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Working Paper No. 123. Competencies and Institutions Fostering High-growth Firms

PublicationWorking paper
Äganderätt, Dan Johansson, Egenföretagande, Entreprenörskap, Företagandets villkor, Gaseller, High-growth firms, Industri, Innovation, Magnus Henrekson, Skattepolitik
Working Paper No. 123.
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Abstract

High-growth firms (HGFs) are critical for net job creation and economic growth. We analyze HGFs using the theory of competence blocs, linking firm growth to property rights and the interaction of complementary expertise. Specifically, we discuss how the institutional framework affects the prevalence and performance of HGFs. Firm growth is viewed as resulting from the perpetual discovery and use of productive knowledge. A key element in this process is the competence bloc, a nexus of economic actors with complementary competencies that are vital in order to generate and commercialize novel ideas. The institutional framework determines the incentives for these individuals to acquire and utilize knowledge. We identify a number of institutions that foster the emergence of competence blocs and the creation of HGFs. In particular, our analysis points to the pivotal roles played by tax structures, labor market regulation, and the contestability of currently closed service markets. Finally, we characterize institutions beneficial for sclerotic or dynamic capitalism, respectively, depending on whether they provide a favorable environment for the emergence of competence blocs and the creation of HGFs.

Related content: Competencies and Institutions Fostering High-growth Firms

Henrekson, M. & Johansson, D. (2008). Competencies and Institutions Fostering High-growth Firms. Ratio Working Paper No. 123.

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Working Paper No. 150. Firm Growth, Institutions and Structural Transformation
Working paperPublication
Henrekson, M. & Johansson, D.
Publication year

2010

Abstract

This essay argues that the economic contribution of certain firms – be they small, young or rapidly growing – has to be understood in a broader context of creative destruction. Growth of some firms requires contraction and exit of some other firms to free up resources that can be reallocated to expanding firms. Entry and expansion are flip sides to exit and contraction and the process through which the factors of production are put into different use defines structural transformation. We analyze institutions and policies conducive to structural transformation, in particular the expansion of high-growth firms (HGFs), since they have empirically been shown to contribute disproportionately to economic development. Firm growth is viewed as resulting from the continuous discovery and use of productive knowledge. Rapid firm growth requires a set of economic actors with complementary competencies that work together to identify and commercialize novel business ideas. The institutional framework determines the incentives for these individuals to acquire and utilize knowledge. We identify a number of institutions that encourage the creation of HGFs and promote structural transformation. In particular, our analysis points to the key roles played by tax structures, labor market regulation, and the contestability of service markets. Even in advanced economies, there is a large untapped economic potential which can be unleashed by institutional changes, such as the opening up of closed markets for entrepreneurial competition. However, there is no “quick-fix” that will boost the frequency of HGFs and structural transformation. Our analysis suggests that policymakers need to adopt a broad approach and implement a wide array of complementary institutional reforms to increase the prevalence of HGFs and to facilitate structural transformation.

Related content: Firm growth, institutions, and structural transformation

Working Paper No. 150. Firm Growth, Institutions and Structural Transformation
Working paperPublication
Henrekson, M. & Johansson, D.
Publication year

2010

Abstract

This essay argues that the economic contribution of certain firms – be they small, young or rapidly growing – has to be understood in a broader context of creative destruction. Growth of some firms requires contraction and exit of some other firms to free up resources that can be reallocated to expanding firms. Entry and expansion are flip sides to exit and contraction and the process through which the factors of production are put into different use defines structural transformation. We analyze institutions and policies conducive to structural transformation, in particular the expansion of high-growth firms (HGFs), since they have empirically been shown to contribute disproportionately to economic development. Firm growth is viewed as resulting from the continuous discovery and use of productive knowledge. Rapid firm growth requires a set of economic actors with complementary competencies that work together to identify and commercialize novel business ideas. The institutional framework determines the incentives for these individuals to acquire and utilize knowledge. We identify a number of institutions that encourage the creation of HGFs and promote structural transformation. In particular, our analysis points to the key roles played by tax structures, labor market regulation, and the contestability of service markets. Even in advanced economies, there is a large untapped economic potential which can be unleashed by institutional changes, such as the opening up of closed markets for entrepreneurial competition. However, there is no “quick-fix” that will boost the frequency of HGFs and structural transformation. Our analysis suggests that policymakers need to adopt a broad approach and implement a wide array of complementary institutional reforms to increase the prevalence of HGFs and to facilitate structural transformation.

Related content: Firm growth, institutions, and structural transformation

Working Paper No. 123. Competencies and Institutions Fostering High-growth Firms
Working paperPublication
Henrekson, M. & Johansson, D.
Publication year

2008

Abstract

High-growth firms (HGFs) are critical for net job creation and economic growth. We analyze HGFs using the theory of competence blocs, linking firm growth to property rights and the interaction of complementary expertise. Specifically, we discuss how the institutional framework affects the prevalence and performance of HGFs. Firm growth is viewed as resulting from the perpetual discovery and use of productive knowledge. A key element in this process is the competence bloc, a nexus of economic actors with complementary competencies that are vital in order to generate and commercialize novel ideas. The institutional framework determines the incentives for these individuals to acquire and utilize knowledge. We identify a number of institutions that foster the emergence of competence blocs and the creation of HGFs. In particular, our analysis points to the pivotal roles played by tax structures, labor market regulation, and the contestability of currently closed service markets. Finally, we characterize institutions beneficial for sclerotic or dynamic capitalism, respectively, depending on whether they provide a favorable environment for the emergence of competence blocs and the creation of HGFs.

Related content: Competencies and Institutions Fostering High-growth Firms

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