Human capital, innovation and the distribution of firm growth rates

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Abstract

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.
Original languageEnglish
Place of PublicationMaastricht
PublisherUNU-MERIT
Publication statusPublished - 1 Jan 2015

Publication series

SeriesUNU-MERIT Working Papers
Number013

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