High-Growth Firms Facts, Fiction, and Policy Options for Emerging Economies Grover Medvedev Ofafsen Arti Grover Goswami, Denis Medvedev, and Ellen Olafsen CONFERENCE EDITION High-Growth FirmsHigh-Growth Firms HGF.indb 1 31/10/18 7:01 pmHGF.indb 2 31/10/18 7:01 pmHigh-Growth Firms Facts, Fiction, and Policy Options for Emerging Economies Arti Grover Goswami, Denis Medvedev, and Ellen Olafsen Conference Edition HGF.indb 3 31/10/18 7:01 pmThe text of this conference edition is a work in progress for the forthcoming book, High-Growth Firms: Facts, Fiction, and Policy Options for Emerging Economies. doi:10.1596/978-1-4648-1368-9. A PDF of the final book, once published, will be available at openknowledge.worldbank/ and print copies can be ordered at amazon. 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Cover design: Bill Pragluski, Critical Stages HGF.indb 4 31/10/18 7:01 pmv Contents Preface . xi Acknowledgments .xiii Selected Abbreviations and Acronyms . xv Executive Summary .xvii 1. The Appeal of High Growth .1 Definitions.2 Incidence .4 Jobs and Output Creation .12 Linkages and Spillovers .16 Annex 1A .18 Notes .25 References .27 2. Facets of High-Growth Events .31 Size and Age .32 Sector and Location .39 Firms and Episodes .49 Annex 2A .57 Notes .60 References .62 3. What Makes for High Growth? .67 Productivity .69 Innovation .78 Agglomeration and Firm Networks .82 Managerial Capabilities and Worker Skills .87 Global Linkages .92 Financial Development .98 Annex 3A .102 HGF.indb 5 31/10/18 7:01 pmvi Contents Notes .104 References .107 4. Searching for Winners .117 Programs and Instruments to Support Firm Growth.118 Selection of Beneficiaries .126 T oward an Evidence-Based Approach to Supporting High Firm Growth .133 Annex 4A .148 Notes .151 References .154List of Background Papers .165 Boxes 1.1 National Firm Data versus Enterprise Surveys .9 2.1 Firm Organization and High Growth .50 3.1 Theories of Firm Growth .70 3.2 Productivity and Demand over the Firms Life Cycle .76 3.3 Firms in Focus: Rappi, Colombia .83 3.4 Firms in Focus: Beijing Genomics Institute, China .91 3.5 Identifying Firm Leaders .93 3.6 Firms in Focus: Chaldal, Bangladesh .93 3.7 Firms in Focus: AAA Growers, Kenya .99 3.8 Firms in Focus: Hi-T ech Gears, India .99 4.1 Communities, Networks, and Ecosystems .119 4.2 National Programs to Support High Firm Growth in Mexico and South Africa .121 4.3 Public Facilitation of Equity Finance .123 4.4 Endeavors Selection Process .129 4.5 Measuring Cognitive Abilities .132 4.6 Competitiveness Policy Evaluation Lab (ComPEL) .136 4.7 Cross-Border Incubation and Acceleration Initiatives .145 4.8 Science, T echnology, and Innovation Public Expenditure Reviews .146 Figures ES.1 Country Coverage of the Book . xviii 1.1 Incidence of High Growth .5 HGF.indb 6 31/10/18 7:01 pmContents vii B1.1.1 HGF Incidence in National Data Sets and Enterprise Surveys .9 1.2 HGF Incidence and per Capita Income .10 1.3 HGF Incidence and Industry Concentration or Growth .11 1.4 HGFs Contribute Disproportionately to Employment Growth .13 1.5 HGF Contributions to Employment Growth in Brazil and Mexico .14 1.6 HGFs Account for the Majority of Growth in Sales .15 1.7 Buying from or Supplying to HGFs Improves Firm Performance in Hungary . 17 2.1 HGFs Are More Likely to Be Y oung .34 2.2 Most HGFs in Indonesia Are Medium-to-Large Firms .36 2.3 HGFs T end to Be Larger than Other Firms .37 2.4 HGFs in Turkey Are More Likely to Be Larger than Other Firms .38 2.5 Large HGFs in Indonesia Create a Disproportionately Greater Number of Jobs .38 2.6 HGFs in Hungary Are More Common in Knowledge-Intensive Sectors .41 2.7 HGFs in Indonesia Are More Common in High-T ech Manufacturing but also in Some Low-T ech .42 2.8 HGFs Are Found in High-T ech and Low-T ech Industries Alike .43 2.9 More Entrepreneurship Translates into More HGFs across Brazilian States .46 2.10 HGFs Are More Common in the North of Mexico and in Large Cities .47 2.11 Reforms Increased the Concentration of HGFs in Ethiopias Capital City .48 2.12 Larger Micro-Enterprises in India Benefit More from Improved Connectivity . 49 2.13 HGF Growth in Indonesia Is Volatile and Lacks Persistence .51 2.14 HGFs Have Survival Probabilities Similar to Those of Non-HGFs .55 2.15 Firms Move in and out of HGF Status in Mexico .56 2A.1 Incidence of HGFs in Services Sectors .57 3.1 Higher Initial TFP Is Associated with Subsequent High Growth among Ethiopian Plants .72 3.2 Future HGFs Outperform Other Hungarian Firms on Multiple Dimensions of Productivity .73 3.3 Firm Performance in Hungary Improves during High-Growth Episodes .74 3.4 High-Growth Experience Boosts TFP Growth in Ethiopia, and Particularly So for T op Performers .75 3.5 The Overlap between Observed and “Efficient” HGFs Is Limited .77 3.6 The Fastest-Growing Firms in India Are Significantly More Innovative .79 3.7 Innovation Increases the Likelihood of High Growth in India .80 3.8 R&D Activity in Mexico Correlates Positively with High Growth .81 3.9 HGFs in Ethiopia Are More Common in or Close to Agglomeration Centers . 82 HGF.indb 7 31/10/18 7:01 pmviii Contents 3.10 Agglomeration Increases the Likelihood of High Growth in Ethiopia while Industry Concentration Reduces It .84 3.11 Policy Reforms Strengthened the Links between Agglomeration and High Firm Growth in Ethiopia .85 3.12 In-Network Thai Firms Are Larger and More Likely to Experience High Growth .85 3.13 Participation in Networks Increases the Likelihood of High Firm Growth in Thailand .