Project Inception presentation for ERC Project 9. Firm Heterogeneity and Local Job Growth.

1. Michael Anyadike-Danes
and Mark Hart
ERC

2. Background
The focus of the ERC's programme of research in business demography is to
investigate the distribution of firm-level performance across the UK's business
population to provide an evidence base for policy
Amongst the findings to date:
• the extraordinary force of mortality – two-thirds of firms do not survive past the age of five;
• of the firms that do survive only a small proportion record much growth
• for firms that do grow it is largely concentrated in the first 5 years
• the conclusions about survival and growth do also depend on size -- larger firms have a better
chance of survival and are less likely to grow -- but the size effects are quite modest
• comparing across firms of the same age, the principal contributions to overall job creation are
shared between a very small group of very small firms which grow remarkably quickly, and a
group of larger slow growing firms whose contribution rests mainly on their size
Implications for policy: firms with a ‘track record’ – having survived 5 years, and having
grown -- might be more appropriate candidates for support

3. Productivity: Latest results
• Work has started on productivity (measured as turnover per job) and there are
some, tentative, early conclusions
• Productivity of the (non-financial) business population in the UK exhibits two
of the features which have been found across many countries and over many
time periods to characterise the distribution of firm-level of productivity:
– a very high degree of dispersion -- in the UK firms at the top 10% point of the
distribution have ten times the productivity of the firms at the bottom 10% point
– this dispersion persists over time – overall productivity levels do not converge over time
• However there is a considerable degree of productivity 'churn' within the
distribution -- firms do move up and down the distribution -- but it is quite
'localised' and the middle of the distribution, remains little changed and, so
the extraordinary spread of productivity remains unchanged too

4. A Simple Story of Productivity! – 2008-15
Turnover
Growth
Job
Growth
Zero
Zero
‘Green
Zone’
+
+
+
-
-
-
Only one ‘space’ where
growth in T/O; Jobs and
productivity are all +ve – the
‘green zone’
But sparsely populated with
firms – approx. 10%
…and more than half of them
where there is very little
growth – the blue triangle
Rule of thumb – 3 out of 4
firms which grow turnover
grow productivity; 1 in 5 firms
which grow jobs grow
productivity

5. The Agenda (1)
Some other recent findings about productivity are the point of departure for the first
‘strand’ of the agenda:
– firms which record a rapid growth of jobs generally do not grow productivity
– firms which record rapid growth of productivity generally do not grow jobs
– less than a quarter of high growth firms (HGFs) -- measured using the OECD
job growth criterion -- record much productivity growth
The implication of these findings – that ‘scale-ups’ may not necessarily be good for
productivity growth -- signals the need to investigate productivity growth more deeply
We need to explore – as we did with job growth – the role of age, size and survival on
productivity growth. Given our productivity measure – turnover per job – we also
need to examine the extent of inter-sectoral differences.

6. The Agenda (2)
• The OECD’s HGF measure may not be an ideal summary indicator of firm
performance but its use has shed some light on the evolution of an influential
group of fast-growth firms. We now know that,
– firms which record one high growth episode typically record at least one other
– a substantial proportion of HGFs record their first high growth episode by age 5
– ‘repeat’ growth episodes are much less age-dependent
• We know rather less about job creation by HGFs, and this is the second
principal strand of the agenda.
– we need to explore the dynamics of job creation: do younger HGFs create more jobs
than older HGFs?
– we know that HGFs are unevenly spread across the country but their location does not
appear to be closely related to their impact on ‘local’ job creation
• If policy-makers wish to put HGFs closer to the centre of policy, a stronger
evidence base is clearly required

7. HGFs – an update to 2016

8. Job Creation and Destruction Update

9. Thank you!
Questions and comments?
More information at http://enterpriseresearch.ac.uk/
Contact us about this research: Mark Hart mark.hart@aston.ac.uk
This work reflects the joint effort by the research team of the ERC, including
Michael Anyadike-Danes, Karen Bonner and Mark Hart.
This work contains statistical data from ONS which is Crown Copyright. The use of these data does not imply the
endorsement of the data owner or the UK Data Service at the UK Data Archive in relation to the interpretation or
analysis of the data. This work uses research datasets which may not exactly reproduce National Statistics
aggregates.