High-growth, innovative enterprises in Europe. Counting them across countries and sectors

Abstract

High-growth, innovative enterprises are a key source of business dynamics, but little is known about their actual share in the enterprise population. This is due to an inherent uncertainty in how to define the threshold that distinguishes high-growth firms from non-high-growth firms – illustrated by the lack of agreement between the definitions applied by Eurostat and the OECD. This explorative study aims to help measure the share of high-growth, innovative enterprises in the European enterprise population, test how the choice of definition affects their share. We introduce a methodology to address the uncertainty in the definition, and compute national and sectoral average scores for high-growth and innovation in order to assess their distribution across countries and sectors of economic activity. We test the impact of a number of alternative definitions on a pooled sample of 92,960 European firms observed by the 2012 wave of the Community Innovation Survey (CIS). Our finding suggests that the share of high-growth, innovative enterprises in Europe may range between 0.1 to 10%, depending on the definitions, and the outcomes are most sensitive to the growth measure (employment- or turnover-based) and threshold (absolute or relative), as well as the degree of novelty expected of the innovations introduced by firms. With the help of aggregate measures, we observe a trade-off between high-growth and innovation performance at the country-level, which disappears at the overall European sectoral level. This observation highlights the importance of structural differences across EU Member States in terms of firms’ innovation profile, size and associated high-growth performance.