1. High Growth Firms and Gazelles in Denmark Ditte Rude Petersen FORA

2. Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk Measuring High Growth Firms and Gazelles >The Danish results >Employment vs. turnover based measure >The value of international comparable data - example from the Danish Entrepreneurship Index

3. Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk Number of firmsShare All firms with 10+ employees21.583 High Growth firms - turnover1.4306,6 High Growth firms - employment7213,3 New firms with 10+ employees4.645 Gazelles - turnover48510,4 Gazelles - employment2816,1 >The preliminary results; > Mergers, acquisitions and take-overs are not considered > First year has not been removed from sample High growth firms and gazelles, 2000-03 Measuring High Growth Firms and Gazelles

4. Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk The Challenges when measuring Gazelles… >The number of new firms is overrated; New CVR number (business register number) = New firm birth >Correcting for this, the number of Gazelles is somewhere between 62 and 281… t – 3 t t – 8 Period of start-up Observation period New CVR – but not a real employer birth

5. Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk Looking at High Growth Firms… >The thresholds seem to be adequate;  High growth rate (employment) = 3,3 pct.  Due to confidentiality 4 observations (721) was removed when looking at the 2 digit NACE sector level. High Growth Firms (employment base)2003 High Growth rate (Employment base) 64Post and telecommunications13,21 73Research and development12,24 72Computer and related activities9,92 >Gazelles..? Maybe introducing Mini Gazelles; 5+ employees

6. Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk >The question is whether the two measures capture the same firms? >First of all, it can be observed that there are twice as many HGT as HGE. This can be explained by a greater variance in turnover growth; Employment and turnover growth among all firms with 10+ employees, 2000-03 Mean Standard deviationVariance Employment growth-4,9107,111.470 Turnover growth14,6219,148.005 Employment vs. Turnover based measure

7. Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk >Secondly, it can be observed that it is the same sectors that generate High Growth Firms in Denmark regardless of measure… Employment vs. Turnover based measure

8. Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk Employment vs. Turnover based measure High Growth firms, 2000-03Number of firmsShare Revenue1430 Employment721 Both42058,3 High Growth firms, 2000-03Number of firmsShare Revenue721 Employment721 Both28339,3 Intersection of sets between employment and turnover based measure >However, looking at the firm level the conclusion is bit different…

9. Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk Employment vs. Turnover based measure >In conclusion, there seems to be a rationale in using both measures - despite the flaws of the turnover measure… R2R2 All firms0,01 All firms with 10+ employees0,25 High growth - turnover0,24 High growth - employment0,52 >Especially, when looking at how employment growth is correlated with turnover growth… Correlation between employment and turnover growth

10. Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk >The Danish Entrepreneurship Index; Note: Different definition of gazelles and preliminary results The value of international comparable data…

11. Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk The value of international comparable data… (1) Now it is possible to say exactly how far behind Denmark is; High Growth Firms (employment base), 2003 DenmarkUSA Number of high growth firms72156.907 High growth rate3,34,4 If high growth rate = 4,4952 Extra high growth firms231

12. Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk (2) It is possible to say whether it is possible to catch up… (3) Concrete policy measures; >How many more High Growth Firms do we need; >In different sectors in Denmark >In different regions of Denmark >Target for the Regional Growth Houses The value of international comparable data…