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Firm performance after high growth: A comparison of absolute and relative growth measures

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  • Erhardt, Eva Christine

Abstract

Do high-growth firms continue to create jobs after the high-growth period or is high-growth a one-time event? Does the answer to this question depend on the definition of high growth? This paper analyzes data from Amadeus on Bulgarian firms for three consecutive 3-year periods (2001-2004, 2004-2007, and 2007-2010). Previously, high growth has been defined in terms of relative growth or composite measures such as recommended by Eurostat-OECD. We additionally apply an absolute measure of growth, i. e. the actual change in headcount. Using a two-part model with separate equations for sur-vival and growth, we moreover specifically account for the impact of firm exits on aggregate effects. We find that definitions are central for outcomes. In terms of relative and Eurostat-OECD high growth our results for Bulgarian firms largely confirm what has been found for high-income countries: surviv-ing relative high-growth firms are characterized by negative future growth rates. High growth firms defined according to Eurostat-OECD continue to grow positively after high growth. If growth is meas-ured in absolute terms, then high growth firms only continue to create more jobs than non-high growth firms as far as surviving firms are concerned. Taking firm exits into account, absolute high-growth firms are outperformed by average firms due to the job losses of large exiting high-growth firms – with one notable exception: absolute high-growth firms of initially small size (10-49 employees) continue to grow faster than other firms even if exits are accounted for and indeed seem a worthwhile target for policies promoting high-growth entrepreneurship.

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  • Erhardt, Eva Christine, 2018. "Firm performance after high growth: A comparison of absolute and relative growth measures," MPRA Paper 88077, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:88077
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    More about this item

    Keywords

    high-growth firms; growth measures; employment; persistence; entrepreneurship policy;
    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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