Project Seminar – December 2016
The ERC held a project day on 13th December 2016 at the WBS offices in The Shard. The day was split into two sessions. In the morning we discussed the findings relating to the projects we have coming to a close in our current core research programme. The event was attended by over 40 stakeholders, and generated interesting discussion and useful feedback to help inform the research.
Jun Du reviewed the project objectives and made a detailed report on the findings in a presentation entitled “Growth heroes and their wider economic impact”.
The first part of project, focusing on definitions of fast growth firms, aims to understand the differences in these definitions and their policy implications. Based on the ONS Business Structure Database (BSD) 1997-2013, the evidence suggests that employment-based high growth firms generate lots of jobs but have mixed productivity records, while productivity-based high growth firms have mediocre job creation records but show productivity superiority. It is therefore important to note that the definition matters. Given different groups of firms are identified in the business population, the same policies applied may likely exert different effects and result in different economic outcomes. For the purpose of this project, this leads to the adoption of the both fast growth firm definitions (productivity-based Super growth hero, and employment-based OCED HGFs) in the following analysis.
The second stage of the project investigates the wider impact of fast growing firms in the UK. Drawing on the linked longitude data of ONS BSD, regional and industrial aggregate data from several sources spanning the period of 1997-2013, we empirically model regional-industrial spillover effects of fast growth firms in manufacturing and professional service sectors.
For the first time we provide evidence to highlight that beyond job creation and productivity improvement within their own organizations, high growth firms have externalities to other firms in the region, within industrial sectors and along the supply chains. We identify strong negative employment growth externalities within the same industrial sectors due to fast employment growth firms, indicating possible competition-led crowding out effects for skills and labour. There is consistent evidence of positive productivity spillovers within the same industrial sectors and across the sectors of production chains, indicating knowledge spillovers and competition-led efficiency improvement induced by fast productivity growth firms. The positive externalities may also be signs of reallocation of inputs to more productive (and likely more innovative) firms within sectors.
A map of regional disparity emerges in the distribution of fast growth firms and their wider economic impact. Interestingly, the areas of more high growth incidences are not necessarily those which benefit most from it. Further investigation is needed to help understand the mechanisms through which the benefits or adverse effects of fast growth phenomenon.
Finally, our spatial analysis corroborates the previous findings on the industrial horizontal externalities, highlighting a negative effect on the employment growth of surrounding firms, while the analysis of the one-to-one distance shows that the closest located fast growing firm have a strongly positive spillover effect both in terms of employment and productivity growth on the surrounding non-fast growing firms.