One swallow does not make a summer: episodes and persistence in high growth

Area of Science:

• Business and Economics
• Industrial Organization
• Entrepreneurship

Background:

• Understanding high growth (HG) is crucial for economic development.
• Previous research often overlooks the dynamic, episodic nature of firm growth.

Purpose of the Study:

• Analyze the duration and determinants of high growth (HG) episodes in Spanish manufacturing firms.
• Investigate the persistence of HG and its variation across the business cycle.

Main Methods:

• Utilized duration models to analyze firm-level data over two decades.
• Examined transitions into and out of high-growth states.

Main Results:

• Approximately 50% of firms experience at least one HG episode, but repeat episodes are rare due to initial selection.
• Hazard rates from HG decrease after the first year, indicating episodic growth.
• Firm and market characteristics impact HG probability and persistence, with age and size effects varying by economic cycle.

Conclusions:

• High growth is predominantly episodic, characterized by distinct spells rather than sustained growth.
• Two firm profiles emerge: those with long HG spells and short non-high-growth spells, and vice versa.
• Economic conditions influence the factors driving high growth and its duration.