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

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Abstract

This paper analyses the effect of R&D investment on firm growth. We use an extensive sample of Spanish manufacturing and service firms. The database comprises diverse waves of Spanish Community Innovation Survey and covers the period 2004–2008. First, a probit model corrected for sample selection analyses the role of innovation on the probability of being a high-growth firm (HGF). Second, a quantile regression technique is applied to explore the determinants of firm growth. Our database shows that a small number of firms experience fast growth rates in terms of sales or employees. Our results reveal that R&D investments positively affect the probability of becoming a HGF. However, differences appear between manufacturing and service firms. Finally, when we study the impact of R&D investment on firm growth, quantile estimations show that internal R&D presents a significant positive impact for the upper quantiles, while external R&D shows a significant positive impact up to the median.

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Notes

  1. For instance, see European Commission (2011).

  2. This study only considers incumbent firms since exiters are excluded. Here, we only consider organic growth, also called internal growth, which occurs when the firm grows from its own business activity.

  3. Initially, Hart and Oulton (1996) and Singh and Whittington (1968) found evidence that smaller firms grew faster than their larger counterparts, and Wagner (1992) found that those firms that grew faster in one period of time were more likely to grow faster in subsequent periods.

  4. Authors have used different periods of observation. For instance, Henrekson and Johansson (2010) consider HGFs to be those that grow more than 20 % every year for a period of 3 or 4 years, while Fritsch and Weyh (2006) used the longest period of 18 years.

  5. Daunfeldt et al. (2010) present an exhaustive panel of growth indicators and growth measurements used in empirical literature. They define HGFs by employment and sales and add definitions of added value and productivity.

  6. Recently the OECD and Eurostat in the Manual on Business Demography Statistics, European Communities/OECD 2008, define HGFs as: “All enterprises with average annualised growth in employees (turnover) greater than 20 % a year, over a 3-year period, and with 10 employees at the beginning of the observation period”. Note that the provisional size threshold of ten or more employees holds for both the turnover and employment measures. The advantage of this is that the initial population is the same, regardless of whether growth is measured in employment or turnover. Moreover, it would be difficult to apply a consistent turnover threshold across all countries participating in the data collection.

  7. Also in the Annex, there are graph quantiles of the marginal effects of the internal and external R&D effort on growth (see Graph A-1).

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Acknowledgments

We are very much indebted to participants at the Workshop on Firm Growth and Innovation (Tarragona 28th–29th June 2012), Encuentro de Economía Aplicada (Huelva, 2011) and two anonymous referees for helpful comments and in particular to Alex Coad, David Audretsch and Marco Vivarelli. This paper is part of the research done with the financial support of the Ministry of Innovation and Science (project ECO2009-08735) and the Consolidated Group of Research 2009-SGR-907. We are grateful to Verònica Gombau for her research support. The usual disclaimer applies.

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  1. Research Group of Industry and Territory, Department of Economics – CREIP, Universitat Rovira i Virgili, Av. Universitat, 1, 43204, Reus, Spain

    Agustí Segarra & Mercedes Teruel

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  1. Agustí Segarra
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Correspondence to Agustí Segarra.

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Segarra, A., Teruel, M. High-growth firms and innovation: an empirical analysis for Spanish firms. Small Bus Econ 43, 805–821 (2014). https://doi.org/10.1007/s11187-014-9563-7

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