The impact of Investors in People on small business growth: who benefits?

Investors in People (IiP) plays a central role in the UK government's policies for workforce development. Small firms have been a particular focus of government support with IiP along with claims that the scheme will enhance the performance of these firms. However, it is argued in this paper that such benefits are unlikely to accrue to all types of small firm. In particular, only those businesses with a comparative advantage from investing in formalised human resource programmes are likely to experience enhanced performances. An econometric model is developed and applied to examine this issue empirically. The model incorporates the multistage decisionmaking processes that are entailed for firms involved with IiP. In this manner we are able to control for selection bias in the performance (employment growth) estimates. The empirical results support the contention of comparative advantage. Businesses that choose IiP achieve enhanced growth as a result of their investments. In contrast, the impact for an 'average' small firm is neutral.