High-growth firms and productivity: evidence from the United Kingdom

Abstract

There is considerable evidence that high-growth firms (HGFs) contribute significantly to employment and economic growth. However, the literature so far does not adequately explore the link between HGFs and productivity. This paper investigates the empirical link between total factor productivity (TFP) growth and HGFs, defined in terms of sales growth, in the United Kingdom over the period 2001–2010, by examining two related research questions. Firstly, does higher TFP growth lead to HGF status and secondly, does HGF experience help firms achieve faster TFP growth? Our findings reveal that firms in both the manufacturing and services sectors are more likely to become HGFs when they exhibit higher TFP growth. In addition, firms that have had HGF experience tend to enjoy faster TFP growth following the high-growth episodes. Policy implications are drawn based on the self-reinforcing process of the high-growth phenomenon that is revealed by our results.