High-growth firms and innovation: an empirical analysis for Spanish firms

Abstract

This paper analyzes the effect of firms' innovation activities on their growth performance. In particular, we observe how important innovation is for high-growth firms (HGFs) for an extensive sample of Spanish manufacturing and services firms. The panel data used comprises diverse waves of Spanish CIS over the the period 2004-2008. First, a probit analysis determines whether innovation affects the probability of being a high-growth firm. And second, a quantile regression technique is applied to explore the determinants and characteristics of specific groups of firms (manufacturing versus service firms and high-tech versus low-tech firms). It is revealed that R&D plays a significant role in the probability of becoming a HGF. Investment in internal and external R&D per employee has a positive impact on firm growth (although internal R&D presents a significant impact in the last quantiles, external R&D is significant up to the median). Furthermore, we show evidence that there is a positive impact of employment (sales) growth on the sales (employment) growth.

Myth-busting and entrepreneurship policy: the case of high growth firms

“…In the UK, it has been found that 70% of HGFs are at least five years old (NESTA 2009), while survey-based research in Scotland identified that some HGFs are over 25 years old . Across Europe, similar findings have occurred: Danish HGFs were found to have a mean age of 13 years (Senderovitz et al 2015) and a Spanish study found no bias towards younger firms amongst Spanish HGFs (Segarra and Teruel 2014).…”

Innovation Strategies and Firm Growth

“…Third, and relatedly, we also contribute to the recent literature (Coad and Rao, 2008;Falk, 2012;Segarra and Teruel, 2014) that adopts quantile regressions to show that while innovation can have mixed or nil effect on the average growth rate in a cross section of firms, innovation is indeed more beneficial for fast-growing, firms. Besides mostly focusing only on patents or R&D, these studies apply basic quantile regression techniques, with few exceptions (Coad et al, 2016;Mazzucato and Parris, 2015).…”

Are high-growth firms overrepresented in high-tech industries?

“…Further, in a least squares regression framework, Stam and Wennberg (2009) demonstrate that R&D has a positive effect on growth for the top 10 percent of fastest growing startups, but this is not the case for the overall population of firms. In a study of Spanish firms, Segarra and Teruel (2014) find that R&D investments positively affect the probability of becoming a HGF but the effect is greater and more often significant in manufacturing industries than in service industries.…”

“…While many theoretical and descriptive contributions highlight the importance of innovation in firm growth, few studies observe a strong association between innovation and firm growth. This may be because converting R&D into innovation and innovation into growth takes time (Coad and Rao, 2008), an observation that is further complicated by the uncertainty inherent in any innovative process (Cefis and Orsenigo 2001;Coad and Rao 2010;Segarra and Teruel 2014).…”

“…Furthermore, because their industry distribution is only one of many aspects of the HGFs under examination, little space is generally devoted to this issue; however, in recent years, some studies (Almus, 2002;de Wit and Timmermans 2008;Hölzl 2009;Wyrwich 2010;Stam and Wennberg 2009;Segarra and Teruel 2014) employ econometric methods to examine it directly.…”