The elusive quest for high-growth firms in Africa: when other metrics of performance say nothing


The purpose of this paper is to study the persistence of firm growth in Africa, dedicating special attention to high-growth firms. The worldwide interest in identifying high-growth firms comes from the idea that these firms will continue to outperform in the future and to create jobs. We exploit a rich dataset covering all formal firms operating in Senegal from 2006 to 2015 to scrutinize growth persistence. We document that growth rates are negatively correlated across time, especially for high-growth firms, in line with evidence from industrialized countries. A top performer is more likely to become a bad performer in the next period than to sustain its previous performance. We show that other indicators of performance (such as profitability and productivity in the first period) are unrelated to the persistence of growth. This finding challenges the possibility of policymakers and investors selecting persistent high-growth firms by scrutinizing their previous performances.

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  1. 1.

    We extend the Table provided by Daunfeldt and Halvarsson (2015). Interested readers may refer to this article and other papers (Coad and Hölzl 2009; Coad et al. 2018) for a description of works published before 2005.

  2. 2.

    Two papers (Daunfeldt and Halvarsson 2015; Capasso et al. 2014) also investigate the transition matrix and therefore the ability for HGFs to be permanent.

  3. 3.

    These figures are in line with those provided by Capasso et al. (2014) and Daunfeldt and Halvarsson (2015). Hölzl (2014) document that High-Growth Firms are more likely to sustain growth when they are measured using the Birch Index.

  4. 4.

    Coad et al. (2014) point out that HGFs are not more frequent in some industries (e.g., high-tech sector) than in other sectors. However, size and age play a role. The autocorrelation is negative for small firms, while large firms show positive or no persistence in growth rate (Coad 2007; Coad and Hölzl 2009; Capasso et al. 2014). Young firms exhibit positive autocorrelation in growth rate, contrary to old ones, as documented by Coad et al. (2018). We test whether in a different context these findings remain valid. In addition, we add other firm characteristics, especially ownership. These is a priori no reason to believe that foreign-owned firms differ from domestic-owned firms in the profile of growth. However, the impact of size could be blurred by ownership insofar as foreign-owned firms are larger than local ones in developing countries.

  5. 5.

    Data are extracted from survey in Senegal in 2014 and are available at:

  6. 6.

    In 1981 between Léopold Sédar Senghor and his former Prime minister Adbou Diouf. In 2000, the historical opponent Abdoulaye Wade was elected and remained in office until 2012. In 2012, Macky Sall became the fourth president of Senegal.

  7. 7.

    Data are not freely available but the last report (in French) based on these data is available in the ANSD website at the following link:

  8. 8.

    When an observation in t is lacking while we have data in t-1 and t + 1, we apply the arithmetic average to infer the value in t for financial value (sales). For employment, we fill the gap if the number of employees is unchanged between t-1 and t + 1. Results (available upon request) are robust when we do not apply this correction.

  9. 9.

    Firm size is the logarithm of sales when we consider sales growth or the logarithm of employment when we consider employment growth.

  10. 10.

    As a robustness check, we also extend Eq. (2) by adding interactions with other metrics of performance. Econometric results are closely similar.

  11. 11.

    Because our sample assembles together formal firms, the number of firms with no employees is lower than 5%. Econometric results are insensitive when we consider the number of employees rather than the number of workers (employees plus one).

  12. 12.

    In a previous version of the paper, we run econometric models using the triannual growth rate instead of average 3-year growth rates. Results are closely similar to those reported in Tables A2-A5.

  13. 13.

    The distribution of 3-year growth rate provides a close picture (available upon request). However, in this case, the distribution of employment growth is more concentrated toward zero.

  14. 14.

    Table 2 only displays the median for the sake of brevity.

  15. 15.

    The use of value-added explains the negative value of labor productivity in some cases. However, this issue concerns only 5% of firms.

  16. 16.

    Results are unchanged when interactions enter one by one (available upon request). Findings from the 3-year growth rate are displayed in Table A4 in the Appendix. We confirm our main findings for size and age. Results are less robust for foreign-dummy.

  17. 17.

    We employ the qregdp command in Stata developed by Baker et al. (2016).

  18. 18.

    The formula is \( \overset{\sim }{Gr}{(y)}_{\mathrm{i},\mathrm{t}}=\frac{\left({y}_{\mathrm{i},\mathrm{t}}-{y}_{\mathrm{i},\mathrm{t}-1}\right)}{0.5\left({y}_{\mathrm{i},\mathrm{t}}+{y}_{\mathrm{i},\mathrm{t}-1}\right)} \)

  19. 19.

    We thank a reviewer for inviting us to consider sectoral characteristics.

  20. 20.

    In theory the value should be minus infinity because log(0) equals minus infinity. The minimum of growth never exceeds − 15 for continuing firms so fixing the value to − 100 seems a good approximation.

  21. 21.

    We do not state that firms with a positive debt ratio are not credit-constrained. Indeed, these firms may suffer from a limited access to funds (want higher loan amount or lower interest rates). We cannot measure the intensity of this form of credit constraints. In addition, the importance of the lack of access to banks is certainly more detrimental than obtaining loans at unfavorable conditions.


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We would like to thank Bérénice Hiniger, Stjepan Srhoj and two anonymous referees for their useful comments. Any errors are our own. The manuscript previously circulated under the title “The elusive quest for high-growth firms in Africa: The (lack of) growth persistence in Senegal”.


This research was supported by the Agence Nationale de la Recherche of the French government through the program ‘Investissements d’avenir’ (ANR-10-LABX-14-01), through the IDGM + initiative led by Ferdi (Fondation pour les Etudes et Recherches sur le Développement International).

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Léon, F. The elusive quest for high-growth firms in Africa: when other metrics of performance say nothing. Small Bus Econ (2020).

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  • Firms
  • Growth paths
  • Africa
  • Senegal
  • High-growth firms

JEL classifications

  • G21
  • O16
  • L26