Reigniting growth: trends and challenges for business dynamism in Belgium

Belgium isn't short on new companies, but it is short on ones that are growing. The country's business start-up rate is comparable to its neighbours, but too few young firms scale up to become major employers. As a result, the share of jobs in young, fast-growing companies ("gazelles") is low. Using a concise indicator (the gap between the fastest-growing and fastest-shrinking firms), this article shows that business dynamism in Belgium declined steadily between 2000 and the mid-2010s and only recently started to pick up again. This rebound has been driven mainly by the services sector and older incumbent firms rather than by start-ups. What lies behind this trend? Global forces (e.g. digital technologies, globalisation) reward large "superstar" firms, while Belgium's rigid labour market slows down reallocation and the significant number of firms without employment boosts entry statistics without adding much growth. A shift from counting start-ups to cultivating scale-ups is needed. This could imply easing hiring and growth frictions, adjusting the design of subsidies that keep firms small, and investing in things that help firms expand, such as management skills, growth finance and support with exporting to and operating in foreign markets. To achieve faster productivity growth, Belgium needs more young firms to grow into large enterprises, rather than just more start-ups.