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High-growth firms: does location matter?

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Abstract

The challenge for economies lies in boosting employment growth, not just by fostering entrepreneurship, but also by improving the growth potential of existing firms. Consequently, many studies have focused on assessing the dynamism of firms, and especially the capacity of high-growth firms (HGFs) to generate employment. This study aimed to identify HGFs in Spain during two periods, 2003–2006 and 2007–2010 and to analyse their characteristics and territorial distribution during the initial years of the economic crisis. Accordingly, a key area of inquiry of the study was the influence of agglomeration (in metropolitan areas, industrial districts and technological districts) on the locations of HGFs. To analyse the influence of location on the probability of firms being HGFs, a logit model was estimated. The main results supported the study’s hypotheses that technological districts and large urban areas are significantly associated with the probability of firms being HGFs, because firms profit from comparative locational advantages offered by these areas. The importance of HGFs requires special emphasis in relation to Spain’s context of economic crisis and high unemployment levels because of their significant contribution to employment generation.

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Notes

  1. Other studies have used indicators such as Birch’s index that defines growth of employment, turnover or other variables as (Xt1 - Xt0)(Xt1/Xt0), where X is the variable being analysed.

  2. This database does not provide exhaustive information about multi-plant firms as it only includes information about the firm’s headquarters. Therefore, location analysis was limited to firm-level data. Information about mergers and acquisitions was also not provided.

  3. This publication defines LUAs as areas that have just one municipality with more than 50,000 inhabitants or a group of municipalities with at least one of them comprising more than 50,000 inhabitants. SUAs are defined as follows: cities with a population of between 20,000 and 50,000 inhabitants and urban municipalities with a population of between 10,000 and 20,000 inhabitants. There are 748 LUAs and 325 SUAs in Spain.

  4. The dataset used here only includes firms with 10 or more employees. Therefore, new jobs created by smaller and new firms established during the periods 2003–2006 and 2007–2010 were not considered in this analysis.

  5. A greater reduction of employment must be considered in light of the number of firms that closed down during the period 2007–2010. These are not included here.

  6. Analysis for the period 2003–2006 was not possible as enterprise-level microdata were not available for this period.

  7. A complete list of the economic sectors included in each category can be viewed at: http://www.ine.es/en/daco/daco43/notaiat_en.pdf (accessed January 28, 2015).

  8. A high level of regional concentration can be clearly observed, with four regions accounting for 60 % of HGFs: Catalonia (21.1 %), Madrid (13.3 %), Andalucía (12.5 %) and the Valencian Region (11.5 %). A large number of specialised areas in Spain are also concentrated in these regions.

  9. Estimation was not possible for the period 2003–2006, because enterprise-level microdata were not available for this period.

  10. The estimation of the model using the whole dataset showed 97 % predictive accuracy (Total). However, only 3 % was correctly predicted for HGF = 1 (Yes)

  11. The sample was obtained using the following basic sectoral classification: agriculture, industry, services and construction.

  12. A linear regression was estimated to obtain collinearity statistics, enabling the removal of those variables with a Variance Inflation Factor (VIF) higher than 10. This process was carried out repeatedly to obtain the final data set.

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Acknowledgments

We would like to thank two anonymous reviewers for their valuable and helpful comments. The usual disclaimer applies.

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  1. “Industrial Economics and Local Development” Research Group, Department of Applied Economics and Economic Policy, University of Alicante, P.O. Box 99, E-03080, Alicante, Spain

    José Miguel Giner, María Jesús Santa-María & Antonio Fuster

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Giner, J.M., Santa-María, M.J. & Fuster, A. High-growth firms: does location matter?. Int Entrep Manag J 13, 75–96 (2017). https://doi.org/10.1007/s11365-016-0392-9

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