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Who persistently creates jobs? Absolute versus relative high-growth firms

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  • Erhardt, Eva

Abstract

This paper examines the economic contribution of high-growth firms after their high-growth event. While the central role of high-growth firms for job creation is well-established, little is known about their dynamic development in coming periods. We address this question for the first time by comparing absolute with relative growth measures and use data on private firms in Bulgaria for three consecutive 3-year periods (2001-2004, 2004-2007, and 2007-2010). Next to calculating transition probability matrices to investigate growth in employees in coming periods, we model future employment growth by means of a two-part model with separate equations for the probability of survival and exit as well as for growth of survivors and growth of exits. The decomposition of aggregate growth effects shows that it is central for outcomes whether growth is measured in absolute or relative terms. High-growth firms defined according to an absolute measure show the biggest potential for job creation in coming periods while those measured in relative terms without size threshold tend to be outperformed by other firms. In that regard, both public support programs for high-growth firms as well as researchers should refrain more from exclusively applying relative growth measures.

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  • Erhardt, Eva, 2017. "Who persistently creates jobs? Absolute versus relative high-growth firms," MPRA Paper 79295, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:79295
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    More about this item

    Keywords

    high-growth firms; growth measures; job creation; persistence; Bulgaria;
    All these keywords.

    JEL classification:

    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • P23 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Factor and Product Markets; Industry Studies; Population

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