Why are we in the grip of a start-up frenzy?

Ireland, or at least the Government, is in the grip of a frenzy around entrepreneurship. From local government, through the higher education system, to the highest in the land, hardly a day goes by without some new band jumping on the wagon.

We are being flogged with the mantra that we must start up, become entrepreneurs, be self-employed, yadda yadda yadda. It’s a diversion of resources, built around a self-perpetuating meme.

The SME sector is really important, in Ireland and in Europe. In Europe, as of 2012, SMEs accounted for over 99% of all companies, employing just under 90m people. They account for 66% of total employment and about 58% of output.

However, when we think of SMEs in Ireland we think of small and medium-sized companies. The SME definition is companies with less than 250 employees and €50m in total turnover. This is by Irish standards a fairly substantial enterprise.

In Ireland, SMEs account for 68% of total employment. Thus, it makes sense to ensure that SMEs as a sector are in rude health.

The issue however is not so much SMEs as a group but the make-up of them.

First, in Ireland, we have fewer large employers than in the EU as a whole. We therefore should put resources into ensuring that companies can transit from S to M to L(arge). As things stand, this is not happening.

Second, we are fairly well represented in the start-up sectors that matter. Micro companies are defined as those with less than 10 employees. The proportion of all companies which are micro and in the services sector, at about 7% of all (non holding) companies, is relatively large in Ireland. The EU average is about 5%.

Curiously, despite the notion that we are overrun with construction subbies, these micro construction companies only account for about 1% of all (non-holding) companies in Ireland, less than half the European average. We have a larger percentage of all companies in the micro industrial sector than in the EU as a whole.

Third, we are not short of start-ups. The EU business demographics database suggests that while we are not prolific in new companies, with about 6% of the existing company stock being added to each year, nor were we that horrific in company deaths, with, even in 2011, only a number equivalent to 5% of the stock closing. So we are adding about 1% of companies per annum, as of 2011.

From the Global Entrepreneurship Monitor, an international annual survey of same, we see similar news. Compared to the OECD average, in Ireland: We are more likely to believe we have the skills needed to be entrepreneurs; have a greater likelihood to be owner-managers; have more graduates as a percentage of entrepreneurs (but less school leavers); have older and therefore more experienced, owner-managers; are more likely to have immigrants as entrepreneurs; are more likely to be in the high-tech or consumer services sectors at start-up (but much less so in business services); are more likely to be offering unique products and services; and to be export orientated.

Given all this, one wonders why the frantic push? In particular, given the cuts in state support for higher education over the last half decade, why are the higher education institutions rushing to reconfigure themselves as innovation campuses, entrepreneurial universities, etc etc? The role of the higher education system is to provide skills, general and specific, to people as part of their education. Good practice is, when faced with fiscal constraints, to focus resources on the core business in order to survive. The core business of our universities and even our Institutes of Technology, is not to be part of the state supra and infrastructure driving forward that which does not need to be driven.

A read of the “about us ” pages of the Irish universities shows a major part of the education sector is now in whole, or in large part, captured by the meme that it’s about entrepreneurial and innovation activities.

For every euro spent on setting up innovation bootcamps, incubators and startup academies, monies are not spent on the core mission. Libraries are cut, academic and support staff not replaced, conference and fieldwork travel curtailed, student fees increased and so forth.

Irish universities spend €1.8bn per annum, a large part of it from the State (but not as much as people think). They are chasing the dragon of entrepreneurship for no good reason. Time and money is being diverted from the creation of a well-educated graduate cohort.

We need to stop and think again.