Diapositiva 1

1
An Empirical Analysis to investigate on High
Growth definition
Session 6A Entrepreneurship indicators,
Business Demography and SMEs

• By Patrizia Cella and Mirella Morrone (ISTAT-
  Italy)
• 21 Meeting of the Wiesbaden Group on BR-
• Roundtable on Business Survey Frames

Paris, November 24-27, 2008
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Outlines
21th Meeting of Wiesbaden Group on BR
Roundtable on Business Survey Frames

• Purposes
• The Potential High Growth
• The High Growth definition
• Shift-share analysis
• Performance Indicators
• Conclusions

Paris, November 26, 2008
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Purposes
21th Meeting of Wiesbaden Group on BR
Roundtable on Business Survey Frames
The purpose of this work is to investigate on the
definition of High Growth enterprises, described
in the EUROSTAT-OECD Manual on Business
Demography Statistics. In particular, various
strategies for determining HG rates and their
impacts on entrepreneurship are tested,
especially with regards to wealth and employment
creation contribution. For this purpose different
sets of potential high-growth enterprises are
compared in terms of employment and turnover.
Paris, November 26, 2008
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The Potential HG (1)
21th Meeting of Wiesbaden Group on BR
Roundtable on Business Survey Frames
Definition All enterprises that are actives in
three consecutive years, excluding the
enterprises born in the beginning of the
observation period. In the year 2005 the
Potential HG is AAN2002 n N2003 n N2004 n N2005
Paris, November 26, 2008
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21th Meeting of Wiesbaden Group on BR
Roundtable on Business Survey Frames
The Potential HG (2)
Potential Population for HG
Paris, November 26, 2008
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21th Meeting of Wiesbaden Group on BR
Roundtable on Business Survey Frames
The Potential HG (3)
Potential Population for HG
Where Entropy average (MH)
Paris, November 26, 2008
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The HG definition (1)
21th Meeting of Wiesbaden Group on BR
Roundtable on Business Survey Frames
Definition All enterprises with average
annualised growth greater than 20 per annum,
over three year period should be considered as
high-growth enterprises. Growth can be measured
by the number of employees or by turnover
Paris, November 26, 2008
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The HG definition (2)
21th Meeting of Wiesbaden Group on BR
Roundtable on Business Survey Frames
HG_rate 9.1
What is the meaning of this high-growth rate?
What is the impact that these high-growth
enterprises are on the economy?
Paris, November 26, 2008
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The HG definition (3)
21th Meeting of Wiesbaden Group on BR
Roundtable on Business Survey Frames
Contribution of high-growth enterprises by
sectors of economic activity
Paris, November 26, 2008
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The HG definition (4)
21th Meeting of Wiesbaden Group on BR
Roundtable on Business Survey Frames
Contribution of high-growth enterprises by
sectors of economic activity
Paris, November 26, 2008
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Shift-share analysis (1)
21th Meeting of Wiesbaden Group on BR
Roundtable on Business Survey Frames
Shift-share analysis permits to decompose
employment or turnover growth into three
components
1) Trend Component
2) Industry Mix effect
3) Competitive effect



CE (Competitive Effect)
TC (Trend component)
IM (Industry Mix Effect)
Paris, November 26, 2008
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Shift-share analysis (2)
21th Meeting of Wiesbaden Group on BR
Roundtable on Business Survey Frames
Shift-share analysis was applied to 6
sub-population
1) Other legal forms of enterprises with less
than 10 employees
2) Limited liability company with less than 10
employees
3) Other legal forms of HG enterprises
4) Limited liability of HG enterprises
5) Other legal forms of enterprises with 10 or
more employees that are not high growth
6) Limited liability company with 10 or more
employees that are not high growth
The shift-share analysis is applied both
employment and turnover growth
Paris, November 26, 2008
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Shift-share analysis (3)
21th Meeting of Wiesbaden Group on BR
Roundtable on Business Survey Frames
Components of employment growth, identified by
shift-share analysis of 6 sub-populations
Paris, November 26, 2008
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Shift-share analysis (4)
21th Meeting of Wiesbaden Group on BR
Roundtable on Business Survey Frames
Components of turnover growth, identified by
shift-share analysis of 6 sub-populations
Paris, November 26, 2008
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Performance Indicators (1)
21th Meeting of Wiesbaden Group on BR
Roundtable on Business Survey Frames
Four economic performance indicators from
balance-sheet accounts are used as significant
instruments to quantify the economic and
financial performance of the HG enterprises
1) The turnover by persons employed
2) The value added by persons employed
3) The ROE (Return on Equity)
4) The ROS (Return on Sales)
These four indicators are calculated only for
the limited liability companies
1) Limited liability company with less 10
employees 2) Limited liability of HG
enterprises 3) Limited liability company with 10
or more employees that havent high growth
Paris, November 26, 2008
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Performance Indicators (2)
21th Meeting of Wiesbaden Group on BR
Roundtable on Business Survey Frames
1) The turnover by persons employed
This indicator represents the most immediate
measure of business output. It is calculated as
ratio among the revenues of the sales and the
number of persons employed
Paris, November 26, 2008
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Performance Indicators (3)
21th Meeting of Wiesbaden Group on BR
Roundtable on Business Survey Frames
2) The value-added by persons employed
This indicator represents the real wealth
created by the processes of production of goods
and services that pay for all the production
factors. It is calculated as ratio between the
characteristic value added (the difference
between the value of the production and the
costs of subjects, services and enjoyment of
goods) and the number of the persons employed
Paris, November 26, 2008
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Performance Indicators (4)
21th Meeting of Wiesbaden Group on BR
Roundtable on Business Survey Frames
3) The ROE (Return on Equity)
This indicator represents the productivity
obtained by the proper capital in terms of
profit. It expresses the return that a firm has
had on the net property (that is the inside
source of financing). It is calculated as ratio
between the profits of exercise and the net
property
Paris, November 26, 2008
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Performance Indicators (5)
21th Meeting of Wiesbaden Group on BR
Roundtable on Business Survey Frames
4) The ROS (Return on Sales)
This indicator measures the profitability of the
sales in terms of characteristic management. Is
an indicator influenced by the sector in which
the firm operates. It serves for measuring the
return of the sales on the profits
Paris, November 26, 2008
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An Empirical Analysis to investigate on High
Growth definition
Conclusions The analysis carried out in this
work shows that the high growth are the
enterprises with more performance than others,
above all in terms of turnover. The performance
economic indicators show that the high growth are
the best in terms of profitability, especially in
the sector of Industry less in the sector of
services. The threshold of 10 employees
according to which the high growth are
identified, is too much restrictive for those
sectors characterized by micro and small
enterprises. To use a growth composite
indicator (we are going to work on this issue)
that take account of both the arithmetic average
and the characteristic dimension of the economic
activity sectors, would be desirable.
Paris, November 26, 2008