Entrepreneurial diversification, business-cluster formation, and growth

In its 1998 White Paper on competitiveness, the British government stressed the importance of entrepreneurship in halting Britain's apparent relative economic decline and in enhancing international competitiveness. In this do cument the potential contribution of entrepreneurship is envisaged primaril y in terms of the need to increase the supply of entrepreneurs capable of s tarting and growing innovative new businesses; less recognition is given to the entrepreneurial vitality of the existing business base. This is in kee ping with much of the influential policy and research literature, in which concentration through core growth of single firms has tended to be valued, rather than growth through diversification by entrepreneurs starting additi onal firms. The authors researched diversification as an entrepreneurial ph enomenon through case studies of new high-growth Scottish companies. Most b usiness founders in the study had established more than one company, and ma ny had successfully pursued entrepreneurial forms of diversification. The h igh-growth companies were, in effect, embryonic business clusters, rather t han single unidimensional businesses. This supports the notion that the gre atest source of new high-growth businesses is entrepreneurs with existing b usinesses, not novice entrepreneurs. This has implications for future polic y support for entrepreneurship.