ERC Presentation. Theme 6 Reference Group . dynamic Job Creation and Productivity Growth.

1. ERC Theme 6:Firm Dynamics, Job
Creation and Productivity
Growth
Reference Group Presentation
20 February 2014

2. Headline Activity since April
2013
• Contribution to ERC White Paper: “Supporting
Sustained Growth Among SMEs – Policy Models And
Guidelines”
• ERC Research & Insight Papers:
– “Accounting for Job Growth: disentangling size and age
effects of an international cohort comparison”
– “Localisation of Industrial Activity across England’s LEPs”
– “Vital 6% Revisited”

3. New Research Projects – for BIS
• Localisation of Industrial Activity across England’s LEPs (ERC
Research Paper No.15 – January 2014) – update of the 2001
analysis using the BSD for 2008 and 2012 – feeding into LEP SEPs
and the Witty Review
• Understanding motivations for Entrepreneurship (kick-off -
November 2013 – reporting in March 2014)
• Growth Accelerator Collaboration - building a ‘Growth Dashboard’
for the English LEPs: Key metrics:
– Barriers to growth (GA diagnostic data)
– % growing firms; % of firms £1-2m to £3-5m; % of start-ups getting to £1m
in 3 years
– Interim evaluation of Growth Accelerator

4. Engagement and Impact
• Overarching objective – inserting evidence into discussions
about the nature, scale and impact of business support:
– Grant Thornton/ BIS – Growth Accelerator CRM analysis
– Involvement in LEP SEPs – though cluster work, HGF analysis and
business birth rate analysis (e.g., GBS LEP and Leeds City-Region LEP)
– Scottish Government – business demography analysis – especially fast-
growing firms analysis
– Early discussion on a joint policy paper with FSB – June 2014
– Building a common evidence base with Centre for Entrepreneurs and
DueDil
– Micro-entrepreneurs and growth (CDFA link; RSA “Power of Small”
project)
– MSBs – action research – early discussions with RBS and their MSB
clients for a strategy clinic (ABS; WBS and BBS in the Midlands)

5. Research Plan for 2014
• HGFs Re-visited – “Moving on from the Vital 6%”
• LEP-Level Analysis:
– “Localisation of Industrial Activity across England’s LEPs”
– “Business Birth Rates and New Job Creation in England’s LEPs”
• Job Creation and Destruction – 2008-2013
• Data Infrastructure
• Job Growth
• Productivity Work

6. “Moving on from the Vital 6%”b
ERC Insight (Feb 2014)

7. HGFs in Context

8. Growth of a Cohort of Start-ups
• Just 11% of start-up firms born in 1998 survive until
2013.
• 60% of the surviving firms are job creators and the
bulk of these job creators were born very small, with
less than five employees and most of them remain
very small and create very few jobs.

9. An Alternative Vital 6%!
• But within the class of very small firm start-ups there is a very
small group (6% of them: 1,248 firms) which are extraordinary
prolific job creators (EPJCs):
• ……between them accounting for 90 thousand added jobs,
about 40% of job creation by all 15 year survivors.
• For policy discussion purposes we need to abandon our
reliance on an OECD HGF metric – it is an arbitrary definition
and does not satisfactorily reflect the episodic nature of the
growth process in rapidly growing small firms.

10. Job Creation & Destruction
Private sector job creation and destruction, by component, ratio to
opening stock (%), 1998-2013
-15
-10
-5
0
5
10
15
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
ratiotoopeningstock(%)
net birth expansion exit contraction

11. Are all LEPs Created Equal?
• There is virtually no relationship across LEPs between the
business birth rate and net job creation.
• The (proximate) reason is that the death rate is very strongly
(positively) correlated with the business birth rate across LEPs,
and the difference between the birth rate and death rate is
uncorrelated with the birth rate:
• in other words, LEPs with large birth rates have proportionally
larger death rates.
• Whilst variations in the difference between the birth rate and
death rate do account for some of the variation in rates of net
job creation, the contribution to net job creation by
continuing firms is more important almost everywhere.

12. Data Infrastructure
• Creating a linked micro-level database for the UK – enhancing
the current longitudinal dataset of the whole private sector in
the UK (1998-2013)
• Based on plant and firm-level BSD data liked to other ONS
business survey data as well as other relevant datasets (e.g.,
Growth Accelerator CRM data) – the foundation of our work
to explain the growth trajectory of small firms.
• Facilitates cross-theme projects – especially Themes 4 and 5

13. Job Growth Analysis
• HGF/EPJC growth trajectories -- by characteristics:
age, size, sector, location, foreign ownership, multi
and single work place
• Modelling job creation and destruction accounts --
by characteristics
• Job growth rate distributions -- by characteristics
• LEPs and Scotland and Wales – and other
geographies – city-regions and rural areas

14. Productivity Work
• Initially turnover per job for single workplace firms: level,
growth and growth rate distributions by characteristics
• Growth of the Fittest? Evidence of Productivity and High
Employment Growth Firms in the UK - working in progress
• Decompose aggregate productivity (growth) and look at
potential drivers and barriers to growth. This is best done on
population data, so presumably BSD linked with ARD.
• Early discussions with Barclays have taken place about access
to their business data

15. Discussion
• Other related issues we should be looking at that are
of interest to you and where you would wish to be
engaged?
• Do you have data or research evidence on these
topics you can share with ERC?
• Are there other organisations we should be talking
to?

16. Contact us:
If you would like any more information about Theme 6 and any of its activities
please contact the Theme Lead, Mark Hart at mark.hart@aston.ac.uk or
Michael Anyadike-Danes at m.anyadike-danes@ston.ac.uk or
Jun Du at j.du@aston.ac.uk or Ying Zhou at y.zhou8@aston.ac.uk
More details about the activities of the ERC and our latest events can be
found at:
www.enterpriseresearch.ac.uk