Policy Innovation Blog

Analysing high-growth firms

Stian Westlake - 05.05.2011

In February, NESTA issued a call for proposals to build further evidence on high-growth firms.

NESTA’s report The Vital Six Percent and more recently, Vital Growth have examined the number of high-growth firms in the UK, and their influence on employment growth.

We have recently provided funding to five projects that will provide further analysis on the characteristics of high-growth firms, their sources of finance, their role in the innovation ecosystem and the relationship between high-growth firms and productivity growth.

The grants awarded as a result of an open call for proposals are as follows:

Aston Business School

Professor Mark Hart and Dr. Sumon Bhaumik of the Economics and Strategy group at Aston Business School will lead a number of projects building evidence on high-growth firms.

These projects will build on previous work, including the NESTA-funded report, Measuring Business Growth and sources of data including the Business Structure Database (BSD) held in the ONS VML.

The work will cover areas including the characteristics of high-growth firms, financing of high-growth firms, links between high-growth firms and productivity and knowledge spillovers and links to universities.

National Institute of Economic and Social Research (NIESR)

The grant will fund Geoff Mason and Catherine Robinson at NIESR in expanding their previous work on high growth firms in several areas:

1. using the National Employer Skills Survey (NESS) linked to the Business Structure Database (BSD) and Community Innovation Survey (CIS) to provide new insights on the characteristic of high-growth firms (HGF), including the relationship between firm growth, innovation and workforce skills;
2. examining the role of geography/clusters on HGFs and their links with universities, making use of data from the Higher Education Business and Community Survey at city-region level; and 
3. studying the relationship between firm dynamics and productivity growth.

Dr Josh Siepel, Dr Alex Coad, and Professor Marc Cowling

The grant will fund the work of Dr Alex Coad, Professor Marc Cowling and Dr Josh Siepel to exploit a variety of data sources and generate robust econometric evidence regarding the patterns of firm growth in the UK.

The project will investigate a variety of issues such as sample selection bias on growth analysis, the persistence of growth rates, dynamic processes of growth (e.g. growth path analysis), spillovers and interfirm rivalry, and to what extent the relationships identified are causal.

In addition, the project will include new analysis of the performance of UK and German startups, based on data collected as part of a project funded by the Anglo-German Fund in 1997 and 2003.

Experian Ph

Experian Ph are being funded to further develop a model that if successful may help identify the characteristics of high-growth firms before growth is actually observed, providing a tool that allows policy initiatives to target firms with high growth potential.

The model will bring together data from a variety of sources, including Experian’s own “Megafile” dataset, to create a score that predicts high growth, building on earlier work undertaken by the Experian Ph in this area.

The Work Foundation

The Work Foundation will use the grant to examine the responses of the Small Business Survey (SBS) 2010 conducted by the Department of Business, Innovation & Skills to identify econometrically what are the barriers to growth that firms at different growth stages face.

The project will distinguish between the barriers faced by firms that achieve high-growth and those faced by firms that could have potentially achieved high-growth, based on the similarity of their characteristics with those of high growth firms. 

The project will also consider other high growth firms characteristics and will link the results to specific policy interventions.