What is it and what does it aim to do?
Training involves publicly provided courses delivered to existing firms or to individuals aiming to start a business. Start-up (or entrepreneurial) training aims to increase the likelihood that an individual successfully launches a new business. For existing firms, training aims to improve business performance e.g. in terms of business growth, innovation or survival.
How effective is it?
For start-up training the evidence suggests that training usually leads to a higher probability of launching new ventures. However, while start-up training may have a positive effect on business creation, this does not necessarily imply a long run effect on business performance.
For existing firms, the evidence shows positive (but moderate) effects of training hours on business survival and stronger positive effects of training on profits or employment.
How secure is the evidence?
The evidence base on training is not as weak as for other areas of business support. However the conclusions on cost-effectiveness are still based on a limited number of studies (only half of the studies present cost figures). More rigorous studies are required.
We found ten studies that examined the effectiveness of training. Three of these provided high quality evidence based on randomised control trials, two provided before and after comparisons using a control group and the rest were based on comparisons over time for a group who enrolled in the programme.
None of these studies come from the UK and six of them come from the US. For a full list of studies and summaries of their findings please see the Annex in the PDF download below.
Is it cost-effective?
Half of the ten studies present information on costs (although two of those consider the same project).
The two studies that evaluate the same programme perform a cost-benefit analysis that takes into account the cost of the programme, as well as changes in earnings and unemployment benefits. They find the programme has a net cost to society of £938 per participant on average. However, for the subsample of unemployment benefit recipients, who experience larger self-employment effects and sacrifice less wages, there was a benefit of £1,204 per participant. Note, however, that this programme combines elements of both training and public advice, and it is not possible to uniquely attribute costs or benefits to either form of support.
A third study reports an overall annual cost of the programme of £129,498.1 Given the effect sizes for firm creation and the increase in employment, the cost-effectiveness of this project is estimated to be £23,310 per firm created and £1,683 per new job.
The other two studies show very low cost figures with respect to the benefits of the programmes they are analysing and conclude that the business training courses considered are cost-effective with benefits that far exceed the costs of such schemes.
While these schemes may be cost-effective from the firms’ point of view, if these benefits come at the expense of other local firms, this may not be cost-effective from an area point of view.
Things to consider
- Is start-up training good value for money? Since there are no persistent effects of start-up training on the performance of new ventures in the long run, the cost-effectiveness of such schemes should be interpreted carefully.
- Are there particular groups that would benefit more from training? For entrepreneurial training courses (training for start-up), it may be more cost-effective to target particular groups (e.g. women or unemployment and welfare benefit recipients).
- How long should training or other forms of support (e.g. subsidised consultancy services) continue post start-up? Training is effective in increasing start-up rates but does not appear to improve performance for these firms once established. In contrast, training provided to existing firms does improve performance.
- Are gains coming at the expense of other local firms? If so, this will reduce the net-benefits of the programme. This is more likely to be a problem for firms that serve local markets (see our evidence review on other Area Based Initiatives).