Identifying high-growth firms in five European countries: micro firms vs. larger firms

Purpose This study uses an extensive sample of firms from Germany, France, UK, Portugal and Spain with the aim of obtaining conclusive results on the determinants that drive a firm to be high-growth firm (HGF). This sample includes micro firms, which are not generally considered in the literature. There are several reasons to take them into account: not excluding an important part of the business fabric, the results can be extrapolated, the study can show if micro firms also present high growth and if there are differences in the factors that determine the probability of being an HGF between both segments of firms. Design/methodology/approach A multivariate dynamic model of binary choice is used to analyse the probability of a company being classified as high growth. Then, with the Blinder and Oaxaca decomposition, the differences in the probability of being an HGF between micro firms and non-micro firms are studied. Findings The results show that HGFs demonstrate persistence, and younger firms are more likely to be HGFs. Micro firms also register high growth, although they are less dynamic and show a negative differential with respect to larger firms as highlighted by the characteristic component. Originality/value In some countries, such as Spain and Portugal, micro firms predominate, and these tend to be less dynamic, so to identify how to improve business dynamics, the factors that limit the growth of this type of company must first be determined. In this paper, in line with Acs and Mueller (2008), we therefore include firms with less than ten employees so as not to exclude an important part of the business fabric and to ascertain whether this type of firm also shows high growth.