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Small Business Economics
Published in: Small Business Economics 1/2022

20-09-2021

High growth firms and trade linkages: Imports do matter

Authors: Marcio Cruz, Leila Baghdadi, Hassen Arouri

Published in: Small Business Economics | Issue 1/2022

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Abstract

This paper examines the association between high-growth firm status and global linkages with special focus on the role of imports. We rely on a rich panel data covering all formal firms in Tunisia between 1999 and 2015. Our results show that firms that import, export, have foreigner ownership, or benefit from offshore regimes are more likely to achieve high-growth status compared to other similar firms in terms of size, age, sector, and region. Among these channels, importing status has a robust positive association with high growth. We find that an increase in the import barriers led by changes in non-tariff measures reduces the likelihood of achieving high-growth status through import channel for firms that are in sectors facing relatively higher levels of exposure to the shock.
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Appendix
Available only for authorised users
Footnotes
1
For example, if 1000 small firms, with 10 employees each, manage to grow 20% per year over 10 years, their number of jobs would increase from 10,000 to almost 62,000 over this period.
 
2
Coad and Srhoj (2020) use comprehensive datasets on Croatian and Slovenian firms and highlight that predicting HGF status based on observable characteristics of the firm is a significant challenge. Lopez-Garcia and Puente (2012) use a dynamic probit analysis with firms from Spain and find that human capital factors and access to credit are important to high-growth episodes. Audretsch (2012) summarizes the discussion on key determinants of HGF highlighting the importance of several factors, including managerial skills, access to finance, market orientation, human capital, and geographic clusters.
 
3
We use lag information starting in 1996 to calculate HGF status, which require 3 years of existence.
 
4
We assess the robustness of the results in the empirical analysis (section 5) by following the OECD definition FOR HGF and imposition the constraints towards firms with 10 or more employees. Section 1 of the appendix provides a short summary on other HGF definitions available and used in the literature.
 
5
The OECD report Entrepreneurship at a Glance (OECD 2017) has been publishing several indicators of HGF annually, but mostly concentrated on OECD countries.
 
6
Addition information on the RNE is presented in Rijkers et al. (2014).
 
7
We use data from previous years, up to 1996, to calculate the HGF indicators for 1999 and identify the entry rate information, starting in 1997.
 
8
This pattern is very common across the 2000–2014 period. The year 2015 is very atypical regarding the share of young firms in total number of jobs, as described in the Appendix.
 
9
Following Woodridge (2002, p. 455), “the LPM often seems to give good estimates of the partial effects on the response probability near the center of the distribution of X. If the main purpose is to estimate the partial effect of Xj on the response probability, averaged across the distribution of x, then the fact that some predicted values are outside the unit interval may not be very important.”
 
10
The HGF status is calculated based on the definitions previously described over 3-year growth rate average.
 
11
This estimation assumes a linear relationship regarding exporting and importing statuses. It means that the marginal estimates associated with becoming an exporter (importer) or exporting (importing) an additional year with high-growth status are constant.
 
12
Results are available under request.
 
13
Foreign and Offshore statuses are also negative, but not significant. Yet, these variables have low variation within-firm, given that a very small share of firms change their FDI or offshore status over time.
 
14
For example, Clayton et al. (2013) and Daunfeldt et al. (2014) find that at least 75% of firms in the US private sector and 95% of surviving firms in Sweden, respectively, are smaller than 10 employees.
 
15
Another option suggested by Clayton et al. (2013) classifies a firm with fewer than 10 employees as an HGF if it made a growth of 8 or more employees over a 3-year period.
 
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Metadata
Title
High growth firms and trade linkages: Imports do matter
Authors
Marcio Cruz
Leila Baghdadi
Hassen Arouri
Publication date
20-09-2021
Publisher
Springer US
Published in
Small Business Economics / Issue 1/2022
Print ISSN: 0921-898X
Electronic ISSN: 1573-0913
DOI
https://doi.org/10.1007/s11187-021-00538-w

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