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

Erhardt, Eva Christine (2018): Firm performance after high growth: A comparison of absolute and relative growth measures.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: high-growth firms, growth measures, employment, persistence, entrepreneurship policy
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C18 - Methodological Issues: General; D - Microeconomics > D2 - Production and Organizations > D22 - Firm Behavior: Empirical Analysis; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J23 - Labor Demand; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L26 - Entrepreneurship; P - Economic Systems > P2 - Socialist Systems and Transitional Economies > P23 - Factor and Product Markets ; Industry Studies ; Population

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