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Do micro start-ups fuel job creation? Cross-country evidence from the DynEmp Express database

Abstract

Exploiting a novel database recently built from national business registers by the OECD with the support of an international network of experts, this paper investigates the growth dynamics of micro-firms (employing less than ten workers) across 16 countries. Results show that only a small proportion of micro-firms manage to grow beyond ten employees, but those contribute disproportionately to overall job creation. Econometric analysis focusing in particular on the role of age confirms that young micro-firms—especially those below 3 years of age—are much more likely to grow above ten employees than older firms. These findings are remarkably stable over the three time periods considered (2001–2004, 2004–2007, and 2007–2010), i.e., also during the Great Recession.

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Notes

  1. Included countries are Austria, Belgium, Brazil, Canada, Finland, France, Hungary, Italy, Japan, Luxembourg, the Netherlands, Norway, New Zealand, Portugal, Sweden and the United Kingdom. As data suppression due to confidentiality restrictions is more binding for the United States, results including at will appear only as a robustness check and for those descriptive charts where the issue does not pose a problem.

  2. See the documentation of the DynEmp v2 routine in Criscuolo et al. (2014b), which also includes as an option the DynEmp Express run.

  3. Confidentiality blanking for US follows more complex criteria that are themselves confidential, and that do not only depend on the number of units contained in the cell.

  4. To answer the question of whether the increased exit rates were productivity enhancing one should look at whether the firms that exited were on average the least productive, and whether average productivity increased after the recession. Recent evidence from the US suggest that the crisis was accompanied by productivity enhancing reallocation; for Europe recent evidence (Andrews et al. 2015) suggests that for Europe this was also the case.

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Acknowledgments

The authors wish to thank the following people for making the DynEmp project possible: Mariagrazia Squicciarini, Javier Miranda, Werner Hölzl, Hilde Spinnewyn, Chantal Kegels, Michel Dumont, Gabriel Lopes de Ulyssea, Carlos Henrique Leite Corseuil, Fernanda de Negri, Pierre Therrien, Jay Dixon, Anne-Marie Rollin, John Baldwin, Mika Maliranta, Lionel Nesta, Flora Bellone, Adrienn Szep, Szollosine, Erzsebet Eperjesi Lindnerne, Gabor Katay, Peter Harasztosi, Stefano Costa, Kyoji Fukao, Kenta Ikeuchi, Leila Peltier—Ben Aoun, Anne Dubrocard, Michael Prombo, Michael Polder, Lynda Sanderson, Richard Fabling, Arvid Raknerud, Eivind Lorentzen, Jorge Portugal, Valentin Llorente Garcia, Luis Esteban Barbado Miguel, Eva Hagsten, Chiara Rosazza-Bondibene, Catherine Robinson, Albert Bravo-Biosca, Steve Bond, and James Stainer. The financial contribution of NESTA (UK) is gratefully acknowledged. The authors are also indebted to Nick Johnstone, Dirk Pilat, and Andy Wyckoff for comments on an earlier draft, and to two anonymous referees for very useful suggestions.

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Correspondence to Carlo Menon.

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The views expressed in these papers are those of the authors and do not necessarily reflect those of the OECD or of the governments of its member countries.

Appendix: Additional tables

Appendix: Additional tables

See Tables 8 and 9.

Table 8 Data coverage of the DynEmp Express database
Table 9 Regression results, period–sector interactions: initial size class: 0–9 employees

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Criscuolo, C., Gal, P.N. & Menon, C. Do micro start-ups fuel job creation? Cross-country evidence from the DynEmp Express database. Small Bus Econ 48, 393–412 (2017). https://doi.org/10.1007/s11187-016-9778-x

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Keywords

  • Micro-firms
  • Start-ups
  • Employment dynamics

JEL Classifications

  • D22
  • L25
  • L26