80_20_comp.jpgThe Pareto Principle: The Importance of the Vital Few in Business Support Programmes

In 1906, the Italian economist, Vilfredo Pareto, noticed that the distribution of land-ownership in Italy was highly concentrated with around 80% of the land owned by 20% of the population. Carrying out surveys in other countries, he found similar distributions.

This 80-20 rule of thumb has been identified in other economic and business contexts, and has been applied to highlight the fundamental importance of the 'vital few', for example in quality control or prioritising clients.

In this paper we explore the distribution of benefits associated with three government-funded business and innovation support programmes targeted at small and medium-sized enterprises (SMEs). In all cases we find that levels of concentration are even higher than the 80-20 distribution observed by Pareto.

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