Author: Gerrit de WitDate: March 28th, 2012

Determinants of High-Growth Firms and Related Dutch Policies

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Overview

• Paper: Why do some countries have more high-growth firms than others?

• Possible implication to local determinants• Some examples of Dutch policies with respect to high-

growth firms

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Paper on High-Growth Firms

• Joint work with Mercedes Teruel (Universitat Rovira i Virgili)

• Overview:• The paper in short• Motivation• Determinants that are investigated• Results• Policy implications

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The paper in short

• Panel data set: 17 countries, 7 consecutive years• To be explained: percentage of high-growth firms• Explanatory variables concerning entrepreneurship,

institutional settings, opportunities for growth• Simple OLS regression to sort out the most important

determinants

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Motivation for paper

• Interest of Dutch policy• Believed to be important for the economy

• Contribute to dynamics of economy• Contribute to innovation and growth of labour

productivity• Contribute to employment growth• Act as a role model for existing and nascent

entrepreneurs• Percentage of high-growth firms in the Netherlands

was lower compared to foreign countries• Attempt to explain differences between countries

quantitatively with all information available• Unique data set on high-growth firms

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Variable to be explained:% high-growth firms

• Average growth of 20% per year over the last three years

• Growth in turnover• Size at the end 3-year growth period: 50 – 1000

employees

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Entrepreneurship variables

• Tertiary education• Income motive• Desirable career choice

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Institutional obstacles

• Employment protection• Start-up procedures

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Opportunities for growth

• Population size• GDP growth• Technological development

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Table 4.

Explaining the average percentage of high-growth firms between countries on the basis of model (2) from table 3

part of the deviation that is explained by differences in:

Entrepreneurship I nstitutional obstacles Opportunities for growth

deviation

from

average

tertiary

education

income

motive

desirable

career

choice

employment

protection

start-up

procedures

populatio

n size

GDP

growth

technological

development

unexplained

part

Austria -6% -1.6% 0.2% -1.2% -0.7% -0.9% -1.0% -1.1% 1.0%

Belgium -6% 0.3% -2.1% -1.7% 0.6% 0.2% -0.7% -1.1% -1.3% -0.2%

Czech Republic 5% -5.2% 0.1% 1.5% -1.1% -0.7% 1.3% 6.2% 2.4%

Denmark -3% 1.7% -2.2% -0.9% 1.1% 1.2% -1.3% -1.7% -1.3% 0.5%

Finland -1% 6.4% -0.3% -3.3% -0.3% 1.6% -1.3% 0.6% -1.0% -1.5%

France -5% -1.0% -0.8% 1.3% -0.8% -0.5% 0.8% -1.1% -1.3% -1.5%

Germany -7% -2.8% -1.7% -0.1% -1.3% -0.7% 1.1% -2.7% -1.1% 2.5%

Hungary 13% -2.7% 3.6% -0.2% 0.4% -0.7% 2.0% 6.4% 0.4%

I reland 4% -1.3% 0.0% 2.2% 0.9% 1.2% -1.5% 6.5% -1.5% -1.9%

I taly -1% -0.7% 3.9% 2.7% 0.5% -0.7% 0.8% -2.4% -1.1% -2.6%

J apan -12% -1.8% -0.5% -5.3% -0.8% -1.5% 1.4% -2.5% -1.6% -1.7%

Netherlands -7% -0.8% -3.0% 4.0% -2.0% 0.1% -0.3% -1.1% -1.0% -1.9%

Poland 7% -0.6% -1.3% 0.4% 1.6% 7.5% -2.1%

Spain 6% 0.8% 1.2% 2.4% -1.1% -1.3% 0.5% 1.7% -0.2% 3.9%

Sweden 3% 3.7% 0.4% -1.0% -1.6% 1.6% -0.8% 0.9% -1.3% 1.6%

United Kingdom 2% 0.4% -1.0% -0.5% 1.9% 0.4% 0.8% 0.0% -1.1% 0.4%

United States 14% 4.0% 3.5% -0.9% 3.7% 0.8% 2.1% 0.3% -1.7% 0.5%

The second column gives the difference between the country's percentage of high growth firms and the average over all countries.

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Policy implications

• Stimulate enrolment in tertiary education• Stimulate ambition of entrepreneurs• Promote entrepreneurship as a desirable career choice• Lower the degree of employment protection• Lower the administrative burden for firms• Create common markets with other countries to

enlarge the relevant market for firms

=> Implications for local policies ?!

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High-growth policies in the Netherlands

• Various programs to stimulate growth• “Growth Accelerator”, aim: lead at least 100 firms to

an annual turnover of 20 million a year in five years• “Fast Forward”, aim: facilitate 75 entrepreneurs that

have growth ambitions with a 2-year program• “Red Carpet for Growth”, aim: stimulate growth of

innovative firms and fast growers (300 startups and 150 fast-growing firms a year)

• All programs are setup along approx. the same lines

=> We take “Growth Accelerator” as an example

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Selection of firms and finance

• Selection criteria:• Gross turnover between 1 and 8 million a year• Business potential to grow to 20 million in 5 years• Ambition of entrepreneur• Entrepreneur will actively participate in program• Head office in the Netherlands

=> More than 100 firms are selected, they start in groups of approx. 20

• Finance:• Partly by government• Partly by firm itself:

• 70 thousand for 5 years• ½ day a week during 5 years

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What is offered to the firms?

• Tailor made business plan• Senior advise, growth support• Expert workshops• Unique network of growth entrepreneurs

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Results after the first year

• Turnover growth: 22% more than control group• Employment growth: 8% more than control group• Export growth: 55% more than control group• Growth in R&D: 45% more than control group

=> Subscribers of the program were selected. Hence you cannot say that these results are due to the program!

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