Small business development in remote rural areas: The example of mature manufacturing firms in Northern England

Abstract

There is a growing interest in the potential contribution of small and medium sized enterprises (SMEs) to rural economic development, as reflected in the Rural Development Commission's strategy for the 1990s. Using some evidence on the development of mature manufacturing SMEs in remoter rural areas during the 1980s and comparing them with similar urban based firms, the paper shows that whilst there was little difference between the rural and urban SMEs in terms of their growth performance when measured by sales turnover, the rural firms generated significantly more jobs. This indicates a different relationship between SME growth and employment generation in different geographical environments. SMEs in remote rural areas are shown to pursue rather different development paths than their urban counterparts resulting from the way in which they adjust to the opportunities and constraints afforded by their local operating environments. The main section of the paper focuses on three particular kinds of adaptation: (i) to local market conditions, and in particular on the ability of SMEs to make the transition into national and international markets; (ii) to local labour market conditions, including various qualitative characteristics of rural labour such as skill levels and functional flexibility; and (iii) to the lack of an industrial milieu, especially the limited opportunities for externalising production. The paper concludes by raising some concerns about the longer term competitiveness of SMEs in remote rural areas including low levels of labour productivity, technological backwardness and skill levels within the workforce.