GRANT ASSISTANCE AND SMALL FIRM DEVELOPMENT IN NORTHERN IRELAND AND THE REPUBLIC OF IRELAND STEPHEN ROPER and NOLA HEWITT-DUNDAS NORTHERN IRELAND ECONOMIC RESEARCH CENTRE Grant Assistance and Small Firm Development in Northern Ireland and The Republic of Ireland

Small business support is an important element of industrial development policy in both Northern Ireland and the Republic of Ireland. This paper examines the effect of grant support on small business performance from 1991-95. Around 50 per cent of small businesses in Northern Ireland and 30 per cent of small businesses in the Republic of Ireland received support over this period. In Northern Ireland, three clusters of assisted companies were identified who received support for marketing, training and capital investments. In the Republic of Ireland, two assisted clusters of firms were identified who received marketing and training grants. In each case firms in the assisted clusters grow faster, tend to be more profitable, are more active in terms of sales and market development and adopt more ambitious strategic directions than those in the non-assisted clusters. Selection models are used to explore whether these differences are due to differences in the characteristics of the assisted and non-assisted groups or can be directly attributed to the effects of assistance. In the Republic of Ireland there is no evidence of any targeting of assistance at better performing firms. In Northern Ireland, there is some evidence that assistance was targeted at firms with higher productivity growth. Grant aid had no effect on either the turnover growth or profitability of small businesses in either area. It did, however, boost employment growth. This is good-news for job creation but has potentially worrying implications for firms’ longer-term competitive position through its effect on productivity.