High growth firms in a regional perspective: Evidence for Austria Workshop High-Growth Firms: Local Policies and Local Determinants Copenhagen, 28 March 2012 Werner Hölzl & Klaus Friesenbichler

High growth firms (HGFs) in Austria Growth rate distribution in Austria has the same shape as the growth rate distribution for other countries: Most firms have marginal growth rates and a few firm display very high rates of growth (decline) However, the same evidence shows that Austria has a comparatively low number of high growth and high decline firms and a quite large share of stable firms

The Research Surprisingly little is known about HGF from an regional or local perspective. In the proposed research we study the share of high growth firms for Austrian NUTS-3 regions. Do we observe significant differences in the share of HGF across Austrian Nuts3 regions? What explains those differences? What about manufacturing and KIBS?

The Research The available literature (e.g. Henrekson and Johansson 2010) suggests that we should not observe systematic differences as: The likelihood of observing HGFs should be independent of patterns of industrial specialization. The likelihood of observing HGFs should be correlated with growth rates at the industry level. We observe some minor divergence of growth rates between Nuts3 regions but not in an order of magnitude as to expect very divergent patterns of HGF shares. Cross-country comparisons (e.g. Bravo-Biosca 2010) show considerable differences in HGF shares and growth rate distributions across countries. Institutional differences are minor, even if Austria is a federal country.

Data HGF data are derived from the Austrian Social Security files annual employment stocks a for all private sector firms with at least one employee Time 1994 to 2009: five 3-year periods: 1995/1997, 1998/2000, 2001/2003, 2003/2006, 2007/2009 35 NUTS3 districts Additional Data: Statistics Austria & Eurostat, OECD

High growth firms We use the Eurostat/OECD definition: More than 20% p.a. relative growth in three years Larger than 10 employees at the beginning Other definitions are used in our research to check robustness high impact firms (top 5% of ‘Birch index’ distribution, i.e. absolute * relative growth index)

Growth rate distribution at the firm level across Nuts3 regions and time

Average growth rates of HGF, LGF and stationary firms

HGF shares at the Nuts3 level Linz Salzburg Vienna Innsbruck Graz

HGF shares at the Nuts3 level Linz Salzburg Vienna Innsbruck Graz

HGF shares at the Nuts3 level Linz Salzburg Vienna Innsbruck Graz

HGF shares at the Nuts3 level Linz Salzburg Vienna Innsbruck Graz

HGF shares at the Nuts3 level Linz Salzburg Vienna Innsbruck Graz

Some impressions Regional differences seem to be systematic Higher share of HGF in urban areas Some degree of persistence over time Why?

Regional indicators Urban (Eurostat): 5: urban to 1: rural, remote Specialization (Marshallian externalities) Variety (Jacobs externalities) Related variety (within 2 digit – related activities) Unrelated variety (across 2 digit industries – unrelated activities)

Preliminary results

preliminary results Share of high decline firms Seems not to matter much Dynamics matter but not in form of Firm entry and exit Labour market dynamics Employment growth Is associated with HGF share

preliminary results Share of high Impact firms Variety is more important than specializaiton RV and UV are quite correlated

Results in words Growth matters Dynamics matter Variety matters More HGFs in regions with higher growth rates Dynamics matter More HGFs in regions with higher excess labour turnover. Firm turnover (entry/exit) seems not to be as relevant for HGFs. Variety matters More HGFs in regions with higher (unrelated) variety; Jacobs spillover are more important than specialization.

Further research Look at different industries (manufacturing, services) KIBS: many regions do not have enough firms with more than 10 employees to calculate HGF share What is behind the importance of unrelated variety May yield deeper policy insights Robustness checks HGF share and regional growth Other definitions of HGFs (HIF)

Thank you