Skip to content

Firm growth dynamics across countries: Evidence from a new database

We present a newly-developed database that measures the distribution of firm growth across 12 countries, building on confidential microdata from business registers in the US and Europe that cover the universe of firms.

Nesta Working Paper 16/03
Issued: December 2016
Keywords: growth, firm dynamics, productivity
JEL codes: D22, L11, O49

Abstract

We present a newly-developed database that measures the distribution of firm growth across 12 countries, building on confidential microdata from business registers in the US and Europe that cover the universe of firms. We document not just average growth but also the growth rate for all the percentiles of the growth distribution, breaking it down by size, sector and age.

We identify a number of stylised facts that hold across countries, but also show that there are significant differences in their growth distributions. Firms in the US grow and shrink more rapidly than in Europe, which has a much larger share of static firms, for which employment does not vary much (up or down). Finally, we find that a more dynamic growth distribution is associated with faster productivity growth, and this relationship becomes stronger as countries converge to the global technology frontier (specifically, a 5pp higher share of static firms is associated with 1pp lower productivity growth).

Author

Albert Bravo-Biosca, Nesta and Barcelona GSE

The Nesta Working Paper Series is intended to make available early results of research undertaken or supported by Nesta and its partners in order to elicit comments and suggestions for revisions and to encourage discussion and further debate prior to publication (ISSN 2050-9820). © Year 2016 by Nesta. Short sections of text, tables and figures may be reproduced without explicit permission provided that full credit is given to the source. The views expressed in this working paper are those of the author(s) and do not necessarily represent those of Nesta.​

Authors

Albert Bravo-Biosca

Albert Bravo-Biosca

Albert Bravo-Biosca

Director, Innovation Growth Lab

Albert is Director of the Innovation Growth Lab at Nesta. The Innovation Growth Lab (IGL) is a global collaboration of governments, foundations and researchers that develops and test...

View profile