High performing firms and job creation: a longitudinal analysis (1998-2013) ERC Insight Paper
Published: 3 April 2017
The OECD High-Growth Firm (HGF) measure was a pragmatic solution to a practical problem. It was designed to assist in identifying the small group of firms which contributed disproportionately to job creation. This statistic could be used to inform national policy and to make comparisons across countries, since it could be readily replicated using business register data. The decade since the measure was first published has seen increasing dissatisfaction amongst the academics and policymakers seeking to make use of it. There are two important criticisms. First, it focuses attention on relatively short ‘bursts’ of growth rendering invisible the reality of growth for the majority of businesses, and second, it does not in fact capture some important members of its target group the ‘relatively small proportion of firms that contribute disproportionately to job creation’.
We present a new analysis of job creation in the UK, using data on a cohort of start-ups born in 1998 to identify three different groups of high performing firms. Of these three groups we find that HGFs as defined by the OCED do not create the most jobs, in fact they grow more slowly and have a lower survival rate than the comparators. Notably, though, most of the observed growth in all three groups takes place within the first five years after start-up.
Business Demography Research Theme
It has recently been recognised that conclusions about firm size were confounded by the effect of the age of the firm. This paper explores the role of size, controlling for age, by comparing the cohorts of firms born in 1998 over their first decade of life.
Published: 2 May 2013
Decomposing UK aggregate labour productivity and growth: 1998-2013 using the ONS business structure database data. Research Paper No. 48
This study provides a comprehensive analysis of UK labour productivity patterns and contributing factors over the 1997-2013 period. Based on the ONS Business Structure Database (BSD), we present a full picture of the UK firms’ productivity patterns in the whole economy over the examined period and in particular during the “Great Recession”, at aggregate level, sector level, and among heterogeneous groups. We observe significant business demographic changes underlying UK aggregate productivity change, featuring an increasing number of small businesses especially single-employee firms, less entrants and more exits and discuss the implications of these changes in explaining the productivity decline. When differentiating firm growth types, we find “Growth heroes” and “Decline by efficiency loss” firms over-contribute to aggregate labour productivity compared to their weight in the business population. In contrast, an already large group of ‘Decline by contraction’ firms surged over the recent recession and under-contribute to aggregate labour productivity. We highlight that within firm productivity improvement has been mainly responsible for aggregate productivity changes in the UK while resource allocation on average played a limited role in driving the aggregate productivity change.
Published: 12 July 2016
During the last decade High-Growth Firms (HGFs) – sometimes referred to as ’Scale-Ups’ – have increasingly become an established feature of the UK business policy landscape. Indeed, HGFs are mentioned in the government’s recently published policy document ”Building our Industrial Strategy”, and are now considered sufficiently important that the Minister for Small Business has taken on the role of ”Scale-Up Champion”.
Whilst we know something of the characteristics of these firms – about their age, size, sector and location – we know relatively little about the dynamics of the HGF population as it evolves over time. For the most part attention is focused simply on the annual count which, as we shall see, is not an entirely appropriate measure of HGF activity.
Published: 7 September 2017
Enterprise Research Centre
Warwick Business School
University of Warwick
Coventry CV4 7AL
Enterprise Research Centre
Aston Business School
Birmingham B1 7ET
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