High-Growth Firms: Not So Vital After All?

Sammanfattning

High-growth firms have received considerable interest recently since they create most of the new jobs in the economy. The purpose of our paper is to investigate the characteristics of high-growth firms prior to their growth period, and whether these characteristics differ across industries. Using data on a large sample of limited liability firms in Sweden for the period 2007-2010, we find that high-growth firms do not have the characteristics that we typically associate with successful firms. On the contrary, our results indicate that high-growth firms initially have low profits and a weak financial position. This might explain why studies have found that so few high-growth firms are capable of sustaining their high growth rates in subsequent periods, and thus question policies that are targeted towards these companies.
Related content: Working paper No. 263

Amundsen versus Scott: are growth paths related to firm performance?

Artikel (med peer review)Publikation

Coad, A., Daunfeldt, SO. & Halvarsson, D.

Publiceringsår

2022

Publicerat i

Small Business Economics 59, 593–610 (2022).

Sammanfattning

In the race to the South Pole, Roald Amundsen’s expedition covered an equal distance each day, irrespective of weather conditions, while Scott’s pace was erratic. Amundsen won the race and returned without loss of life, while Scott and his men died. In the context of firm growth, the Amundsen hypothesis suggests that smoother growth paths are associated with better performance in subsequent periods. We develop a new method to investigate how firms’ sales growth deviates from their long-run average growth path. Our baseline results suggest that growth path volatility is associated with higher growth of sales and profits, but also with higher exit rates. However, this result is driven by firms with negative growth rates. For positive-growth firms, volatility is negatively associated with both sales growth and survival, providing nuanced support for the Amundsen hypothesis.

The article can be accessed here.

Do Targeted R&D Grants toward SMEs Increase Employment and Demand for High Human Capital Workers?

BokkapitelPublikation

Daunfeldt, S. O., Halvarsson, D., Tingvall, P. G., & McKelvie, A.

Publiceringsår

2022

Publicerat i

Springer.

Sammanfattning

Most previous studies on the employment effects of government R&D grants targeting SMEs are characterized by data-, measurement-, and selection problems, making it difficult to construct a relevant control group of firms that did not receive an R&D grant. We investigate the effects on employment and firm-level demand for high human capital workers of two Swedish programs targeted toward growth-oriented SMEs using Coarsened Exact Matching. Our most striking result is the absence of any statistically significant effects. We find no robust evidence that the targeted R&D grant programs had any positive and statistically significant effects on the number of employees recruited into these SMEs, or that the grants are associated with an increase in the demand for high human capital workers. The lack of statistically significant findings is troublesome considering that government support programs require a positive impact to cover the administrative costs associated with these programs.

The book can be downloaded here for free.

Third-Generation Innovation Policy: System Transformation or Reinforcing Business as Usual?

BokkapitelPublikation

Bergkvist, J. E., Moodysson, J., & Sandström, C.

Publiceringsår

2022

Publicerat i

Questioning the Entrepreneurial State, 201.

Sammanfattning

There has been a shift in innovation policy in recent years toward more focus on systemic transformation and changed directionality. In this chapter, we describe a collection of challenges that such policies need to address. Based on a review of dominant frameworks regarding socio-technical transitions, we compare these theories with examples of innovation policy in different countries. Systemic transformation across an economy usually requires a process of creative destruction in which new competencies may be required, actors need to be connected in novel ways, and institutions may need to be changed. Our empirical illustrations show that support programs and initiatives across Europe do not always seem to result in such a process, as they include mechanisms favoring large, established firms and universities. These actors have often fine-tuned their activities and capabilities to the existing order, and therefore have few incentives to engage in renewal. As the incumbent actors also control superior financial and relational resources, there is a risk that they captivate innovation policies and thus reinforce established structures rather than contributing to systemic transformation.

Sammanfattning

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