Economic Dynamism
Örebro Studies in Economics 25
NIKLAS ELERT
Economic Dynamism
Essays on firm entry and firm growth
© Niklas Elert, 2014
Title: Economic Dynamism – Essays on firm entry and firm growth
Publisher: Örebro University 2014
www.oru.se/publikationer-avhandlingar
Print: Örebro University, Repro 05/2014
ISSN 1651-8896
ISBN 978-91-7529-030-0
Abstract
Niklas Elert (2014): Economic Dynamism – Essays on firm entry and firm
growth. Örebro Studies in Economics.
The topic of this thesis is economic dynamism. The five articles contribute to the
literature on firm entry and firm growth. Studies are based on a dataset covering
all Swedish limited liability firms between 1997 and 2010.
The first article investigates conditions for firm entry in Sweden, distinguishing regular entrants from entrants that survive for at least two years,
modelling the firm entry decision using count data models. While high income
and a well-educated population had a positive effect, the effect was more important for surviving entrants. The second article uses a similar method, but
focuses on wholesale industries and distinguishes between regular entry and
in-migration of firms, i.e. when an incumbent firm relocates its operations.
Access to a university, many educated workers and low local taxes had positive
effects. Better access to infrastructure had a strong positive effect on entrants,
but it was smaller for in-migrating firms. The third article investigates if the
industry context matters for whether Gibrat’s law holds, i.e. whether firm
growth is independent of firm size. The law is found more likely to be rejected
in industries with a high minimum efficient scale and a large number of firms
located in metropolitan areas, but more likely to hold in industries with high
market concentration and more group ownership. The fourth and fifth article
contribute to the high-growth firms (HGFs) literature. In the fourth article it
is examined whether the way HGFs are defined matters for the policy implications. It is found that the economic contributions of HGFs differ significantly
depending on definition. Young firms are however more likely to be HGFs
irrespective of definition. The fifth article considers the frequent argument that
policymakers should target high-tech firms, i.e., firms with high R&D intensity, because such firms are thought more likely to become HGFs. We examine
this assumption by studying the industry distribution of HGFs. Results indicate
that industries with high R&D intensity, ceteris paribus, can be expected to
have a lower share of HGFs than can industries with lower R&D intensity. By
contrast, we find that HGFs are overrepresented in service industries with a
high share of human capital.
Keywords: Entrepreneurship, Innovation, Firm entry, Regional economics,
Gibrat's Law, Firm growth, Firm size, Gazelles, High-growth firms, Highimpact firms.
Niklas Elert, Department of economics
Örebro University, SE-701 82 Örebro, Sweden, [email protected]
Acknowledgements
According to fantasy author Neil Gaiman, a novel can best be defined as “a long
piece of prose with something wrong with it”. I am quite certain that I have
written a thesis that also meets that criterion. I want to take the opportunity to
thank the people who made the errors fewer than they otherwise would have
been, and all those who in one way or another made this thesis possible.
First of all, I would like to express my deep gratitude to The Ratio Institute,
Dalarna University and Örebro University for giving me the opportunity to pursue a post-graduate education. Notably I am indebted to Nils Karlson and The
Ratio Institute, my workplace. Ratio has been an engaging and inspiring environment and has meant a lot to me and to this dissertation. I am furthermore
much indebted to my main supervisor Sven-Olov Daunfeldt for his invaluable
advice, guidance and encouragement. I also want to express my gratitude to my
co-supervisors Dan Johansson and Niklas Rudholm, whose many insightful
comments have greatly improved this dissertation.
I would especially like to thank my fellow Ph. D student (now doctor) Daniel
Halvarsson, for the time and effort he spent helping me throughout this dissertation, but most of all for his good friendship. I also want to express my gratitude to my other colleagues at Ratio, whose help, friendship and encouragement
over the years have been very valuable. In particular I want to thank Hannes
Andréasson, Karl Axelsson, Niclas Berggren, Anders Bornhäll, Ann-Kari
Edenius, Elina Fergin, Anne-Sophie Larsson, Daniel Klein, Hans Pitlik, Christian Sandström, Patrik Tingvall, Karl Wennberg, and Hans Westerberg.
Furthermore, I would like to thank Professor Martin Andersson for his many
valuable comments during my licentiate seminar, Professor Johan Klaesson who
discussed my papers at the pre-seminar, and all participants at seminars whose
comments and suggestions have been very useful. I also owe a great debt to Lars
Hultkrantz, Daniela Andrén and many others at Örebro University for their
great help and encouragement. During the fall of 2013, I got the opportunity to
study at George Mason University in Washington DC, for which I gratefully
recognize financial support from the Ragnar Söderberg Foundation.
Finally I want to express my great appreciation to my friends and family for
their never-ending support. Words cannot express how grateful I am to my fiancée Josefin for her patience and encouragement. Thank you for believing in
me.
Of course, all errors are my own.
Niklas Elert
The Ratio Institute, Stockholm, May, 2014.
Table of Contents
Introductory Chapter
Article 1 – What determines entry? Evidence from Sweden
Article 2 – Start-ups and firm in-migration: evidence from the Swedish
wholesale industry
Article 3 – When is Gibrat’s law a law?
Article 4 – The Economic Contribution of High-growth Firms: Do policy
Implications Depend on the Choice of Growth Indicator?
Article 5 – Are High-Growth Firms Overrepresented in High- tech Industries?
Introductory Chapter
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4.1 Chapter 1. What determines entry? Evidence from Sweden
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wholesale industry
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65
Publications in the series
Örebro Studies in Economics
1.
Lundin, Nannan (2003): International Competition and FirmLevel Performance. – Microeconomic Evidence from Swedish
Manufacturing in the 1990s. Licentiate thesis.
2.
Yun, Lihong (2004): Productivity and Inter-Industry Wages.
Licentiate thesis.
3.
Poldahl, Andreas (2004): Productivity and R&D. Evidence from
Swedish Firm Level Data. Licentiate thesis.
4. Lundin, Nannan (2004): Impact of International Competition
on Swedish Manufacturing. Individual and Firm-Level Evidence
from 1990s.
5.
Karpaty, Patrik (2004): Does Foreign Ownership Matter?
Evidence from Swedish firm Level Data. Licentiate thesis.
6.
Yun, Lihong (2005): Labour Productivity and International Trade.
7.
Poldahl, Andreas (2005): The impact of competition and
innovation on firm performance.
8.
Karpaty, Patrik (2006): Does Foreign Ownership Matter?
Multinational Firms, Productivity and Spillovers.
9.
Bandick, Roger (2005): Wages and employment in multinationals.
Microeconomic evidence from Swedish manufacturing.
Licentiate thesis.
10.
Bångman, Gunnel (2006): Equity in welfare evaluations
– The rationale for and effects of distributional weighting.
11.
Aranki, Ted (2006) Wages, unemployment and regional
differences – empirical studies of the Palestinian labor market.
12.
Svantesson, Elisabeth (2006): “Determinants of Immigrants’
Early Labour Market Integration” (Essay 1). “Do Introduction
Programs Affect the Probability for Immigrants getting Work?”
(Essay 2).
13.
Lindberg, Gunnar (2006): Valuation and Pricing of Traffic Safety.
14.
Svensson, Mikael (2007): What is a Life Worth? Methodological
Issues in Estimating the Value of a Statistical Life.
15.
Bandick, Roger (2008): Multinationals, Employment and Wages.
Microeconomics Evidence from Swedish Manufacturing.
17.
Krüger, Niclas A. (2009): Infrastructure Investment Planning
under Uncertainty.
18.
Swärdh, Jan-Erik (2009): Commuting Time Choice and the Value
of Travel Time.
19.
Bohlin, Lars (2010): Taxation of Intermediate Goods.
A CGE Analysis.
20.
Arvidsson, Sara (2010): Essays on Asymmetric Information in the
Automobile Insurance Market.
21.
Sund, Björn (2010): Economic evaluation, value of life, stated
preference methodology and determinants of risks.
22.
Ahlberg, Joakim (2012): Multi-unit common value auctions:
Theory and experiments.
23.
Lodefalk, Magnus (2013): Tackling Barriers to Firm Trade.
Liberalisation, Migration, and Servicification.
24. Liu, Xing (2013): Transport and Environmental Incentive Policy
Instruments – Effects and Interactions.
25.
Elert, Niklas (2014): Economic Dynamism.