Policymakers who wish to benefit from the growth of scaleup companies need to understand them first.
Scaleups – also known as high-growth firms or gazelles – are firms that grow very quickly, at a minimum of 20 percent each year for a three-year period. These companies are key contributors to economic growth and have been increasingly the focus of economic policy discussions in recent years.
A team of researchers at the University of Sussex conducted an extensive review of academic literature to identify a few key findings about these businesses. Here is what they found:
1. Scaleups are not specific to the technology sector. They are equally represented in all sectors; in fact, some researchers believe they are over-represented in the services industry.
2. The few firms that grow fast also create most new jobs. Academics certainly agree on one thing: no matter how you define high-growth firms, they seem to be responsible for a surprisingly large share of new jobs in developed economies.
3. It all comes down to the people. Knowledge intensive firms are over-represented among high growth firms, which points to the importance of human capital in fueling high growth.
4. Age matters: high growth firms are younger than their peers. Not only that, but there seems to be an inverse relationship between age and growth rate: the younger firms are, the faster they grow on average.
5. High growth rates are rare. Scaleups rarely sustain high growth rates, which makes sense: after a few years’ very high job growth, businesses may need to slow down to adjust their organizational structure. There are exceptions to this rule, of course.
For more information on scaleup companies and their impacts, please see the following posts on Entrepreneurship Ecosystem Insights:
- U.K. Releases Innovative Entrepreneurship Report on Scaleups,
- How Can the Public Sector Support High-Growth Firms,
- Lessons from Silicon Valley: How to Cultivate High-Growth Industries,
- The High-Growth Paradox.
The original paper by Fabiana Moreno and Alex Coad, “High-Growth Firms: Stylized Facts and Conflicting Results” is available here.
Contributed by Lili Torok.