High-growth versus declining firms: the differential impact of human capital and R&D

ABSTRACT

We provide evidence that both human capital and R&D increase the likelihood that a firm will be a high-growth firm in the industry. However, different from human capital, being an R&D active firm also increases the probability of substantial decline or failure, underscoring the risky nature of innovation. Quantile regression results show that, different from R&D, human capital is growth-enhancing for all firms, hence also those located in the lower quantiles of the distribution of growth rates across firms.

KEYWORDS:

• Firm growth
• high-growth firms
• R&D
• human capital
• quantile regression

JEL CLASSIFICATION:

• L11
• L25
• L26
• O30

Notes

¹ Dependent variable is [log(employment2011) − log(employment2008)]/3 with a mean value of −0.011 and a SD of 0.138. Full estimation results, with size and age included and industry dummies and bootstrapped SEs can be obtained upon request from the authors.

Additional information

Funding

Financial support of the Steunpunt Ondernemen en Regionale Economie (STORE), Flemish authorities, is gratefully acknowledged.