Is Enterprise Funding effective, and how should it be evaluated?
The returns on Merseyside Special Investment Fund investments are under scrutiny in a particularly challenging local economy. But do we know whether MSIF, or any other public investment bodies, are actually doing a good job? The answer is probably, ‘Pass….’. Unless there is directly comparable information about enterprise programmes where funding was unasked or declined, there is actually nothing meaningful against which to make evaluations of the adequacy of the funding decision-making process for programmes which do receive public investment.
The debate about whether MSIF (Merseyside Special Investment Fund) is effective continues. Their performance in the past year is for some unconvincing – today’s Daily Post Business Week reports an MSIF £10m venture fund, of which £9.6m has been written off. There is discussion about whether such funding is given in the right sort of way – it’s ‘given’ as loans at strictly commercial rates – and whether it’s an appropriate form of investment at all in a challenging economy such as Merseyside’s, which is indeed a fair question.
Similar discussion of course is frequently heard about other funding and loans. Is the type right for the need? Why is there so much apparent failure?
There is however a question which is rarely if ever asked, but which could tell us a lot: How do the enterrpises (of whatever sort, commercial or social) which are refused support actually fare, compared to those that receive it?
This would be a basic question in any respectable ‘proper reseach’ programme, whatever the subject under scrutiny. There has to be information against which to evaluate the outcomes of intervention.
For instance, if we were conducting clinical research we might expect a ‘double-blind trial’; in other disciplines the ‘null hypothesis’ might be involved – essentially the assumption that there is no difference or effect until one is clearly demonstrated. But no equivalent comparator information seems to be forthcoming when the subject is the use of the public purse for enterprise investment.
Probably this is because business investors tend only to look at their own and similar portfolios; and most senior people involved in funding enterprise have in their previous lives been business investors. Not many social science or economic researchers are directly engaged at operational level in decisions about the distribution of large investment cheques from the public purse.
Perhaps investment specialists are better at business advice than they are likely to be at research? Probably so; but we don’t actually know, because we don’t have the comparative data by which to tell if their advice and guidance, or indeed their cheques, are effective: Few (if any) public funding bodies provide comparator information about investment proposals which were developed without public funding, or were turned down when they asked.
It may seem a strange idea; but there could be a case for obligatory induction courses in research methods for investment bankers who see a future for themselves in expending public monies on enterprise on our behalf. Perhaps it’s time to re-write the job spec?
Or maybe the real issue is, do those who scrutinise public investments of this sort understand the difference between Outcomes (what happens at the end of the process) and Evaluation (whether specific outcomes have actually been changed – and, if so how? – by the intervention/s)?
If the difference between outcome and evaluation is understood, it’s only a short step to seeing that what public investment programmes really need is benchmarking by external research, to show whether funding intervention really does in general improve outcome. Then we’ll know whether they’re value for money – which by common agreement must in the end be what it’s all about.