Growth and profitability of small and medium-sized enterprises: Some Welsh evidence.

Policy-makers throughout the Organization for Economic Co-operation and Development (OECD) are keen to promote the development of small and medium-sized enterprises (SMEs) by a wide variety of means. The present study of over 1600 Welsh SMEs casts doubt on the effectiveness of doing so by grants, by encouraging trade associations, by pursuing current initiatives in training or by stimulating innovation as defined by SME management. On the other hand, it finds that support for selective Information Technology investment and for marketing planning could be beneficial. Additional results that might be addressed by policy are short-termism by older managers - preferring current to future profits more than younger managers - signs that fixed costs of tax compliance bear substantially more heavily on the profitability of smaller SMEs, and evidence for a substantial partnership and sole trader 'risk premium' between SMEs, suggesting considerable entrepreneurial risk aversion.