Abstract
There is considerable evidence that high-growth firms (HGFs) contribute significantly to employment and economic growth. However, the literature so far does not adequately explore the link between HGFs and productivity. This paper investigates the empirical link between total factor productivity (TFP) growth and HGFs, defined in terms of sales growth, in the United Kingdom over the period 2001–2010, by examining two related research questions. Firstly, does higher TFP growth lead to HGF status and secondly, does HGF experience help firms achieve faster TFP growth? Our findings reveal that firms in both the manufacturing and services sectors are more likely to become HGFs when they exhibit higher TFP growth. In addition, firms that have had HGF experience tend to enjoy faster TFP growth following the high-growth episodes. Policy implications are drawn based on the self-reinforcing process of the high-growth phenomenon that is revealed by our results.
Highlights
The concept of high-growth firms (HGFs) has attracted significant interest by governments and policy makers across many countries
Using a large UK firm-level dataset spanning the period of 2001–2010, this paper explores the links between total factor productivity (TFP) growth and highgrowth firms (HGFs) prevalence as defined in terms of sales growth
We draw the following conclusions based on the preceding analysis: (1) All else being equal, firms experiencing higher TFP growth are more likely to achieve HGF status; (2) Firms’ past HGF experience helps firms to achieve higher TFP growth in the future; (3) There is considerable firm heterogeneity in what determines HGF incidence and how HGF experience affects future TFP growth, among firms at different development stages, namely for newer firms or incumbents, as well as firms across the manufacturing and service sector
Summary
The concept of high-growth firms (HGFs) has attracted significant interest by governments and policy makers across many countries. A firm may grow in terms of employment without much efficiency improvements, or experience slower employment growth in favour of capital investments for future efficiency gains This is echoed in a recent report by the UK Department for Business, Enterprise and Regulatory Reform (BERR) (2008), which notes that HGF status in itself may not necessarily imply high productivity. By employing an array of measures for TFP across a number of specifications, our overall findings show firstly that on average, firms that exhibit higher productivity growth are more likely to become HGFs and secondly that HGF experience enhances the prospects of higher productivity growth in the future through a number of firm-level and regional economic channels These results hold across both the manufacturing and services sectors.
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
