The short-term bias in policy programs for small business: exploring discontinuation of a successful growth program

Abstract

PurposeWhen a successful policy intervention for small firm growth is ending, a continuation decision may be relevant. However, immediately after program termination, solid analysis of the growth of the treated firms in comparison with similar firms cannot be produced, so decision makers rely on less valid data. Moreover, the decision process is challenging because many players, alternative programs, decision levels and financial sources tend to be part of the process. In such a complex and volatile policy environment, successful programs may well be discontinued despite a clear continuation need. The purpose of the paper is to explore this weakness.Design/methodology/approachThe paper identifies four fundamental principles that are conducive for a rational continuation choice: “additionality,” “substitution,” “need” and “success”. It argues that if these principles are fulfilled, the rational choice would be to continue the program. To demonstrate that this rational outcome does not always happen in practice, an extreme case fulfilling the four principles well was selected.FindingsThe program aimed to enhance growth in small firms through manager training. It encompassed about 700 growth-oriented small firms in three years and was comprehensively evaluated after program termination. This evaluation demonstrated a high success rate of the program in all respects, including in terms of achieved growth compared to a control group of similar firms.Originality/valueThis discontinuation case suggests that non-rational reasoning plays a significant role in contemporary complex and volatile policy environments, which again points to a need for reform in this policy area.