Transcript Sustainable high-growth entrepreneurship: A study of rapidly growing firms in the Scania region Jonas Gabrielsson, Åsa Lindholm Dahlstrand and Diamanto Politis CIRCLE, Lund University &

Sustainable high-growth
entrepreneurship:
A study of rapidly growing firms in the
Scania region
Jonas Gabrielsson, Åsa Lindholm Dahlstrand and Diamanto Politis
CIRCLE, Lund University & Halmstad University
International Workshop on High-Growth Firms, Organised by the Danish Business
Authority and the OECD, Copenhagen
2012-03-28
Research on rapidly growing firms does
not provide a very coherent picture of
what characterize them
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few long term longitudinal studies of high growth entrepreneurial firms.
empirical evidence suggest that high growth is rather an exceptional event
in the life of a new venture,
firms have a quite complex pattern of development where firm growth is
highly uneven and where sustained growth over time is rather rare.
Attributes of firms with a successful growth record have been found in a
number of studies
Different samples and timeframes have come up with contradictory or
inconclusive results
as much as 80 per cent of sample variance is left unexplained in some of
these studies
High growth is also a result of a mix of factors, at the firm level as well as
the systemic level.
Firm growth is in respect increasingly acknowledged as the outcome of a
complex interaction carried out between multiple players in a networked
context.
Growth paths
Source: Garnsey et al 2006
High growth entrepreneurship in
Sweden’s Scania region
• What characterize firms with sustainable
high growth?
• What is different in these firms compared
to firms with a temporary high growth?
• What explain these differences, at the
firm-level and the local level?
Definitions
The OECD-Eurostat definition of high-growth firms
• “All enterprises with average annualised growth greater
than 20% per annum, over a three year period, and with
ten or more employees at the beginning of the
observation period. Growth is thus measured by the
number of employees and by turnover”.
The recommended definition of “gazelles” is:
• “All enterprises up to five years old with average
annualised growth greater than 20% per annum over a
three-year period, and with ten or more employees at the
beginning of the observation period”.
Share of high-growth enterprises
employment definition 2006
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turnover definition 2006
Enterprises grow faster in
terms of turnover than of
employment.
This is especially so in
manufacturing
Gazelles represent less
than 1% (by employment)
or 2% (by turnover) of the
total population…
… and less than one-fifth
of high-growth enterprises.
Sweden:
• 3-4% of firms have high
employment growth
• 10-12 % have high
turnover growth
Source: OECD-Eurostat Entrepreneurship
Indicators Programme, 2009
Sample of “gazelles”
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“Gazelles” identified by the
Swedish business newspaper
Dagens Industri
i) at least four full years of operations
with a positive net result every
year,
ii) total sales of more than 10 million
SEK,
iii) at least 10 employees,
iii) doubled their sales the past three
years,
iv) have “healthy” finances, and
v) have grown organically (not
through M&As).
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Only companies that operate in
the Öresund region of Scania in
the period 2001 to 2007.
The selection criteria led to a total
sample of 544 companies
Survey: questionnaires with
complete responses from 206
companies (response rate of
37.9 %)
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Scania (Skåne) is a Swedish
administrative county in the very
south of Sweden.
It is populated with about 1,2
million people (13% of Swedish
inhabitants).
Both the Swedish and Danish
sides of Öresund has
experienced strong economic
development since 2000 (opening
of bridge)
Today Öresund region generates
a rough quarter of the combined
GDP of Sweden and Denmark.
The industry structure in Skåne
include pharmaceuticals/biotech,
IT /telecom, food, environment,
logistics and design
the regional economy in Skåne is
- from the perspective of industry
structure - a Sweden in
“miniature”
Characteristics of responding firms
Mean
Std dev
Firm age
19.8
13.7
No of employees in 2007
40.4
50.1
Sales in 2007 (MSEK)
87.0
132.5
% of regional sales
49.8
38.2
% of international sales
16.9
27.9
High technology
manufacturing
.06
.25
High tech services&
manufacturing
(HTKIS)
.16
.36
Knowledge intensive
services
.22
.42
Company spin-off
.16
37
University spin-off
.02
.14
• These rapidly growing firms
are relatively old and small
• a greater part of their sales
come from the local market
rather than from international
sales
• the gazelles are spread across
a wide range of different
industries.
• Few firms are in high-tech
sectors (manufacturing of
service)
• Only 4 firms are university
spin-offs. 30 are corporate
spin-offs
Continued growth of former
Swedish gazelles
Frequency
(N=193)
Low/no sales growth
Low/no employee growth
Sales growth > .10
Sales growth>.20
Employee growth>.10
Employee growth>.20
Sales/Emp gr>0.1
Sales/Emp gr>.20
Percent
108
56,0
109
56,7
85
44,0
11
5,9
83
43,5
17
8,9
112
58,0
23
12,0
• 9 firms bankruptcy (4.4%), 2
inactive (1%) and 2 M&As (1%)
• 5.4% of these former gazelles
show sustainable high
employment and turnover
growth (2007-2009)
– 5.9% show high turnover
growth
– 8.9% show high growth in
employees
• 12% show high growth with
either the turnover or the
employee definition
• The majority of the firms show
limited or no growth
Firms with sustainable growth…
sustained
temporary
Signlevel
(2tailed)
1991
1983
0.052
PhD education
,09
,49
.005
Company spin-off
,13
,16
.707
Academic spin-off
,04
,02
.570
University research - own
1,78
1,25
.294
University research - other
1,00
1,48
.000
Customer contacts
3,93
3,80
.761
Suppliers
2,92
3,09
.734
Competitors
2,80
2,84
.927
Private idea - own
4.16
4,24
.796
Previous employer in industry
3,82
3,32
.378
Employed by university
,00
,02
.045
Self employed
,17
,34
.065
Year of founding
• ..are younger than the firms
with temporary high growth
• …have no founders with
previous university
employment
• … and few with PhD
education.
• Industrial employment most
common
• Few firms based on university
research
• Relatively few are serial
entrepreneurs
R&D and University collaboration
sustained
temporary
Signlevel
(2tailed)
No cooperation
,65
,67
.880
Cooperation but not
in Scania
region
,00
,05
.002
R&D tasks
,04
,04
.965
Consulting
,00
,06
.001
Discussions
,04
,11
.175
Joint R&D
,04
,04
.863
R&D documents
,00
,02
.083
R&D facilities
,00
,04
.014
Recruitment
,17
,14
.667
• Firms with sustainable high
growth have very little
collaboration with universities
– inside as well as outside the
Scania region
• Firms with temporary high
growth have more significant
collaborations with universities
• Only 9% of firms with
sustained growth do R&D on
their own (19% of the
temporary high growth firms)
• There are no significant
differences in innovative
behaviour
Export and performance
sustained
Percent of total sales from customers in
Öresund region
temporary
Signlevel
(2tailed)
60,61
48,79
.178
Novelty in offerings*
1,36
1,25
.323
Exporting countries
2,84
6,30
.100
New exporting countries last three years
,56
2,23
.002
Countries with employees on paylist
,80
1,71
.030
Percentage of sales from exports (2007)
9,35
17,45
.167
Percentage of workforce in other
countries
4,05
3,38
.819
Profit (last 3 years) in relation to
competitors
3,67
3,66
.994
4,00
3,54
.022
-Cash flow (last 3 years) in relation to
competitors
• Sustainable highgrowth firms have
relatively limited
export focus
• Temporary highgrowth firms have
export activities in
more countries
• Sustainable and
temporary high
growth firms are
profitable,
• But sustainable high
growth firms have a
considerably better
cash flow
*1=Similar products/services, 2=Significant improvement products/services, and 3=Unique products/services
Explaining sales growth?
Model
Standardized
Coeffic
ients
t
Sig.
Beta
(Constant)
-1,000
,321
Year of founding
,105
,834
,408
Company spin-off
,182
1,517
,135
-,024
-,191
,849
Self employed
,128
1,074
,287
Percent of total sales
from customers in
Öresund region
,290
2,077
,042
Cash flow
,236
1,878
,065
Novelty in offerings
,133
1,161
,250
Countries with
employees on
paylist
,128
1,025
,309
Percentage of sales from
exports (2007)
-,266
-1,842
,070
Profit
-,012
-,092
,927
,253
2,193
,032
University research other
Knowleddge intesive
sector
R=,557a, R Square=,310, Adjusted R Square=,182
F (Fsign) 2,414 (0,01)
• Factors significantly
affecting sales growth
include:
+KIS
+Local customers
+Cash flow
-export
• BUT - as in many
other studies - most
of the sample
variance is left
unexplained
‘Dynamic Capitalism Typology’ of entrepreneurial firms (Kirchhoff, 1994).
RESOURCE
CONSTRAINED
III
GROWTH
HIGH
II
INTERNALLY
GLAMOROUS
CONSTRAINED
BUSINESS
INNOVATION
RATE
GROWTH
LOW
I
IV
ECONOMIC
CORE
AMBITIOUS
© Kirchhoff, 1994
LOW
HIGH
BUSINESS GROWTH RATE
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”Glamorous” firms have highest growth
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Glamorous firms are nice... and some are
necessary for growth
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There are five times as many
”ambitious” firms as there are
”glamorous”
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Ambitious firms are more important for job
creation through firm growth
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Economic core firms create growth through new
firm formations
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Constrained growth firms need attention
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”Ambitious” firs are often seen as
exceptions
”glamorous” and ”constrained” firms
are usually focused
Continuous growth: Sustainable and temporary high
growth firms
high
knowledge
27
14%
4
2%
141
74%
19
10%
intensity
low
low
high >20
continuous growth
• 16% of the firms are high tech knowledge firms. 13% of these are
high-growth ”Glamorous” firms
• 84% are not knowledge intensive, 12% of these are high-growth
Ambitious firms
• There are five times as many ”ambitious” high growth firms as there
are ”glamorous”
• The high-growth glamorous firms do not show higher growth than
the high-growth Ambitious firms
Innovative entrepreneurship policy
targets
High
IIa)
III
IIb)
Business
innovation
rate
I
Low
IV
Low
High
Business growth rate
In order to increase economic growth through innovative high growth entrepreneurship
there are at least three important policy options:
• Increasing entrepreneurship in general (entrepreneurial climate, education etc) (all
quadrants, I to IV)
• Increasing the frequency of high-growth firms (resources, financing, networking, etc.)
(quadrants I, IIa and IIb)
• Increasing innovation and R&D in SMEs (networking, universities, etc.) (quadrants I
and IV)
Summary and conclusion
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the high growth firms in the
sample are spread across a wide
range of different industries
Only a handful are in technology
intensive sectors
collaborations between high
growth firms and universities are
quite modest, especially so among
the sustainable growth firms
the majority of the firms had been
involved in improving existing
products or services and
developing new market.
but we found no associations
between innovation activities and
continued firm-growth
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5-12% of the firms show
sustainable high growth
The majority of the firms show
limited growth (sales/employees)
The temporary high-growth firms
are more internationalised and
export more
The sustainable high growth firms
focus on the local market
The sustainable high growth firms
have a considerably better cash
flow than their competitors
Policy implications
OECD (2010): “…most of the initiatives used to promote the
growth and high-growth of firms rely on the facilitation of access
to finance and the support to R&D and innovation. As argued,
policy initiatives in these areas, though critical, need to be
matched with support to training and skill upgrading in new and
small firms, and with the encouragement of growth ambitions.”
• Public policy promoting innovation and economic growth must also
involve instruments promoting entrepreneurship. Entrepreneurship
policy and innovation policy areas need to be integrated.
• The promotion and increase of innovative high growth
entrepreneurship include
– the encouragement of entrepreneurship in general,
– increasing the frequency of high-growth firms among the innovative
ones,
– increasing R&D and innovative activities among “ambitious” firms.