Ditte Rude Petersen
FORA

Measuring High Growth Firms and Gazelles
> The Danish results
> Employment vs. turnover based measure
> The value of international comparable data example from the Danish Entrepreneurship Index
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Measuring High Growth Firms and Gazelles
High growth firms and gazelles, 2000-03
All firms with 10+ employees
High Growth firms - turnover
High Growth firms - employment
Number of firms
21.583
1.430
721
Share
6,6
3,3
New firms with 10+ employees
Gazelles - turnover
Gazelles - employment
4.645
485
281
10,4
6,1
> Mergers, acquisitions and take-overs are not considered
> First year has not been removed from sample
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The Challenges when measuring Gazelles…
> The number of new firms is overrated; New CVR number
(business register number) = New firm birth
> Correcting for this, the number of Gazelles is somewhere between 62 and 281…
New CVR – but not a real employer birth t – 8 t – 3
Period of start-up Observation period
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t

Looking at High Growth Firms…
> The thresholds seem to be adequate;
 High growth rate (employment) = 3,3 pct.
 Due to confidentiality 4 observations (721) was removed when looking at the 2 digit NACE sector level.
High Growth Firms (employment base) 2003
High Growth rate
(Employment base)
64
73
72
Post and telecommunications
Research and development
Computer and related activities
13,21
12,24
9,92
> Gazelles..? Maybe introducing Mini Gazelles; 5+ employees
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Employment vs. Turnover based measure
> The question is whether the two measures capture the same firms?
> First of all, it can be observed that there are twice as many HGT as HGE. This can be explained by a greater variance in turnover growth;
Employment and turnover growth among all firms with 10+ employees, 2000-03
Mean
Standard deviation Variance
Employment growth
Turnover growth
-4,9
14,6
107,1
219,1
11.470
48.005
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Employment vs. Turnover based measure
> Secondly, it can be observed that it is the same sectors that generate High Growth Firms in Denmark regardless of measure…
H ig h g rowth rates on s ec tor bas is 2000-03
35,0
30,0
25,0
20,0
15,0
10,0
5,0
0,0
0,0 2,0 4,0 6,0 8,0
R ² = 0.793
10,0 12,0 14,0
Hig h g row th ra te - e m ploym e nt
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Employment vs. Turnover based measure
> However, looking at the firm level the conclusion is bit different…
Intersection of sets between employment and turnover based measure
Share High Growth firms, 2000-03
Revenue
Employment
Both
Number of firms
1430
721
420 58,3
High Growth firms, 2000-03
Revenue
Employment
Both
Number of firms
721
721
283
Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk
Share
39,3

Employment vs. Turnover based measure
> Especially, when looking at how employment growth is correlated with turnover growth…
Correlation between employment and turnover growth
All firms
All firms with 10+ employees
High growth - turnover
High growth - employment
R 2
0,01
0,25
0,24
0,52
> In conclusion, there seems to be a rationale in using both measures - despite the flaws of the turnover measure…
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The value of international comparable data…
> The Danish Entrepreneurship Index;
Gazelles - employment growth
25,00
20,00
15,00
10,00
5,00
0,00
U ni te d
St at es
C an ad a
Ko re a
Sw itz er la nd
U ni te d
Ki ng do m
Fi nl an d
G er m an y
Sp ai n
Be lg iu m
Sw ed en
Au st ria
D en m ar k
Ita ly
Fr an ce
N et he rla nd s
N or w ay
Note: Different definition of gazelles and preliminary results
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The value of international comparable data…
(1) Now it is possible to say exactly how far behind Denmark is;
High Growth Firms (employment base), 2003
Number of high growth firms
High growth rate
If high growth rate = 4,4
Extra high growth firms
Denmark
721
3,3
952
231
USA
56.907
4,4
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The value of international comparable data…
(2) It is possible to say whether it is possible to catch up…
(3) Concrete policy measures;
> How many more High Growth Firms do we need;
> In different sectors in Denmark
> In different regions of Denmark
> Target for the Regional Growth Houses
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