here is widespread agreement that skill shortages or recruitment difficulties can constrain economic growth and reduce the competitiveness of an economy T (Buechtemann and Soloff, 1994;Campbell and Baldwin, 1993). It is also widely assumed that workforce training enhances f i r m performance and competitiveness (Lynch, 1994). Further, a consistent finding from studies both in the US and the UK is that all groups of employees in small firms are less likely to be in receipt of formal structured training than employees in larger firms. Overall, there appears to be a broadly linear relationship between formal structured training provision and f i r m size. This paper focuses explicitly upon management training in small and medium-sized enterprises (SMEs) as a group. It seeks to provide an understanding of why, as a group, small firms are less likely than large firms to provide training for managers. It does not attempt to provide an explanation of why some small firms provide training and others do not.* For current purposes it is sufficient to observe that real differences exist between SMEs and large firms. The issue is central to policy debate; if the low rate of management training provision by small firms (or SMEs) reflects ignorance on their part of the benefits of training, then this is a market failure (Greenhalgh and Mavrotas, 1993) which can/should be addressed by provision of public subsidies to encourage more formal/structured training in small firms. Alternatively, does it instead reflect efficient markets in which one group of firms (ie small firms) purchase, for whatever reason, less of a product or service (ie formal management training) than others (ie large firms)? Here, there is no case for the provision of public subsidies to encourage more formal/structured training in small firms.The paper begins with a brief review and some previously unpublished data on the takeup of formal/stmctured training schemes for all groups of employees by firms of different sizes in the west midlands of England. It then provides some explanations for recorded differences in formal/struc&ed management training participation rates by f i r m size for several studies. The following section examines in detail the market for formal/structured management training provision, with a particular emphasis upon management training and small f i r m performance. Finally we assess, on the basis of the evidence presented, the case for public subsidies to encourage small firms to participate in additional training schemes.
PROVISION OF EMPLOYEE TRAINING IN SMESIn the United States, Brown et a2 (1990) noted that employees in large firmswith at least 100 employeeswere twice as likely as those in small firms to have participated in a formal training programme in their current work place. The positive relationship between formal training provision and f i r m size is also apparent in the United Kingdom.