[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/hhs/huiwps/0091.html
   My bibliography  Save this paper

Sleeping Gazelles: High Profits but No Growth

Author

Listed:
  • Bornhäll, Anders

    (HUI Research)

  • Daunfeldt, Sven-Olov

    (HUI Research)

  • Rudholm, Niklas

    (HUI Research)

Abstract
Among 205,322 limited liability firms in Sweden during 1997-2010, more than 10% did not hire new employees in any given 3-year period despite having high profits. Nearly one-third continued to have high profits in the next three-year period, but still no growth. Regression analysis indicates that these firms were not randomly distributed; rather they were small and young, did not belong to an enterprise group, had low own-capital as a share of total liabilities, and operated in local markets with high profit- opportunities and low competition. We conclude that it might be more beneficial to focus policy towards these firms instead of towards a few high-growth firms that, having just grown exponentially, may not be best positioned to grow further.

Suggested Citation

  • Bornhäll, Anders & Daunfeldt, Sven-Olov & Rudholm, Niklas, 2013. "Sleeping Gazelles: High Profits but No Growth," HUI Working Papers 91, HUI Research.
    • Handle: RePEc:hhs:huiwps:0091
    as

    Download full text from publisher

    File URL: http://www.hui.se/MediaBinaryLoader.axd?MediaArchive_FileID=1a4fbfd0-9fb9-4542-977a-c871db4a4fd3&FileName=HUIwp91.pdf&MediaArchive_ForceDownload=true
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Audretsch, David B., 1995. "Innovation, growth and survival," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 441-457, December.
    2. Robert Cressy, 2006. "Why do Most Firms Die Young?," Small Business Economics, Springer, vol. 26(2), pages 103-116, March.
    3. Alex Coad, 2009. "The Growth of Firms," Books, Edward Elgar Publishing, number 13424.
    4. Enrico Santarelli & Marco Vivarelli, 2007. "Entrepreneurship and the process of firms’ entry, survival and growth," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 16(3), pages 455-488, June.
    5. Magnus Henrekson & Dan Johansson, 2010. "Gazelles as job creators: a survey and interpretation of the evidence," Small Business Economics, Springer, vol. 35(2), pages 227-244, September.
    6. Davidsson, Per & Steffens, Paul & Fitzsimmons, Jason, 2009. "Growing profitable or growing from profits: Putting the horse in front of the cart?," Journal of Business Venturing, Elsevier, vol. 24(4), pages 388-406, July.
    7. Israel M. Kirzner, 1997. "Entrepreneurial Discovery and the Competitive Market Process: An Austrian Approach," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 60-85, March.
    8. Paul Geroski & Klaus Gugler, 2004. "Corporate growth convergence in Europe," Oxford Economic Papers, Oxford University Press, vol. 56(4), pages 597-620, October.
    9. Bjuggren, Carl Magnus & Daunfeldt, Sven-Olov & Johansson, Dan, 2010. "Ownership and High-Growth Firms," Ratio Working Papers 147, The Ratio Institute, revised 29 Sep 2010.
    10. Daunfeldt, Sven-Olov & Elert, Niklas & Johansson, Dan, 2010. "The economic contribution of high-growth firms: Do definitions matter?," HUI Working Papers 35, HUI Research.
    11. C. Praag & Peter Versloot, 2007. "What is the value of entrepreneurship? A review of recent research," Small Business Economics, Springer, vol. 29(4), pages 351-382, December.
    12. Alessandro Arrighetti & Marco Vivarelli, 1999. "The Role of Innovation in the Postentry Performance of New Small Firms: Evidence from Italy," Southern Economic Journal, John Wiley & Sons, vol. 65(4), pages 927-939, April.
    13. Davidsson, Per & Henrekson, Magnus, 2002. "Determinants of the Prevalence of Start-Ups and High-Growth Firms," Small Business Economics, Springer, vol. 19(2), pages 81-104, September.
    14. Sven-Olov Daunfeldt & Daniel Halvarsson, 2015. "Are high-growth firms one-hit wonders? Evidence from Sweden," Small Business Economics, Springer, vol. 44(2), pages 361-383, February.
    15. Francisco L. Rivera-Batiz & Luis A. Rivera-Batiz, 2018. "International Trade with Endogenous Technological Change," World Scientific Book Chapters, in: Francisco L Rivera-Batiz & Luis A Rivera-Batiz (ed.), International Trade, Capital Flows and Economic Development, chapter 2, pages 33-70, World Scientific Publishing Co. Pte. Ltd..
    16. Davis, Steven J & Haltiwanger, John & Schuh, Scott, 1996. "Small Business and Job Creation: Dissecting the Myth and Reassessing the Facts," Small Business Economics, Springer, vol. 8(4), pages 297-315, August.
    17. Daunfeldt, Sven-Olov & Elert, Niklas & Rudholm, Niklas, 2011. "New Start-ups and Firm In-migration –Evidence from the Swedish Wholesale Trade Industry," Ratio Working Papers 171, The Ratio Institute.
    18. Sven-olov Daunfeldt & Niklas Rudholm & Fredrik Bergström, 2006. "Entry into Swedish Retail and Wholesale Trade Markets," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 29(3), pages 213-225, November.
    19. Variyam, Jayachandran N. & Kraybill, David S., 1992. "Empirical evidence on determinants of firm growth," Economics Letters, Elsevier, vol. 38(1), pages 31-36, January.
    20. Werner Hölzl, 2011. "Persistence, Survival and Growth: A Closer Look at 20 Years of High-Growth Firms in Austria," WIFO Working Papers 403, WIFO.
    21. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    22. Reinhold Grotz & Udo Brixy, 2003. "Regional Patterns and Determinants of the Success of New Firms in Western Germany," ERSA conference papers ersa03p270, European Regional Science Association.
    23. John C. Haltiwanger & Ron S. Jarmin & Javier Miranda, 2010. "Who Creates Jobs? Small vs. Large vs. Young," NBER Working Papers 16300, National Bureau of Economic Research, Inc.
    24. Marco Capasso & Elena Cefis & Koen Frenken, 2009. "Do Some Firms Persistently Outperform ?," LEM Papers Series 2009/15, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    25. Scott Shane, 2009. "Why encouraging more people to become entrepreneurs is bad public policy," Small Business Economics, Springer, vol. 33(2), pages 141-149, August.
    26. Audretsch, David B. & Keilbach, Max C. & Lehmann, Erik E., 2006. "Entrepreneurship and Economic Growth," OUP Catalogue, Oxford University Press, number 9780195183511.
    27. David B. Audretsch & Dirk Dohse, 2007. "Location: A Neglected Determinant of Firm Growth," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 143(1), pages 79-107, April.
    28. Delmar, Frederic & Davidsson, Per & Gartner, William B., 2003. "Arriving at the high-growth firm," Journal of Business Venturing, Elsevier, vol. 18(2), pages 189-216, March.
    29. Harvey Goldstein & Catherine Renault, 2004. "Contributions of Universities to Regional Economic Development: A Quasi-experimental Approach," Regional Studies, Taylor & Francis Journals, vol. 38(7), pages 733-746.
    30. Jay B. Barney, 1986. "Strategic Factor Markets: Expectations, Luck, and Business Strategy," Management Science, INFORMS, vol. 32(10), pages 1231-1241, October.
    31. Baumol, William J., 1996. "Entrepreneurship: Productive, unproductive, and destructive," Journal of Business Venturing, Elsevier, vol. 11(1), pages 3-22, January.
    32. Giorgio Fagiolo & Alessandra Luzzi, 2006. "Do liquidity constraints matter in explaining firm size and growth? Some evidence from the Italian manufacturing industry," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 15(1), pages 1-39, February.
    33. F. M. Scherer, 1965. "Corporate Inventive Output, Profits, and Growth," Journal of Political Economy, University of Chicago Press, vol. 73(3), pages 290-290.
    34. Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 421-440, December.
    35. Kamhon Kan & Wei-Der Tsai, 2006. "Entrepreneurship and Risk Aversion," Small Business Economics, Springer, vol. 26(5), pages 465-474, June.
    36. Francesca Lotti & Enrico Santarelli & Marco Vivarelli, 2003. "Does Gibrat's Law hold among young, small firms?," Journal of Evolutionary Economics, Springer, vol. 13(3), pages 213-235, August.
    37. Zoltan Acs & David Audretsch, 1990. "Innovation and Small Firms," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011131, April.
    38. Erik Stam, 2005. "The Geography Of Gazelles In The Netherlands," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 96(1), pages 121-127, February.
    39. Dean Shepherd & Johan Wiklund, 2009. "Are we Comparing Apples with Apples or Apples with Oranges? Appropriateness of Knowledge Accumulation across Growth Studies," Entrepreneurship Theory and Practice, , vol. 33(1), pages 105-123, January.
    40. Daunfeldt, Sven-Olov & Lang, Åsa & Macuchova, Zuzana & Rudholm, Niklas, 2011. "Firm Growth in the Retail and Wholesale Trade Sectors – Evidence from Sweden," HUI Working Papers 50, HUI Research.
    41. Udo Brixy & Reinhold Grotz, 2007. "Regional patterns and determinants of birth and survival of new firms in Western Germany," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 19(4), pages 293-312, July.
    42. Audretsch, David B & Mahmood, Talat, 1994. "Firm Selection and Industry Evolution: The Post-entry Performance of New Firms," Journal of Evolutionary Economics, Springer, vol. 4(3), pages 243-260, September.
    43. Hart Hodges & Stein Østbye, 2010. "Is small firm gardening good for local economic growth?," Applied Economics Letters, Taylor & Francis Journals, vol. 17(8), pages 809-813.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. In Search of the Celtic Gazelle.
      by brianmlucey in Brian M. Lucey on 2013-11-09 14:20:29

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Anders Bornhäll & Sven-Olov Daunfeldt & Niklas Rudholm, 2017. "Employment protection legislation and firm growth: evidence from a natural experiment," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 26(1), pages 169-185.
    2. Sorin-Romulus Berinde & Adrian-Gabriel Corpădean, 2019. "Assessing the Sustainable Room for Growth for a Particular Romanian Tourism Area of Business: The Case of Accommodation Businesses," Sustainability, MDPI, vol. 11(1), pages 1-16, January.
    3. Sven-Olov Daunfeldt & Niklas Elert & Dan Johansson, 2014. "The Economic Contribution of High-Growth Firms: Do Policy Implications Depend on the Choice of Growth Indicator?," Journal of Industry, Competition and Trade, Springer, vol. 14(3), pages 337-365, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sven-Olov Daunfeldt & Niklas Elert, 2013. "When is Gibrat’s law a law?," Small Business Economics, Springer, vol. 41(1), pages 133-147, June.
    2. Daunfeldt, Sven-Olov & Lang, Åsa & Macuchova, Zuzana & Rudholm, Niklas, 2011. "Firm Growth in the Retail and Wholesale Trade Sectors – Evidence from Sweden," HUI Working Papers 50, HUI Research.
    3. Sven-Olov Daunfeldt & Niklas Elert & Niklas Rudholm, 2013. "Start-ups and firm in-migration: evidence from the Swedish wholesale industry," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 51(2), pages 479-494, October.
    4. Marco Vivarelli, 2013. "Is entrepreneurship necessarily good? Microeconomic evidence from developed and developing countries," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 22(6), pages 1453-1495, December.
    5. Marco Vivarelli, 2012. "Entrepreneurship and Post-Entry Performance: the Microeconomic Evidence," DISCE - Quaderni del Dipartimento di Scienze Economiche e Sociali dises1286, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    6. Vivarelli, Marco, 2012. "Drivers of entrepreneurship and post-entry performance : microeconomic evidence from advanced and developing countries," Policy Research Working Paper Series 6245, The World Bank.
    7. Colombelli, Alessandra & Krafft, Jackie & Vivarelli, Marco, 2016. "New Firms and Post-Entry Performance: The Role of Innovation," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201602, University of Turin.
    8. Alessandra Colombelli & Jackie Krafft & Marco Vivarelli, 2016. "To be born is not enough: the key role of innovative start-ups," Small Business Economics, Springer, vol. 47(2), pages 277-291, August.
    9. Alex Coad & Werner Hölzl, 2012. "Firm Growth: Empirical Analysis," Chapters, in: Michael Dietrich & Jackie Krafft (ed.), Handbook on the Economics and Theory of the Firm, chapter 24, Edward Elgar Publishing.
    10. Vivarelli, Marco, 2012. "Entrepreneurship in Advanced and Developing Countries: A Microeconomic Perspective," IZA Discussion Papers 6513, Institute of Labor Economics (IZA).
    11. Alessandra Colombelli & Jackie Krafft & Marco Vivarelli, 2016. "Entrepreneurship and Innovation: New Entries, Survival, Growth," GREDEG Working Papers 2016-04, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    12. Jaap W. B. Bos & Erik Stam, 2014. "Gazelles and industry growth: a study of young high-growth firms in The Netherlands," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 23(1), pages 145-169, February.
    13. Enrico Santarelli & Marco Vivarelli, 2007. "Entrepreneurship and the process of firms’ entry, survival and growth," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 16(3), pages 455-488, June.
    14. Bergner, Sören Martin & Bräutigam, Rainer & Evers, Maria Theresia & Spengel, Christoph, 2017. "The use of SME tax incentives in the European Union," ZEW Discussion Papers 17-006, ZEW - Leibniz Centre for European Economic Research.
    15. Daunfeldt, Sven-Olov & Elert, Niklas & Lang, Ã…sa, 2012. "Does Gibrat's law hold for retailing? Evidence from Sweden," Journal of Retailing and Consumer Services, Elsevier, vol. 19(5), pages 464-469.
    16. Francesco Quatraro & Marco Vivarelli, 2015. "Drivers of Entrepreneurship and Post-entry Performance of Newborn Firms in Developing Countries," The World Bank Research Observer, World Bank, vol. 30(2), pages 277-305.
    17. Niklas Elert, 2014. "What determines entry? Evidence from Sweden," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 53(1), pages 55-92, August.
    18. Alex Coad, 2007. "Firm Growth: a Survey," Post-Print halshs-00155762, HAL.
    19. Marko Peric & Vanja Vitezic, 2016. "Impact of global economic crisis on firm growth," Small Business Economics, Springer, vol. 46(1), pages 1-12, January.
    20. Alex Coad & Stjepan Srhoj, 2020. "Catching Gazelles with a Lasso: Big data techniques for the prediction of high-growth firms," Small Business Economics, Springer, vol. 55(3), pages 541-565, October.

    More about this item

    Keywords

    Gazelles; high-growth firms; firm growth; growth barriers; job creation;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:huiwps:0091. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Hans Seerar Westerberg (email available below). General contact details of provider: https://edirc.repec.org/data/huistse.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.