * *

0.49 * *

0.23

0.45 * * 0.41 * * 0.34 *

0.55 * * 0.38 * * 0.49 * *

0.29 *

0.41 * * 0.48 * * 0.48 * *

0.59 * * 0.57 * *

0.42 * *

6

10

11

20.01

0.32 *

0.27

0.36 * * 0.45 * *

12

13

14

0.30 *

0.00

0.14

0.33 *

15

0.37 * * 0.43 *

0.42 * * 0.37 * * 0.41 * * 0.42 * * 0.45 * *

0.43 * * 0.39 * * 0.37 * * 0.54 * *

0.42 * * 0.31 *

0.56 * * 0.41 * * 0.50 * *

0.68 * * 0.42 * *

0.46 * *

9

16

Notes: Means and standard deviations are based on a 5-point scale where 1 ¼ strongly disagree, 2 ¼ disagree, 3 ¼ neither disagree nor agree, 4 ¼ agree and 5 ¼ strongly agree; n ¼ 50; * p , 0:05; * * p , 0:01

0.87 0.08

3.76

0.55 * * 0.36 * * 0.32 *

0.82 0.54 * * 0.46 * *

4.16 0.16

0.59 * * 0.43 * * 0.39 * *

0.97 0.62 * * 0.67 * *

4.20

0.21

0.41 * * 0.60 * * 0.52 * *

0.98 0.50 * * 0.60 * *

4.24

0.23

0.74 * * 0.44 * * 0.40 * *

0.96 0.53 * * 0.58 * *

4.32

0.33 *

0.47 * * 0.64 * * 0.69 * *

0.96 0.48 * * 0.53 * *

4.32

0.79 0.22

0.56 * * 0.88 * * 0.83 * *

0.97 0.56 * * 0.56 * *

4.38

3.84

0.57 * * 0.51 * * 0.59 * *

0.93

4.40

5

0.54 * *

0.72 * *

0.52 * *

0.84 0.59 * * 0.58 * *

4.48

0.66 * *

0.91 0.63 *

4

4.52

3

0.73 0.67 * *

2

4.56

1

4.56

1. To accomplish all the objectives of the program 2. To apply what is learned on a regular basis in my job 3. To have the knowledge and skills to successfully complete the program 4. To have helpful trainer 5. To have a well-prepared trainer 6. To have plenty of time to complete all the modules 7. To have trainer who is supportive 8. To have objectives in the program that are relevant to my job 9. To be well-informed of the requirements for the program 10. To have a good standard of training 11. To be well-informed on how to complete each module 12. To have assessments that are fair 13. To have activities that give sufficient practice and feedback 14. To have many activities that stimulate my learning 15. To exceed my expectations 16. To have a challenging program

SD 0.76

Mean

Items

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Table I. Correlation matrices of evaluation on training and development

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Table II. Correlation matrices of job satisfaction

Items 1. I feel comfortable in my work environment 2. I consider my co-workers friends 3. I am willing to put in a great deal of effort beyond that normally expected in order to help the bakery successful 4. I am proud to tell others that I work for the organisation 5. My values and those of the organisation are very similar 6. My franchisee/supervisor regularly acknowledges when I do a good job

Mean

SD

1

2

3

4

5

4.49

0.74

4.46 3.97

0.76 0.41 * * 1.08 0.13 0.13

3.95

1.07 0.29 * * 0.18 *

3.86

1.04 0.21 *

3.72

1.13 0.42 * * 0.28 * * 0.26 * * 0.36 * * 0.39 * *

6

0.34 * *

0.23 * * 0.47 * * 0.53 * *

Notes: Means and standard deviations are based on a 5-point scale where 1 ¼ strongly disagree, 2 ¼ disagree, 3 ¼ neither disagree nor agree, 4 ¼ agree and 5 ¼ strongly agree; n ¼ 135; *p , 0.05; * *p , 0.01

To be included on a factor, an item must have at least a 0.50 factor loading (Hair et al., 1998). For the employees’ evaluation, the resulting factors were interpreted as trainer quality with alpha score of 0.93 (four items), course design with an alpha score of 0.90 (seven items) and learning experience with an alpha score of 0.73 (four items). Only one item, which was “I was very satisfied with the standard of training I received” failed to load onto any factor. The item loadings of the three resulting factors, together with their respective eigenvalues and per cent of variance accounted for, can be found in Table III. This resulting factor solution accounted for 68.9 percent of the variance in the data. The resulting coefficient alpha reliability scores were 0.93, 0.90 and 0.73 for training quality, course design and learning experience respectively. As the reliability scores are above the commonly used threshold value of 0.70, they are deemed acceptable (Hair et al., 1998). The findings supported H1, H2 and H3. As for job satisfaction, the resulting factors were interpreted as sense of pride (three items including “My values and those of the organisation are very similar”, “I am willing to put in a great deal of effort beyond that normally expected in order to help the organisation to be successful” and “I am very proud to tell others that I work for the organisation”) with an alpha score of 0.71 and work environment (three items including “I feel very comfortable in my work environment”, “I consider my co-workers friends” and “My supervisor/franchisee regularly acknowledges when I do a good job”) with an alpha score of 0.61. The item loadings of the six resulting factors, together with their respective eigenvalues and per cent of variance accounted for, are displayed in Table IV. This resulting factor solution accounted for 62.15 per cent of the variance. The resulting coefficient alpha reliability scores were 0.71 and 0.61 for sense of pride and work environment respectively. A regression analysis was conducted to examine how the three resulting factors on training evaluation would relate to job satisfaction. Table V provides the standardized (B) and unstandardized (b) regression coefficients with their respective contribution and predictive power of each factor. The overall model for job satisfaction has a

Factors The trainer was well prepared The trainer was very helpful I was very satisfied with the support offered to me by my trainer The objectives of the program were relevant to my job I was well informed of the requirements for the program I was very confident that I had the knowledge and skills required to successfully complete the program I was well informed of how to complete each module of the program The assessments used in the program were fair I accomplished all the objectives of the course I would be able to apply what I had learned on a regular basis in my job I had plenty of time to complete all the modules of the program The activities in the program gave me sufficient practice and feedback I found the program overall to be very challenging The program exceeded my expectations The activities in the program gave me sufficient practice and feedback Mean Eigenvalue Percentage of variance explained Scale reliability

Factors I feel very comfortable in my work environment I consider my co-workers friends My supervisor/franchisee regularly acknowledges when I do a good job My values and those of the organisation are very similar I am willing to put in a great deal of effort beyond that normally expected in order to help the organisation to be successful I am very proud to tell others that I work for the organisation Mean Eigenvalue Percentage of variance explained Scale reliability

Trainer quality

Course design

Learning experience

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0.93 0.91 0.83

347

0.65 0.80 0.77 0.79 0.69 0.68 0.61 0.61 0.77 0.72 0.70

4.39 7.58 47.39 0.93

4.37 2.01 12.56 0.90

Work environment

3.48 1.43 8.91 0.73

Table III. Rotated factor matrix for employees’ evaluations of training

Sense of pride

0.83 0.77 0.60 0.82 0.77 0.73 4.22 2.58 43.05 0.71

3.93 1.15 19.10 0.61

Table IV. Rotated factor matrix for job satisfaction

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moderate R2 value of 0.307 and adjusted R2 value of 0.261. The analysis revealed that two out of three training evaluation variables were statistically significant factors of job satisfaction. They were course design (B ¼ 0:45, p , 0:01) and learning experience (B ¼ 0:305, p , 0:05). Training quality did not play a significant role in explaining variation in the dependent variable of job satisfaction. Perhaps the two most interesting findings of this study were the importance of: (1) course design in explaining variations in work environment; and (2) learning experience in explaining variations in sense of pride. Overall, the results in Table V point to the support of H4, as employee’s evaluation of training is moderately and positively related to two measures of job satisfaction. Discussion and implications This preliminary study of franchised store employees has provided a greater understanding of the impact of participation in training and development programmes on job satisfaction. In order that an organisation ensures its employees experience satisfaction with its training and development programmes, it must provide highly knowledgeable, supportive and experienced trainers, courses that are well designed and achievable and a positive applied learning experience. Employees who are satisfied with their training and development are likely to experience job satisfaction, which are influenced by having a comfortable and friendly work environment and a sense of pride and belonging. Organisations that have employees who are satisfied with their jobs and training are likely to experience lower staff turnover and higher staff retention. This study has revealed two interesting findings that relate to the influence of course design in creating a positive work environment and learning experience in developing a sense of pride among the employees. It appears that employees who are effectively and adequately trained are likely to develop positive feelings toward their employers and colleagues. This highlights the importance of employers devoting considerable resources to the development of courses that meet their employees’ expectations. Also, employers should also ensure that their employees achieve a positive learning experience, perhaps through team building or social activities, as it has the ability to harness a sense of camaraderie among the workforce. The findings from this study present franchisers with tremendous opportunities to train and develop their part-time and casual employees to become future store

Work environment a

b

Variables B b Trainer quality 20.046 2 0.044 Course design 0.446 0.498 * Learning experience 0.201 0.236 Table V. Multiple regression analysis on job satisfaction

R2 Adjusted R 2 F

0.267 0.218 5.456

Sense of pride

Prob. B b 0.793 20.145 20.142 0.013 0.313 0.355 0.151 0.311 0.371 * 0.189 0.135 3.487

Overall Prob. B b 0.430 2 0.114 20.093 0.092 0.450 0.427 * * 0.037 0.305 0.304 * 0.307 0.261 6.642

Notes: aStandardized coefficients; bunstandardized coefficients; * p , 0:05; * * p , 0:01

Prob. 0.503 0.010 0.027

managers and franchisees. If well-trained these highly motivated, experienced and productive frontline staff have the potential to serve as favourable candidates for future franchisees. The implementation of this strategy could bring long-term dividends to any franchiser as the success of a franchise system heavily depends on having appropriate franchisees (Choo, 2005). Selecting the wrong franchisees can have an adverse impact on a franchise’s growth, survivability and profitability. A major limitation exists in this study due to the limited sample size. It is predominantly made up of part-time young employees whose turnover is notoriously high in the retail industry. Great difficulty was experienced in generating a representative sample for this study as we relied heavily on the support of individual franchisees in distributing questionnaires to their staff. There have been limited studies so far undertaken on part-time employees as it is often an onerous task in getting them to complete surveys and cooperate with research studies. Therefore, great care must be exercised in interpreting the results of this preliminary study due to the small sample size, which may result in an over-fitting of the data. However, a certain degree of reliability exists due to the robustness of the test-statistics. It is recommended that researchers undertaking future studies examining frontline staff at franchise retail stores make personal contacts with individual stores, in cooperation with the franchiser, to develop a list of all employees. We would like to make three suggestions for future research. First, this study has developed several scales that are moderately reliable in measuring training evaluation and job satisfaction for SMEs, with a specific focus to the franchise retail industry. It is recommended researchers undertake future large-scale empirical studies to further develop a statistically reliable scale for training evaluation and job satisfaction to contribute to the theoretical study in this area. Next, future studies should explore the varying influences of different types of training and development with their respective approaches, styles and philosophies on job satisfaction. Finally, this study has not examined the evaluation of training and job satisfaction of store managers as it singularly focused on frontline staff within a franchise system. It is recommended that a comparison study of managers and frontline staff be undertaken to determine significant differences among the variables. This study provides a practical business implication for franchises. The retail franchise industry is characterised by staff who are mostly employed on a part-time or casual basis. Anecdotally, this sector of employees has been largely overlooked by franchisers as a potential source for future managers or franchisees. Evidence from this research has indicated that the job satisfaction of employees can be enhanced if they are provided with an effective training and development program. Also, this study has increased our understanding of the critical elements in terms of trainer quality, course design and learning experience that an effective training and development program must possess to deliver job satisfaction. References Acton, T. and Golden, W. (2003), “Training the knowledge worker: a descriptive study of training practices in Irish software companies”, Journal of European Industrial Training, Vol. 27 Nos 2-4, pp. 137-46.

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