Productivity Dynamics of High-Growth Firms: Evidence from Korean Manufacturing

This study empirically explores the role of total factor productivity (TFP) in the rise of high-growth firms (HGFs). Our research investigates the determinants of HGFs and assesses the effect of a high-growth period on a firm's future productivity trajectory. Our empirical analysis is based on the methodology of Du and Temouri (2015). We run a panel probit model and quantile regression. We identify HGFs using the methodology of Statistics Korea, and the analysis is based on microdata from the Mining and Manufacturing Survey, provided by Statistics Korea. The empirical results demonstrate that productivity is a key driver of high growth. Our results suggest that as a firm’ productivity improves, its propensity to become an HGF rises significantly. We find that a period of high growth contributes to the persistence of high productivity. The policy Implications indicate a reorientation of traditional small and medium-sized enterprise (SME) policies from a focus on startups towards selecting support for firms with high growth potential and the fostering of an innovation ecosystem.