Human capital, innovation and the distribution of firm growth rates
Micheline Goedhuys & Leo Sleuwaegen
#2015-013
This paper focuses on the occurrence of high-growth firms in relation to
human capital and innovation. High-growth firms are rather exceptional
and temporary phenomena and occur in the upper tail of the conditional
firm growth distribution. Using quantile regression we study how human
capital and R&D affect the probability that high-growth firms occur. The
results show that both human capital and R&D increase the likelihood
that a firm is a high-growth firm. Human capital appears to be positive
and growth enhancing over the entire conditional growth distribution,
hence also in the lower quantiles, where it reduces the likelihood of
low growth. By contrast, R&D increases not only the likelihood of
high-growth firms, but also the likelihood of low-growth firms and
exits, underscoring the risky nature of innovation. A probit analysis
for high-growth firms and low-growth firms provides corroborating
evidence for this finding. From a policy perspective the results suggest
the use of more integrated policies, not only focusing on stimulating
R&D but also on the quality of human capital to foster the development
of high-growth firms.
Keywords: firm growth, high-growth firms, R&D, human capital
JEL Classification: L25, O32