Definition of High Growth Enterprises
In order to perform any empirical research on the effect high growth businesses have on the economy, clear guidelines have to be established to categorise and identify them. The most widely used and accepted guideline is the OECD definition of high-growth firms. The OECD suggest to use two performance indicators, the employment size and the turnover. Enterprises are classified in the high growth sector if their average annualised growth is larger than 20% per year over a 3 year period, ideally in both previously introduced indicators (OECD, 2007, Ch 8). Additionally a size threshold of 10 is applied to the employment measure to exclude 100% growth rates of companies that grow from one to two employees.
This classification leaves blind spots excluding businesses existing less than 3 years. Furthermore it has a three year reaction period until new data is included in the data set but thereby any unprofitable short term businesses are automatically excluded.
Overview of the Business Environment
By applying the previously discussed classification technique the effect different business types have on the economy can be empirically examined. Literature suggests that high growth businesses are not only found in the environment of recently founded businesses, but can be found in all stages of firm age (Anyadike-Danes et al., 2009).
In this paper however we focus mainly on newly created enterprises, since this is the sector that is most sensitive to external influences and support e.g. through policy changes. New companies existing for less than 5 years that classify as HGEs are referred to as ‘gazelles’ (OECD, 2010, page 16) and have proven to be major employment generators (Henrekson &...
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Intervention to encourage the growth of new firms is extremely common in the modern economy. The two main groups that intervene are policy makers and practitioners. A policy maker is defined as “a person responsible for or involved in formulating policies, especially in politics “ (Oxford University Dictionary 2013) in the case of firms formation this would usually be a government body local, regional or national or supra national in the case of the European Union. These people intervene generally for broad economic or macroeconomic reasons. Practitioners are defined as “one who practices something, especially an occupation, profession, or technique“ (American Heritage Dictionary 2000) in this context most likely a businessman of some kind. These professionals intervene for local economic or microeconomics reasons. Policy makers and practitioners often intervene to promote the creation and growth of new firms in the economy. Their reasons for doing are usually quite different but the results are often similar.
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Germany has the largest economy in Europe and the fifth largest in the world. Germany is known for its high quality machinery, vehicles, chemicals and household equipment that form the bulk of its exports. Its vast manufacturing industry has thrived as a result of the existence of a large pool of highly skilled labor force. The country boasts of the world’s most advanced networks in energy, roads, aviation, telecommunications, rail and roads. The German economy is dominated by small and medium-sized enterprises that provide employment to 70 percent of the country’s labor force. While SMEs in the rest of the world are too small to enjoy the economies of scale or even access the international market, Germa...
There are a lot of factors that determines whether or not a company will be successful. These factors are usually derived from economics. One factor that I plan to focus on is scale economies or better known as economies of scale. Firms that have expanded their scale of operations to obtain economies of mass production have survived and flourished. Whereas smaller firms who have not been able to expand have usually ended up as high-cost producers. The topic discussed will be the Italian automotive industry and how it is affected by economies of scale.
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Economic growth focuses on encouraging firms to invest or encouraging people to save, which in turn creates funds for firms to invest. It runs hand-in-hand with the goal of high employment because in order for firms to be comfortable investing in assets such as plants and equipment, unemployment must be low. Hereby, the people and resources will be available to spur economic growth.
Scale Economies: the industry contains several very large players and multiple medium to small players
Governments can inspire both the creation of wealth in an economy and entrepreneurship within that economy as well. Using different policies, they can provide incentives for entrepreneurs to start businesses, such as lowered taxes, private ownership, and less risk/corruption while starting a business. This inspiration leads to growth in an economy and a positive increase in entrepreneurship.
Review of: Olson, Matthew S., Van Bever, Derek ,Verry, Seth. 2008. When Growth Stalls. Harvard Business Review, 51-62.
Growth is generally measured in terms of revenues, profits, capabilities, assets etc &there are two ways through which a company
Joseph Schumpeter, an American economist, renowned for his term ‘creative destruction,’ defined ‘entrepreneurs as individuals who exploit market opportunity through technical and/ or organisational innovation.’ Entrepreneur is derived from the French verb ‘entreprendre,’ meaning to undertake and consequently entrepreneurship is the ability and will to develop and manage a business scheme; accompanied by any of its risks with the intention of making turnover. Conversely, innovation is the process of transforming a creation into a product or service that generates value; ‘the commercially successful exploitation of ideas.’ It is integral to any developing economy, particularly in those where prevailing business models have become outmoded. Entrepreneurship
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"Entrepreneurs who start and build new businesses are more celebrated than studied. They embody, in the popular imagination and in the eyes of some scholars, the virtues of "boldness, ingenuity, leadership, persistence and determination." Policymakers see them as a crucial source of employment and productivity growth. Yet our systematic knowledge of how entrepreneurs start and grow their businesses is limited. The activity does not occupy a prominent place in the study of business and economics.
Entrepreneurs create new businesses, and new businesses in turn create jobs, strengthening competition, and may even increase productivity through technological change. Increases in levels of entrepreneurship will result to an increase in economic growth (Nolan, 2003).Entrepreneurs by starting or setting up their businesses, will help with local development by locating less developed areas. The growth of industries and businesses in these areas leads to infrastructure improvements, such as better roads and stable electricity. Every business that is located in a less developed area will create opportunities that will improve the living conditions of people residing in that particular area (Nolan, 2003).
There are several external growth methods that entrepreneurs may choose for growing their business which are ‘a merger with’ or ‘acquisition of’ other companies.