International Council for Small Business 47th World Conference San Juan, Puerto Rico June 16-19, 2002

icsb 2002-076

The Swedish Start-up Grant: Success or Failure? Ph.D. Birgitta Eriksson & Ph.D. Patrik Larsson Abstract In social debates it is often argued that it is in the small-scale companies we should place our trust as providers of future employment. The giving of grants for the establishment of small firms has also been held up as a good example of an important and successful labour market policy. The contributions to the debate on Start-up Grants (SG) – as the labour-political measure with focus on the establishment of small-scale businesses is called – are based mainly on quantitative descriptions. However, these provide few and relatively simplistic explanations of why certain people succeed in their ventures while others do not. In order to arrive at other and more nuanced explanations it is necessary to discuss the meaning of the words successful and unsuccessful but also to study individual grant receivers and their business concepts in depth. The study shows that success and failure could be viewed on different levels and what is considered a success on one level, could be a failure on another level. On the company level, the SG affords the possibility of a settling in period. This is also the case with the training in administrative work which precedes the actual SG-period. But at the same time as the grant can generate success by allowing for a flexible start, so also can the rules and regulations contribute to a breakdown. From an employment perspective, even if the SG does not result in a new company, the grant in itself can be valuable by “opening the door” to another and steady job or destructive by “closing the door” to future employing opportunities. This could be explained with help of the labelling concept. On the individual level lastly, we can see how the SG can put people in situations imprinted by financial difficulties and deficient work conditions.

Background and aim In social debates it is often argued that it is in the small-scale companies we should place our trust as providers of future employment. Burns (1996) describes how, what he calls, a love affair took place between Great Britain and her small firms during the 1980th. It was not possible to open a newspaper without being exposed to stories about prosperous small enterprises. However, just as in all love stories, the interest cooled down and became even more pragmatic when the governmental grant to entrepreneurs was cut off. In Sweden for example, Prime Minister Göran Persson has said that it is in the small-scale companies that the future jobs will be created and that it now is high time to provide room for the new entrepreneurs. The giving of grants for the establishment of small firms has also been held up as a good example of an important and successful labor market policy (Ringholm 1999). However, there are also some critical contributions to the debate, for instance regarding the rules regulating the grants, and that owners of small firms hardly see it as their task to create employment. They would rather work alone without employees (Cowling & Mitchell 1996; Johannisson 1991). The contributions to the debate on the Start-up Grant (SG) – as the labor-political measure with focus on the establishment of small-scale businesses is called – are based mainly on quantitative descriptions. However, these provide few and relatively simplistic explanations of why certain people succeed in their ventures while others do not. In order to arrive at other and more nuanced explanations it is necessary to discuss the meaning of the words successful and unsuccessful but also to study individual grant receivers and their business concepts in depth. The aim of our study was twofold. First, we wanted to identify the factors behind successful SG ventures. Second, we wanted to map out those factors that contribute to the failure of certain projects in regards to the firm's survival as well as to the individual’s employment and working conditions. The Start-up Grant The SG can be given to people who are, or run the risk of becoming, unemployed and who instead can become engaged in a business of their own with the help of financial support from the state during the start-up phase. The grant is on par with the level of unemployment insurance and is awarded during a maximum of six months. According to the regulations for

labor-political activities (SFS 1998:1784) the purpose is ”to strengthen the individual’s chances to find regular work” (ibid.1§). It can be granted to people ”who are considered potentially suitable to run a commercial/trade business and whose work has a chance of becoming profitable enough to provide the individual with stable employment” (ibid. 30§). The number of unemployed who has been given the grant has increased sharply during the 1990th. Carling and Gustafson (2000) state two main explanations for this. The increase reflects partly a conscious change of focus in the state’s labor politics, partly the presence of a big percentage of well educated unemployed people at that time, who also were considered suitable as entrepreneurs. Many OECD countries have programs similar to our SG, and between 0.5 and 4 percent of those who draw unemployment benefits participate in this type of activities (OECD 1995). For example, Great Britain introduced the ”Enterprise Allowance Scheme” (EAS) at the beginning of the 1980th. The effects of Start-up Grants We can confirm that there is not very much research-based knowledge on SG and the effects that it has had on the labor market. Every time a follow-up has been made in Sweden it has been in respect to how many people still are in business a certain length of time after the end of the allowance period. The time perspective varies, but the results point in the same direction. A great number – between 60 and 75 percent – is still active three to four years after the 6-month period (see for instance Bengtsson & Gustavsson 1998; Berglund 1995; Kronholm 1997; Kronobergs län 1996; Gustavsson 1995; Westin & Bäckström Flyckt 1992). Analyses of the non-usuable response rates are uncommon, but when they exist they suggest that the number of still active could be lower (Kronholm 1997). The National Labor Market Board’s (AMS) research department (AMS 1999) has compared entrepreneurs with and without SG. There are no major differences between the two groups concerning degree of survival or growth (in terms of turnover), yet it indicates that the SG has positive effects. For one thing, because firms built without the help of the grant often are sideline businesses, while the purpose of the grant-receiving firms is to provide livelihood for their owners, who would otherwise be out of work. (See also Eriksson & Markström 1997; Kronholm 1997). Carling and Gustafsson (2000) have compared those who have received SG with those who have been employed with the help of a recruitment incentive. The purpose was to find out which of the two measures was most effective. It turned out to be the SG. The risk of

becoming unemployed again was twice as big for those who were employed with recruitment subsidy compared with those who received a grant. Thus, the result from the Swedish studies points mainly to the positive effects of SG. There are, however, indications that the grant can bring certain negative side effects, for instance, to what degree entrepreneurs would have started their own business even without a grant – the so called dead weight losses. In a study from 1997, 40 to 50 percent of the responding entrepreneurs claimed that they would have given it a try even without the grant. (Riksdagens revisorer 1997). This is a somewhat higher percentage than in other OECD countries (Storey 1994). Yet other aspects discussed, but about which we do not know much, are the repression effects, i.e. when an SG business drives an already established firm in the same sector out of business (Bergwall & Larsson 1999; Carling & Gustafson 2000). Precisely such repression effects are often used to support serious criticism against the grants. International evaluations of start-up programs can be divided mainly into two groups: those where the authors look primarily to the employment aspects and often conclude that the measures are successful, and those who take on a wider perspective and end up with a more hesitant attitude concerning the positive effects. To the first group belongs a British study of unemployed people who had received financial support in order to get started. A follow-up study was conducted after 12, 18 and 30 months respectively (Bryson & White 1996). The aim of the study was to judge the effects of selfemployment as a remedy for long-term unemployment and compared this with the effects of traditional job hunting. The result showed that those in both categories with the highest education and best qualifications more easily found employment. However, the self-employed had more stable jobs. The evaluations that show the more negative results have focused on the significance of the grant, partly on the degree of company survival, partly on the welfare of society at large, and to what degree the new companies are able to create jobs. In a study on the outcome of corresponding grants in different OECD counties (Aronson 1991) the conclusion is drawn that the measures do not lead to any improvement for the unemployed. Rather, countries with a high unemployment rate and big groups of poor have a high share of self-employed people – the self-employment considered rather as a consequence of unemployment and poverty. Yet the British small firm researcher Storey, who has analyzed the effects of EAS, expresses another criticism against this type of measure. A study from 1990 shows that 43 percent of the EAS-companies are gone after three years (Storey 1994). The corresponding number for other small-scale businesses is approximately 35 percent. The low survival rate is also the most

serious criticism that Story aims at EAS. He also points to the fact that more than 60 percent of the jobs that were created three years after the EAS start have been provided by only four percent of the newly started businesses. That, says Storey, strengthens the opinion that one should select those who have the greatest chances to succeed. Therefore, the support should be directed at high tech companies and at education and research in the technical field. One of his points is that not just anybody should be given the chance to start a business with the help of a grant in just any field. Some programs such as EAS, training for future owners of small firms, information and simplified administrative regulations do give some positive effects, but for the measures to be effective they need to be on a macro economic level according to Storey. For instance, he mentions politics that support technological development, scholarships and aid for those companies that truly have a potential for growth. Birch (1987) is still sharper in his formulations when he claims that general programs for small firms can be considered more or less wasted money since only three percent of them will ever expand. Thus, we can conclude that the picture of SG and its effects are ambiguous. The results depend to a great extent on the author’s perspective and what variables are in focus. Success and failure factors What, then, are the factors behind successful and unsuccessful SG projects? We note that attempts have been made only to a limited extent to isolate the grant and its consequences. Instead, traditional success factors are stressed such as the right product on the right market etc. One commonly referred to study of growth in small firms is Storey’s comprehensive overview of the conditions in the UK (Storey 1994). Unemployment plays an important part, i.e. the higher employment rate, the more small-scale businesses and vice versa. Factors associated with unemployment are the general economic situation, consumers’ disposable income and interest rates. According to Storey, limited effects are achieved with public politics. For example, lowered marginal taxation results in decreased working hours, and reduced payroll taxes lead only to a limited extent to new jobs. As for the EAS he claims that the results point in different directions, why it is not quite easy to have an opinion on its importance; however, he is skeptical to this kind of general grants. Swedish evaluations of SG show that companies in the workshop and building industries as well as in the transport services show a higher than average rate of survival (AMS 1996). Earlier positive experiences and business people among friends and acquaintances are also stressed as positive elements (Eriksson & Markström 1998). Here we can note that it is common among researchers to attach great importance to individual factors.

Not seldom mentioned is the individual’s desire to be independent and to fulfill his/her dreams, a good education, family background and profit orientation (Johannisson 1991; Barkham m fl 1996; Birley 1996; Bryson & White 1996; Delmar & Davidsson 1997; Wiklund 1998). Usually, one does not consider failure factors when studying small-scale ventures but treat them more implicitly as the flip side of the success factors. In the category of failed ventures there is clearly an over-representation of weak groups on the labor market such as women, individuals born outside Europe and long-term unemployed (AMS 1999). Other factors that can lead to a downfall during the grant period are illness, pension, maternity leave and discord with the business partner (Bengtsson & Gustavsson 1998). Also, poor profitability and lack of money can often explain a breakdown (see also Storey 1994; Lindh & Ohlsson 1995, who have studied small-scale establishments in general). The Questions at Issue We can say that the main interest among those who have studied SG has been aimed at the rate of survival in combination with the employment aspect. Seldom are specific success and failure factors separated, rather they are considered two sides of the same coin. One important reflection in this context is that the law that regulates the SG – aside from its main purpose, which is to strengthen the individual’s opportunities to land a regular job – also indicates an interest in the establishment of new companies. It is clear in the instructions that the grant should be given to people, who are considered well qualified to run a profitable business. Here, one could say that the grant has a twofold aim: to promote employment for the unemployed and to establish robust companies. The latter is stressed through the fact that follow-ups and evaluations foremost have focused on the company’s degree of survival and to a lesser extent on the individual’s continued employment, and hardy at all on aspects such as working conditions and quality of life. With this in mind, we have formulated the following questions: •

What success and failure factors emerge in a company built on SG regarding survival?

•

What success and failure factors emerge in a company built on SG regarding the individual’s possibility to get a regular job?

•

What success and failure factors emerge from the individual’s point of view in such ventures?

Method Since the purpose with the project was to map qualitatively different factors that affect the result of a business establishment with the help of SG, we chosed a qualitative attempt. We interviewed 34 people from eight municipalities in the province of Värmland. They were selected according to the principle of strategic or theoretic sampling, i.e. we chose respondents who are as different from each other as possible in a number of ways such as gender, class, ethnicity, degree of unemployment (long or short-term unemployment), locality and economic sector (Holter 1982). Table 1 shows how the respondents were distributed according to different background variables. Table 1. The respondents were distributed according to different background variables. Sex Age Place of birth Location

Interview occasion

Men Women 30 and younger 31 to 40 41 and older I Sweden Outside Sweden Karlstad Grums Forshaga Kil Kristinehamn Arvika Sunne Munkfors Grant period After the grant

17 17 11 13 10 32 2 8 2 1 1 1 2 8 11 11 22

Economic sector

Hotel/restaurants Consulting Trade Retailing Body care Animal care Cultural life Prod./transp. Length of Short period unemploy- Long period ment Employed Company Trader form Partnership Corporation Institution/Trust Results Active Ended

2 6 7 6 6 2 2 3 22 6 6 21 4 8 1 20 9

The interviews lasted between 45 minutes and two hours and were carried out with the help of a questionnaire guide based on our earlier literature search on small-scale business establishments and SG. They were taped and written out whereupon we coded them with the aid of Strauss and Corbin (1998). This means that they were summarized in key words and concepts, later combined to form categories and, finally, presented as success failure factors respectively. Ultimately, these factors were put in relation to earlier research in the field and thereafter assembled in an explanatory model.

Result and Analysis As mentioned earlier, success and failure can be considered with the point of departure in the company’s survival and growth. It can also be seen from the standpoint of the individual’s employment – which is the main purpose with the program. Finally, we can also see success and failure from the standpoint of the working conditions that the business produces. In Table 2 we summarize the success and failure factors that crystallized in the data material. Table 2. Success and failure factors of the SG. Perspective Company Employment Individual

Success factors Settling-in period Administrative support Social support Positive labeling Self sufficiency Remaining in the community

Failure factors Rigid regulations Lack of administrative support Lack of social support Negative labeling Financial fox trap Poor working conditions

Success and failure from a company perspective Financial support is a decisive factor for the success of the business venture. Those who succeed often have other sources of financing to count on than their own company, should the business encounter difficulties (Bryson & White 1996). SG is in itself such a source. It affords the possibility of a settling-in period. Everything does not need to function perfectly form the beginning. The link to the unemployment insurance fund also means that one’s livelihood is secured even after the end of the grant period, if the endeavor were to fail completely. At the same time as the grant can generate success by allowing for a flexible start, so also can the rules and regulations contribute to a breakdown. In the interviews it became clear that the regulations are too rigid, partly concerning the time span, partly concerning return to the unemployment insurance fund. One of the respondents described a seasonal activity and said that he after the end of the grant period was prepared to continue the business another six months without the grant to get the experience from a complete season. First thereafter could he decide if it would be able to support him. In order to risk this he wanted to know – as a security measure – if he would have the same unemployment compensation if the company would not pay its way. But according to the rules, one has forfeited the right to the compensation if one continues the business another six months without the grant. That was a risk he did not want to take, so he decided to liquidate the firm. We cannot judge the marketing conditions in this particular case, but it is clear that his job was seasonal in nature,

yet the rules governing the grant precludes the possibility of experiencing seasonal fluctuations. As for the possibility of individual adaptation, women and immigrants are prioritized groups that have a chance to a six-month extended program period. One of the animal breeders explained that it took him 18 months from the purchase of the animals until they could provide him with any return on his investment. It takes a long time for the invested money to give anything in return. It would have been easier if I had been allowed an extension of the grant period. But I was of the wrong sex and born in the wrong country. He argues that individual factors should not decide the length of the grant period; instead this should be decided by the character of and prerequisites for the business. Training in administrative work offered together with the grant can prepare for success. If this training turns out well, it will help the candidate to understand and take control over the company’s development. Yes of course, some respondents said, they had been through the program but that it seemed quite fragmented and was difficult to grasp. When they finally got started with the real bookkeeping etc. they could pinpoint what they ought to have learnt during the training period, but now there was nobody to ask. Consequently, they might not have good enough a grasp on the results to make the right financial decisions. This is an example of lack of administrative support. A woman in the transport industry told us that she has great income variations and believes that she must invest each time she makes a profit for tax purposes. If you have a good income one month, you must go out and buy something quite unnecessary in order to make a deduction. It would be better if the money could be saved until it is needed. Her statement reveals an unawareness of the deduction rules and the marginal (rate of) taxes, since in her case it is quite lawful to save the surplus for expansions. Yet another unfortunate case is when the firm (trade company or partnership) does not yield big enough a profit to cover the owner’s cash withdrawals. Negative equity is difficult for the owner to discover, since he lacks financial knowledge. It can take up to 18 months before he finds out that he has consumed borrowed capital and therefore owes the company money.

Another respondent described how he received good backing during the period up until the grants was awarded, but that he thereafter had to make it on his own. He did not, however, and was forced to file for bankruptcy with a debt of half a million SEK. You know marketing, only such a thing… If we could have gotten consultancy vouchers for marketing and had help to design smarter brochure material and such. It costs a fortune. We started with a colored brochure that I put together, but towards the end we had so little money so we had to copy the brochure. But it isn’t only a lack of money, it's lack of competence. There ought to be competence available so that you could get help with administration and marketing – a sounding board. Otherwise you end up in catch 22. You keep at it for six months but can’t get it off the ground in that period of time, if you can’t get some help with some things. We interpret this as though some form of administrative support is needed even after the decision to give the grant has been made and the operation is underway. Especially since the SG is aimed at people with little experience of running a business and who therefore need extra support. Storey (1994) comes to other conclusions regarding the effects of public politics, as mentioned earlier, when he says that there is very little evidence that training, information or advice would either lead to survival or to growth in small firms. At the same time we need to remember that an important point of departure for Storey is growth itself, why the job is to select and support the most suitable candidates who can generate a profit. The SG, on the other hand, is launched by the state with the main purpose of creating employment for individuals out of work. The importance of a support system around the SG companies is discussed by a number of researchers, not seldom in the terms of networking (Birley 1996; Cantzler 1998). Even if some descriptions of networks are fairly detailed, we feel that the network concept includes all too many different parts - it covers everything from bank contacts and regional political programs to family ties. The concept has become too wide and tends to lose its meaning in this context. Therefore, we have chosen to speak in terms of social support instead of networks, which also more or less explicitly is assumed to be the purpose of the network in this context. Here we can distinguish between support from friends, colleagues, mentors and backing from society. The different types of social support can be described in the form of circles around the self-employed.

Personal support in the form of words of encouragement is very private and can come from a wife/husband, parents, siblings or close friends. Such support has been associated with a gender dimension in earlier studies (Bryson & White 1996; Sundin & Holmquist 1989) based on the assumption that the motivation for entrepreneurship is gender specific. Men often run their business as a project for their main provision, while women to a greater extent view the enterprise as a strategy to be able to combine work and family. Hence, personal support takes on different meanings for men and women. The chance to succeed increases if the men have a woman behind them; they need someone to take care of the daily housekeeping and support them in the business. Since a woman’s business is not associated as strongly with her main provision, the personal support takes on a partly different character. It is more a matter of the partner’s encouragement than of practical assistance. Despite that fact that we do not have access to any quantitative material, we seem to note a similar pattern also in our study. However, we do not associate it as explicitly with social gender. Instead we argue that it has to do with who has the main responsibility for the family’s provision. Irrespective of which, the personal support is especially important in those situations when problems and crises arise in the relationship with the supporting person. A divorce situation, the illness of a close relative etc is sometimes claimed to be the failure-triggering factor. Sometimes the support comes from a partner in the firm – something that is discussed in a study on SG in a number of OECD countries (Bryson & White 1996). They found that partnership contributes more to the success for men than for women. The support from the colleagues can also come from people who operate a similar business or from people who participated in the same training course. One of the respondents told us that she had lost contact with her old colleagues since she started the firm, and that she had not been able to replace them with new ones. I notice that my friends ask me why I never come over and have a cup of coffee with them any more. Earlier, when I had some spare time, I usually went and had coffee somewhere; that’s how it was. /.../ They probably feel that I am boring now. This experience can be interpreted as isolation – something that in the long run can lead to failure. It depicts some kind of movement between classes in society, where the isolation is based partly on the fact that the former colleagues represent other values. This is discussed by Elmlund (1998), who claims that it is easy to forget that a change of employment usually does

not lead to change of class, but that a transition from being a wage earner to being selfemployed per definition involves a change of class. Referring to our metaphor with the social support as rings around the entrepreneur, we have placed the mentor support in the third ring. This differs from having colleagues and can be considered more as a tutor - student relationship. The significance of having a tutor is mentioned also in other studies on the SG (Grefwe 1999). The next ring consists of what we call local support. Simply stated, this means to what extent people in the area buy the company’s products or services. The willingness to favor the newcomer can be seen as an expression of acknowledgement and to a certain extent as an appreciation of the new business, implying social support. An interesting pattern is formed in the material regarding the local support – or rather the lack of social support – consisting of a combination of the mentality in an industrial community and ”don’t think you are better than anybody else”. One craftsman claimed that it is close to impossible for a native of an industrial community to start his own business there. Companies that do succeed, do so only because they know how to handle the distrust and jealousy from the population. Examples of conditions for this: a) the company is inherited, b) the entrepreneur is from elsewhere and has few or no ties with the local people, or c) the firm is registered by the local authorities but the business is carried out mainly somewhere else. One of the respondents employed the latter solution and said that it is hardly a coincidence that her store is located outside her own municipality. The difference is great, it is like two different cultures. On this side of the river you have the farming lifestyle and on the other side the industrial culture. She means that there is some kind of love-hatred to the industrial community, where the love is based on the conviction that the big industry has the utmost responsibility for the employment in the area. Yet another entrepreneur stressed that industrial mentality gives vent to jealousy and distrust. If I advertise you should know that there are people here who will look up the name in the telephone catalogue to find out who is behind the company and then the discussion begins: hmmm, he has opened a [branch name] company, but does he know anything about it? That’s how it is. /…/ And once a man came in with a u-haul filled with white goods. I asked him: have you been to xxx [the local white goods store]? Oh no, he

answered, he is not going to make any money off of me. I have been to town. The man had made the roundtrip to town to buy the equipment just to avoid supporting the local businessman. In our results there are indications that local support is of great importance for the success of the venture. In the traditional industrial communities, the local population has difficulties in accepting small firms. This pattern is documented in the employment statistics as well as in the analysis on company climate that municipalities conduct on a regular basis. In comparison with the country at large, industrial communities have a small number of entrepreneurs and are consequently positioned way down on the list of municipalities with a good company climate. The last ring around the entrepreneur illustrates the support from society including everything from the Prime Minister’s statement that Sweden will rely on the small-scale businesses for future employment to the authorities’ attitudes and actions on the regional and local levels. In our study, it is primarily in communication with the Employment Service that the support from society is reflected. But, local Employment Services have different policies in applying the rules and regulations regarding the requirement of (risk for) unemployment, something that is also indicated in other studies (i.e. Carling & Gustafson 2000). Success and failure from an employment perspective We have mentioned earlier that most follow-up studies of SG focus on the entrepreneurship as such and not on the employment aspect. However, in our interviews there are examples of SG leading to a regular means of livelihood even if it does not happen in the newly started business. The SG is a successful undertaking when the new firm continues to supply the owner with what he needs. But it can also be valuable by ”opening the door” to another and steady job or destructive by ”closing the door” to future employment opportunities. This could be described and explained with the help of the labeling concept, which is used mainly in connection with deviant behavior, but something that also can have a supporting capacity in this context. The labeling theory is based on the thought that people are labeled, or in other words marked, as deviant. In this case it means that the individual cannot provide for him/herself but has to rely on public support. One of the respondents stressed this feeling in a clear way. He had a job in marketing and shared offices with other business people. When we interviewed him, he took great caution in

closing the door to his office and made sure that the interview guide would not be visible so that any of his colleagues could see that he had received SG. Even if the labeling has been used mainly in a negative sense, it can also be used to describe the opposite – in this case as a ”door opener”. To develop and run a business for a period of time can provide knowledge also for the benefit of others. One man, a carpenter, who had terminated his business at the end of the grant period was now employed by a building contractor just because he had experience from running his own company. He considered himself a valuable worker in the eyes of the employer just because he had a business of his own and therefore was familiar with the conditions for entrepreneurship. He said: I got this job only because I have had a company of my own, and, because I am a carpenter of course…. But is also like this that the man I work for knows that I know that it isn’t so easy to be a small-scale businessman and that I therefore put in a little extra effort to make both ends meet, even if it isn’t my own firm. The fact that he had been an entrepreneur gave him the label that he was someone who takes a hold of things, makes himself available when needed and is cost-conscious. Another example is the Internet consultant who, for the lack of traditional capital, turned to the Employment Service and received funding. During the grant period he built his business and thereafter developed it gradually to a company with seven employees. Eventually he sold the firm to an international competitor who also employed him. The original company is gone, but he and his seven colleagues had found employment in the branch. It is also worth noting that it is not always the unemployed individual, who is the most suited to build a business. This can be illustrated by the following quote from one of the respondents: I am not sure that it is the person out of job who is the right one to run a business. It is possible but not for sure. Why not combine it with ”kunskapslyftet”? (a program where an employee has the right to study for one year provided that an unemployed person can fill his/her position in the meantime) People in a certain branch who would like to give it a try but don’t dare, why not help them and let jobless people take their regular place during that year. That could be a requirement. I don’t think that we should concentrate on the jobless to the exclusion of others, since the object is to start new businesses, and just who does it is not that important.

The question whether the unemployed are the best suited for running a business is much debated in the literature. Among the critics we find those who apply a growth perspective to the entrepreneurship (Birch 1987; Storey 1994). At the same time it is important to bear in mind that in other studies the unemployed have not been found to be less successful than others. Possibly, this can be explained by the unusually great number of well educated among the jobless during the 1990’s. These were considered to be better qualified to run a business. When the rate of unemployment decreases, we can expect fewer well educated and, consequently, fewer entrepreneurs. (Carling & Gustafson 2000).

Success and failure from the perspective of the individual Up until now we have viewed the SG from the standpoint of the lawmakers’ intentions, i.e. from a business and employment perspective. Success from a business point of view can also be so from an employment point of view as well as from the individual’s perspective, or rather: The company survives and the founder stays. This is an expression of his/her ability to avoid unemployment yet remain in the community and show proof of independence. What is not discussed in the law but what is of great importance for the individual is the question of what working conditions the labor market policies lead to. In our interviews people express such problems as abnormally long work days, isolation, poor premises and tools and financial difficulties. Let us present a concrete example of the latter. A situation that we call the financial fox trap is when a venture from a business and employment perspective stands out as a success but for the individual is experienced as a flop. The company still exists and employs an earlier jobless individual. With this, the goals of the labor market policy are fulfilled. However, the entrepreneur is stuck in a forced situation characterized by isolation, long working hours and economic pressure. He has been offered employment by a competitor and would like to accept, but he cannot. The reason is that he has been forced to borrow money in order to survive, and the borrowed money makes it impossible for him to terminate the business. Every day I think about quitting, but it doesn’t happen. I am dead tired of this, but I haven’t got much choice. I have all the loans that I can’t just forget about. That would mean a lot of debts to pay for the rest of my life. I have to grit my teeth and carry on.

But I wonder what I have gotten into and think: God, how great it would be to be employed by someone else and be rid of the responsibility. The funding has stimulated him to escape unemployment, but at the same time it has placed him in a financially pressured situation – an economic fox trap that he feels is impossible to escape. Others expressed similar experiences. For example, the inventor who received a big loan at the bank despite the fact that he, knowing the results, should not have accepted. We can point out that the SG gave him a better negotiation opportunity with the bank. He had already had his business concept judged and excepted by the authorities. In addition, the man and his invention was presented in the local papers, which put more pressure on the bank to grant the loan. We can draw two conclusions from this. First, what seems profitable from a business and/or employment perspective does not always need to be so from the individual’s perspective. Second, the SG can give the bank or other financial institution the indication that the authorities approve of and support the company – a declaration that can be disastrous for the individual. Concluding words Our study does not contradict earlier results claiming that the SG is a successful labor market measure. On the other hand, we want to present a somewhat nuanced picture of the measure in different aspects. When we widen the perspective from focusing on the survival of the company – and to a certain extent on the employment as such – to include the entrepreneur’s working conditions, a somewhat different picture appears. Since our material is qualitative in nature, we want to stress that we cannot comment on how frequently other conditions occur. For instance, we do not know how often the rigidity of the grant regulations hampers the work, or that the training offered by the Employment Service is considered providing/not providing sufficient administrative support. Neither do we know to what extent the SG labels people in a positive or negative way, or how many have been given the opportunity to stay in the home community thanks to the grant. Nor do we know how many have ended up in a financial fox trap and/or been forced to work under poor working conditions. However, we have shown that such conditions exist; to what extent would be interesting to research further.

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