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The Economic Contribution of High-Growth Firms: Do Policy Implications Depend on the Choice of Growth Indicator?

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  • Sven-Olov Daunfeldt
  • Niklas Elert
  • Dan Johansson

Abstract

Prior studies have defined high-growth firms (HGFs) in terms of growth in firm employment or firm sales, and primarily analyzed their contribution to overall employment growth. In this paper we define HGFs using the commonly applied growth indicators (employment and sales), but also add definitions based on growth in value added and productivity. Our results indicate that HGFs in terms of employment are not the same firms as HGFs in terms of productivity, and that their economic contributions differ significantly. Economic policy promoting fast growth in employment may therefore come at the cost of reduced productivity growth. Although HGFs of different definitions may not be the same firms, young firms are more likely to be HGFs irrespective of definition. This suggests that economic policy should focus on the conditions for new firm formation and early growth of firms, rather than target a particular type of HGFs. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Sven-Olov Daunfeldt & Niklas Elert & Dan Johansson, 2014. "The Economic Contribution of High-Growth Firms: Do Policy Implications Depend on the Choice of Growth Indicator?," Journal of Industry, Competition and Trade, Springer, vol. 14(3), pages 337-365, September.
    • Handle: RePEc:kap:jincot:v:14:y:2014:i:3:p:337-365
    DOI: 10.1007/s10842-013-0168-7
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    More about this item

    Keywords

    Entrepreneurship; Gazelles; Firm growth; High-impact firms; D24; L25; L26;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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