High-growth Enterprises Research Articles

Digitalisation and high-growth enterprises in Europe

ABSTRACT The profound implications that digital technologies have for business dynamism and the competitive environment have raised the attention of policy makers and scholars. This paper examines the link between digitalisation and firm growth, and investigates whether high-growth enterprises (HGEs) invest and adopt digital technologies differently than non-HGEs. Using the European Investment Bank Investment Survey and Generalised Least Squares as well as random-effects probit models, we find strong complementarities between different digitalisation indicators. Furthermore, firms investing in digitalisation are more likely to exhibit rapid employment, sales and labour productivity growth. Our results also highlight the heterogeneous nature of the digitalisation process and its relationship with firm performance.

How oil price uncertainty influences corporate capital structure: evidence from BRIC countries

ABSTRACT This paper examines how corporate capital structures in emerging markets – Brazil, Russia, India, and China (BRIC) – were impacted by oil price uncertainty (OPU) from 2007 to 2019. We find that the relationship between OPU and firm leverage in BRIC markets is nonlinear and U-shaped. The extent to which OPU affects both short- and long-term leverage varies across nations. These findings are robust to endogeneity tests. Furthermore, while the OPU effect on corporate leverage is lessened in high-growth enterprises, it is strengthened in materials and energy companies. From an OPU perspective, this paper contributes intriguing knowledge of the corporate finance field.

Response of high-growth enterprises to the crisis caused by the Covid -19 pandemic

This paper aims to evaluate the response of high-growth enterprises (HGEs) to the circumstances caused by the COVID-19 pandemic. Adaptation to the pandemic situation presented an enormous challenge for these enterprises. The ability to exercise sound judgment affects rational decision-making and adaptation to the circumstances. The study adopts a situational theory perspective related to high-growth enterprises. Data collection was conducted twice - at the beginning of 2019, and after the third wave of the COVID-19 pandemic, in October 2021. The Generalized Estimating Equations (GEE) method was used to analyze the sample of 150 Polish HGEs. Results show that the impact of the pandemic mainly relates to the reduction or stagnation of market opportunities. The importance of human resources decreased in favor of technological and financial resources. The majority of the surveyed companies also maintained their HGE status.

The Difference and Application of VC and VD base on High-tech Enterprises

As a firm increases in size, it requires more money to cover a variety of activities such as large-scale product development, extending sales and marketing operations, purchasing assets, managing cash flow, and deferring the need for more equity financing. As a result, VC and VD are becoming increasingly significant. Venture capital and venture debt are critical sources of finance for startups and high-growth enterprises, allowing them to fuel development, gain expertise, and expand operations. Understanding the distinction between venture capital and venture debt allows entrepreneurs and company owners to better plan and manage their finances. They may weigh the costs, conditions, and consequences of each financing option to choose which best fits their business objectives, development plans, and risk tolerance. Venture capitalists not only supply firms with the financial resources they require, but they also frequently provide mentorship, industry experience, and access to a network of connections. Overall, understanding the distinction between venture capital and venture debt enables entrepreneurs and business owners to make educated financing decisions, customize their fundraising tactics, manage risks, and assure the long-term financial health and success of their company.

Productivity and HGEs: resilience and recovery from the COVID-19 pandemic

ABSTRACT The impact of crises on firm performance has been studied widely. This paper explores the relationship between firms’ reaction to COVID-19 (in employment) and the adoption of digital technologies, taking into account their productivity, digitalisation level and high-growth episodes before the crisis. We match the EIB Group Survey of Investment and Investment Finance with ORBIS database for 27 EU Member States and the United Kingdom. We find that firms with higher productivity levels are less prone to decrease the number of employees in the short and long term due to the pandemic. High-growth enterprises are less likely to expect a reduction in the number of employees in the long term. Moreover, firms in highly digitalised sectors have a lower probability to reduce the number of employees. Finally, our results suggest that COVID-19 leads firms to increase their use of digital technologies, especially those that were already more digitalised.

FDI and productivity: facts versus fiction of high growth

PurposeThis paper aims to study the role of foreign direct investment (FDI) channels in improving local firms' productivity. Two transmission channels of knowledge spillovers are empirically investigated. The study focuses on the role of high-growth firms (HGFs) that are assumed to have a higher absorptive capacity.Design/methodology/approachA threshold regression model that considers country and sector fixed effects is applied to investigate 8525 firms across 50 sectors in 12 developing countries in the East Asia and Pacific (EAP) region.FindingsThe author's findings indicate that first, larger firms with external market linkages are more productive. Second, high-growth enterprises are powerful engines of job creation; however, the firms do not outperform other firms in terms of capacity in absorbing FDI spillovers and do not have higher productivity.Research limitations/implicationsThe findings highlight the necessity of rethinking public policy priorities to support firm growth. Policies to maximize the gains from FDI spillovers are discussed.Originality/valueThis is the first study to investigate the strength of FDI spillover channels across different sectors, and the channels' impact on the productivity of local enterprises in the EAP region. This study also explores the potential role of high-growth firms (HGFs) in this interaction via job creation and improving output growth rate.

How digital transformation helps enterprises achieve high-quality development? Empirical evidence from Chinese listed companies

PurposeThe purpose of this study is to explore how digital transformation helps enterprises achieve high-quality development, including the mediating mechanism of information transparency, innovation capacity and financial stability, the moderating role of financing constraints and government subsidies, and the heterogeneous effects of property rights, size and growth.Design/methodology/approachThis study conducts two-way fixed-effect model using 780 samples of China's Shanghai-Shenzhen A-share listed companies from 2012 to 2019.FindingsThe results show that digital transformation can effectively improve the total factor productivity (TFP) of enterprises through the triple channels of information transparency, innovation capability and financial stability. Meanwhile, financing constraints significantly inhibited the contribution of digital transformation to TFP, while government subsidies significantly increased the contribution of digital transformation to TFP. In addition, state-owned enterprises (SOEs), large enterprises and high-growth enterprises are more able to achieve high-quality development by increasing their digital transformation.Practical implicationsIn the process of implementing digital transformation, companies should actively improve information transparency, financial stability and innovation capabilities, and choose differentiated paths based on intrinsic characteristics such as property rights, scale and growth. At the same time, the government should actively improve not only the digital institutional environment but also the financial policy and credit system.Originality/valueThis study enriches the theoretical research framework of digital transformation and high-quality development by identifying the channel mechanisms and boundary conditions through which digital transformation affects high-quality development and expands the consequences of digital transformation and the antecedents of high-quality development.

Assessing the competitiveness of listed Chinese high-growth companies in the STAR market

This paper aims to assess the competitiveness of 68 high-growth enterprises listed on China's STAR market and explore the combination of antecedent conditions that led to their listing using fuzzy set qualitative comparative analysis. The interpretive structure model was utilized to identify the factors influencing their competitiveness, and the listing index weight for the STAR market was determined using the analytic hierarchy process. The competitiveness of the listed enterprises was found to be promising, with new energy, next-generation IT, and high-end equipment manufacturing being the most prominent fields. However, energy conservation and environmental protection exhibited relatively weak listed competitiveness. The listing of these enterprises was the result of multiple factors rather than a single factor. The listing paths of high-growth enterprises in China were classified into three types: well-operated with high technical competence and innovation-led, high-profit with low growth and innovation, and large-scale, high-profit, and innovation-led.

Building value in high-growth enterprises in an uncertain environment

Purpose: Our attention was directed to high-growth enterprises (HGEs) whose development is associated with an accelerated cycle of growth and value creation that is a result of the scalability of their business models. The primary research objective of the article is to analyze the value components in the business models of high-growth enterprises divided into three size groups (small, medium, large). We pose the research question: which components build value in HGE enterprises' business models under uncertainty? Design/methodology/approach: An empirical study for HGEs was conducted after the third wave of the pandemic in October 2021 using a survey questionnaire on the sample consisted of a total of 125 Polish companies. The relationships between variables were analyzed using structural equation modelling (SEM) based on the maximum likelihood method. Empirical research in relation to theoretical constructs in business models divided into three size groups of businesses allowed us to notice that only in the case of small enterprises, the creation and delivery of value affect the value proposition. Findings: Empirical research in relation to theoretical constructs in business models divided into three size groups of businesses allowed us to notice that only in the case of small enterprises, the creation and delivery of value affect the value proposition. Exploration of business models of high-growth companies allows for a conclusion that building value in conditions of uncertainty should be based on stable foundations, which are regular customers and key customers, as well as well-proven products/services created under license. Originality/value: The novelty of the paper are conducted researches on business models of HGEs during pandemic Covid-19. Keywords: value proposition, value creation and delivery, value capture, business model, high- growth enterprises, uncertainty. Category of the paper: Research paper.

Digital inclusive finance and enterprise innovation—Empirical evidence from Chinese listed companies

The development of Digital Inclusive Finance (DIF) offers new opportunities for corporate innovation. This study empirically explores the influence of DIF on firms’ R&D and innovation output via a two-way fixed-effects model and an instrumental variable method using the 2011–2018 Peking University Digital Financial Inclusive Index to match city-level data of A-share listed companies. The results show that DIF plays a positive role in boosting company R&D innovation. Among the three DIF sub-dimensions, DIF coverage is the most significant in promoting R&D innovation. The role of DIF in promoting corporate R&D and innovation is most prominent for private enterprises, small and medium-sized enterprises, secondary and tertiary industries, and high-growth enterprises. In addition, DIF helps foster enterprise R&D innovation and can gratify the desire for innovation felt by adventurous business owners. Further analysis reveals that internal financing constraints and external banking competition have intermediary effects on the promotion of enterprise innovation, which are observed for the three sub-dimensions of DIF. The results of an instrumental variable regression and other robustness tests confirm the main findings.

Loving globalization: High-growth enterprises and public opinion on globalization in Europe

Building upon the “new” new trade theory, this article proposes that the regional business demography plays a prominent role in shaping Europeans’ preferences on globalization. Specifically, I argue, regional populations of high-growth enterprises that take advantage of internationalization and export opportunities drive positive attitudes on globalization, especially among the “losers” of import competition. Regression models on cross-sectional survey data from Eurobarometer surveys covering ten waves between 2015 and 2019 supplemented by a series of macro-level covariates establish that residents in regions with higher shares of high-growth enterprises are more likely to view globalization as an opportunity. More importantly, the positive association between regional high-growth enterprise shares and support for globalization is particularly pronounced among lower-educated and lower-skilled individuals.

Ex Ante Predictability of Rapid Growth: A Design Science Approach

We examine how machine learning (ML) predictions of high-growth enterprises (HGEs) help a budget-constrained venture capitalist source investments for a fixed size portfolio. Applying a design science approach, we predict HGEs 3 years ahead and focus on decision (not statistical) errors, using an accuracy measure relevant to the decision-making context. We find that when the ML procedure adheres to the budget constraint and maximizes the accuracy measure, nearly 40% of the HGE predictions are correct. Moreover, ML performs particularly well where it matters in practice—in the upper tail of the distribution of the predicted HGE probabilities. JEL Classification: C53, D22, L25

Investment expectations by vulnerable European firms in times of COVID

The effect of the COVID shock on European economies has been severe and also unequal, with some firms being affected much more strongly than others. To improve the effectiveness of policy interventions, policymakers need to understand which types of vulnerable firms have been suddenly pushed into dire circumstances. We seek to fill this important gap in our knowledge by providing evidence from the European Investment Bank Investment Survey 2016–2020 on how the COVID shock has affected the investment activity and investment-related framework conditions of vulnerable firms. While data on actual investment activity post-COVID is not yet available to us, we focus on investment expectations. We exploit the fact that the same questions relating to investment expectations have been asked in several previous survey waves, which enables a difference-in-differences approach to investigate how investment expectations might have suddenly changed, for vulnerable groups of firms, immediately after the onset of the COVID crisis. We focus on 4 groups of vulnerable firms: High-Growth Enterprises (HGEs), young and small firms, R&D investors and non-subsidiary firms. R&D investors are more likely to be pessimistic about investment plans as a consequence of the COVID shock, and (similarly) HGEs are less likely to be optimistic about investment plans. R&D investors are less likely to be optimistic about the availability of internal finance, while HGEs and R&D investors are more likely to be pessimistic about the availability of external finance. Subsidiary firms, interestingly, are more likely to report a decrease in expected investment, which is not necessarily evidence of financial constraints, because it could instead be part of a conservative group-level strategy and coordinated group-level reduction in investment. Event study graphs generally confirm our regression results.

THE PANDEMIC’S IMPACT ON THE RESOURCES IN THE BUSINESS MODELS OF HIGH-GROWTH ENTERPRISES

The emergency situation caused by the SARS-CoV-19 pandemic poses a significant challenge to all economics units. There has been an intensification of the uncertainty and risk that accompanies decisions. From a research perspective, it is interesting to explore how enterprises adapt to new conditions. The aim of this paper is to conduct a comparative analysis of the resources that are the basis for building a business model in high-growth enterprises in the pre-pandemic and post-pandemic third wave. The results of surveys conducted before and after the third wave of the pandemic among 150 high-growth enterprises allowed to formulate conclusions regarding adaptation and reaction to the market situation.

IDENTIFICATION OF DIRECTIONS OF CHANGE IN BUSINESS MODELS OF HIGH-GROWTH ENTERPRISES DURING THE COVID-19 PANDEMIC

A basic aim of the study is to discuss the change in the business models architecture of high-growth enterprises during the COVID-19 pandemic. In the stream of theoretical research, consideration was given to the interpretation of the essence of the business model and its features, which will allow to know the conceptual assumptions of business model construction and to describe the essential components of its architecture. Empirical research on the change in the structure of business models of high-growth enterprises was based on data obtained from a survey conducted on a group of 150 enterprises of this type in Poland. Identification of the direction of change was made by comparing the results obtained from a study on the construction of business models of high-growth enterprises conducted in 2019 to the results of a study identical in terms of scope and participants conducted in 2021 during the COVID-19 pandemic. On this basis, the research hypothesis assuming that changes in the business models of high-growth companies, occurring during the COVID-19 pandemic, did not affect the fundamental reconstruction of their architecture, was positively verified.

Exploring the Governance of Entrepreneurial Ecosystems for Productive High Growth

This paper aims to empirically identify the characteristics and governance types of regional entrepreneurial ecosystems (EEs) associated with productive high-growth entrepreneurship (PHGE). We developed a unique database comprised of public statistics on high-growth enterprises and regional EEs in Poland over the course of 2011–2018. The Hierarchical Clustering on Principal Components and a taxonomic analysis were used to identify how different types of EE governance relate to varying levels of high-growth enterprises’ performance. We have identified and described the relationships between PHGE and diverse clusters of EE governance and evolution stages toward developed structures. Two clusters proved similarly effective in generating PHGE and they represent alternative EE governance solutions as well as the most advanced evolutionary phases. The proposed conceptualizations of productive high-growth entrepreneurship and EE governance types advance the understanding and measurement of these phenomena. The profiling and configurational approach adopted in this research reflects the heterogeneity of EE governance types and outcomes and can be further replicated in other research settings.

Capacity constraints as a trigger for high growth

High-growth enterprises (HGEs) have a large economic impact but are notoriously hard to predict. Previous research has linked high-growth episodes to the configuration of lumpy indivisible resources inside firms, such that high capacity utilisation levels might stimulate future growth. We theorize that firms reaching critically high capacity utilisation levels reach a “trigger point” involving either broad-based investment in further growth or shrinking back to previous levels. We analyze EIBIS survey data (matched to ORBIS) which features a question on time-varying capacity utilisation. Overcapacity is a transitory state. Firms enter into overcapacity after a period of the rapid growth of sales and profits, and the years surrounding overcapacity have higher employment growth rates. Firms operating at overcapacity make incremental investments (e.g. capacity expansion, process improvements and modern machinery) rather than investing in R&D and new product development. We find support for the “fork in the road” hypothesis: for some firms, overcapacity is associated with launching into massive investments and subsequent sales growth, while for other firms, overcapacity is negatively related to both investments and sales growth.

The birth of new HGEs: internationalization through new digital technologies

This paper explores the relationship between new digital technologies, internationalisation activity and its impact on High Growth Enterprises (HGEs), using the EIB Group Survey of Investment and Investment Finance and ORBIS data for 27 EU Member States and the United Kingdom. After controlling for sample selection bias, our results suggest that being a HGE is positively associated with the probability that a firm conducts international activities, particularly FDI. Conversely, the internationalisation process seems to trigger strong subsequent firm-growth only for FDI, not for exports. Furthermore, we show evidence on the positive association between firms that are internationalised and those adopting new digital technologies. The adoption of new digital technologies is indirectly related to the status of being a HGE via internationalisation activity in the current period. Our results highlight the complex influence of exporting and FDI on the capacity to become a HGE and the role of new digital technologies in this process.

The Barriers to High-Growth Enterprises: What Do Businesses in Africa Experience?

This study examines the challenges that micro, small and medium enterprises (MSMEs) face and provide insights on African business environment and entrepreneurial ecosystem. In the context of growth-oriented entrepreneurship, good policies and favourable institutional environments support firms' growth, productivity and development, while adverse formal and informal institutions constrain business development. Secondary data from World Bank Enterprise Survey (WBES) was used to capture barriers to entrepreneurship and high-growth opportunities which include – lack of finance, lack of innovation and technology, low skilled workforce, poor infrastructure, unfavorable regulations and more pervasively corruption. These barriers are evident in the micro, meso and macro environments. These have implications on the unemployment rate, poverty rates and economic growth of the African region.
 Keywords: Micro, Small and Medium Enterprises; Entrepreneurial Ecosystem; African Entrepreneurship; African Business Environments.

BORN GLOBAL COMPANIES. IS THIS A FUTURE FOR ECONOMY OF LATVIA? A PRELIMINARY STUDY

A small number of export-capable sectors is a factor that renders the Latvian economy sensitive to any changes in the external environment, at the same time it is an incentive to look for growth patterns. Internationalisation is a factor that brings growth. International operations can have various advantages for enterprises, particularly for high-growing companies. The born global companies will experience stronger performance in markets that are more attractive and more internationalised. For this research purposes term ‘born global’ author understands as a ‘truly global’ company as well as domestically based company with overseas operations. The novelty of the research manifests as seeking of novel information and novel solutions based on the experience of different countries. Born global companies are the research object of an investigation. The aim of the article is an analysis of external environment perspective that is necessary to predict long-term survival for every company in conjunction with economic dimensions of globalization. The research methodology is based on the overview of literature sources that attempts to describe the key drivers for early internationalization, statistics of high-growth enterprises and survival rates of newly born enterprises, success factors of high-growth enterprises. As the result framework for the future research is created.