Using multiple indicators to shed light on growth in micro-enterprises and the dynamics of firm growth over time
Understanding Enterprise Growth
Statistics on ordinary high growth enterprises (10 or more employees) have since 2014 been reported annually to Eurostat. To explore aspects of high growth not covered by the reporting, a pilot with three different working programs (WP) were set up.
WP 1 relates to high growth in micro enterprises (1 to 9 employees). WP 2 focused on growth beyond the three-year horizon in the high growth definition. In WP 3 on scale-ups very high growth, growth in prominent enterprises and growth to become prominent enterprises were addressed. The output and experiences from the pilot will be used for evaluating the potential to expand the current reporting.
Table set-outs, high growth definitions and reference years were decided by the participating countries and project managers from Eurostat, in a joint effort. High growth in micro enterprises was defined as absolute growth by 3.31 or more employees in three years, instead of the relative definition used in the reporting, to avoid an overwhelming number of micro high-growthers. For larger enterprises, several growth measures were applied. Most results apply to the 2014-2017 period (WP 1 and 3) and the 2015-2018 period (WP 2). To increase the validity of the study, the time series at an overall level were expanded and two alternative high growth and large decline definitions were tested.
High growth was found to be less frequent among sole proprietors, and more frequent among group participants. However, turnover growth may have been inhibited in group participants, due to economic transfers within the group. Young micro high-growthers grew faster than the older ones and reached their size by the end of the period. They were more likely to become a scale-up, as well, while there were small differences between young and old enterprises in the ability to sustain high growth. Micro high-growthers and employee scale-ups were particularly frequent in industry I. For turnover scale-ups the picture was mixed, while industry J had the highest share of sustained high growth. Mergers and acquisitions, though few in number, were heavily overrepresented among the micro high-growthers.
High growth and large decline were more frequent among micro enterprises than among ordinary enterprises, according to the alternative estimations. The dynamics were fairly balanced in most categories, but enterprises with decline in turnover dominated the largest size group. Oil and gas extraction was hit particularly hard. Growing in both employees and turnover was much harder than growing in just one of these variables, at least when looking at simultaneous growth.
Enterprises showed quite different high growth trends between 2011 and 2018, depending on the high growth criterion. When defined according to absolute or relative employee growth, the share of micro high-growthers and scale-ups rose gently through most of the time series, with a distinct depression in 2015. When defined by relative turnover growth, on the other hand, a large peak was seen in 2012, followed by a depression in 2015 and a gentle increase from there. A similar trend was seen in a Nordic study, when defining growth by full-time equivalents (FTEs). Oil prices appear to be the major driver at large, while a counter-cyclic expansionary may have subdued the depression caused by low oil prices in 2015.
Merging and acquisition does not as such bring growth to the economy. This supports keeping mergers and acquisitions outside the target population of most tables in this pilot. The activity level was far better reflected by turnover and FTE than number of employees, while implementation of “A-ordningen” data on employment from 2015 caused a positive shift in the coverage of very minor positions. Both speak for defining high growth in relative terms by turnover and FTE instead of employees. The relative definitions were more versatile and allow a more comprehensive and transparent picture of the business dynamics to be given.
About the publication
Understanding Enterprise Growth. Using multiple indicators to shed light on growth in micro-enterprises and the dynamics of firm growth over time
Håkon Frøysa Skullerud
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Establishments and enterprises
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- ISBN (printed)
- About Reports
Analyses and annotated statistical results from various surveys are published in the series Reports. Surveys include sample surveys, censuses and register-based surveys.