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Low Incidences of High Growth Firms in Scotland: Why is Scotland lagging behind?

Presentation to ISBE 2019 by Neha Prashar.

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Low Incidences of High Growth Firms in Scotland: Why is Scotland lagging behind?

  1. 1. Aston University Birmingham B4 7ET E: mark.hart@aston.ac.uk, n.prashar14@aston.ac.uk Low Incidences of High Growth Firms in Scotland: Why is Scotland lagging behind? Neha Prashar, Anastasia Ri, Mark Hart, Jonathan Slow, Karen Bonner and Jun Du
  2. 2. Main Research Question โ€ข What explains low levels of High Growth Firms in Scotland 1. Firm Characteristics 2. Regional Level Characteristics 3. Different entrepreneurial activity/ ambition โ€ข Is there a โ€œScottishโ€ effect or can differences be explained through the points above.
  3. 3. 6 8 10 12 14 16 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 HGErate(%)(20%over1year) North East North West Wales Scotland UK UK (Excl London) โ€ข Analysis shows that Scotland has been below the UK average since 2010 โ€ข This is true whether looking at the OECD definition of 20% growth over a 3 year period and relaxing this assumption to looking at 10% and 1 and 2-year periods. Background
  4. 4. Model ๐‘ฎ๐’“๐’๐’˜๐’•๐’‰ ๐‘ด๐’†๐’•๐’“๐’Š๐’„๐’Š๐’• = ฮฑ๐’Š๐’• + ฮฒ๐’Š๐’• ๐‘ฟ๐’Š๐’• + ฮณ๐’Š ๐’•โˆ’๐Ÿ ๐’๐’Š ๐’•โˆ’๐Ÿ + ฮด๐’Š + ฮธ ๐’• + ฮต๐’Š๐’• โ€ข HGE โ€“ High growth episode (10% growth in employment over 1 year for firms with more than or equal to 10 employees) โ€ข HGE_20 โ€“ High growth episode (20% growth in employment over 1 year for firms with more than or equal to 10 employees) โ€ข sHGE โ€“ small high growth episode (growth in employment by at least 8 employees for firms with less than 10 employees) โ€ข allHGE - High growth episode (10% growth in employment over 1 year for firms with more than or equal to 10 employees) and sHGE (growth in employment by at least 8 employees for firms with less than 10 employees) together. โ€ข allHGE_20 - High growth episode (20% growth in employment over 1 year for firms with more than or equal to 10 employees) and sHGE (growth in employment by at least 8 employees for firms with less than 10 employees) together. Data is combined from the Business Structure Database (BSD), Annual Population Survey (APS) and the Global Entrepreneurship Monitor (GEM) for 2010-2018. Logistic regression analysis with random effects is estimated using the panel data. The data was restricted to those born before 2007 and still alive in 2018. This was done due to memory restrictions in the Secure Lab โ€“ something we are working on to modify during the course of this research.
  5. 5. Model ๐‘ฟ๐’Š๐’• includes โ€ข Age = Year โ€“ Birth of a firm โ€ข Sector = 1 digit SIC code classifications (not including Agriculture, mining and public sectors) โ€ข Average TEA = Total early stage entrepreneurial activity (GOR level for each year). This is taken from the Global Entrepreneurship Monitor UK. โ€ข UKborn = percentage of working aged population (16-64) who are non โ€“UK born (NUTS2 level for each year) โ€ข Ethnic = percentage of working aged population (16-64) who are ethnic minority (NUTS2 level for each year) โ€ข NVQ4+ = percentage of working aged population (16-64) who have qualification of NVQ4 or over โ€ข Netemployment = calculated from job creation and destruction estimates as the number of jobs resulting from firm births + firm expansions โ€“ (firm deaths + firm contractions) at NUTS3 level for each year โ€ข GOR = GOR level dummies โ€ข Year = Year level dummies ๐’๐’Š ๐’•โˆ’๐Ÿ includes โ€ข Size = size in terms of number of employees โ€ข Empgr = previous employment growth over one year (ie, for 2010, it would be the employment growth between 2008 and 2009) โ€ข Turngr = previous turnover growth (similar to empgr) ฮด๐’Š represents the regional dummies at GOR level and ฮธ ๐’• are time dummies. Results presented are the odds ratios.
  6. 6. Results (1) (2) (3) (4) (5) VARIABLES HGE HGE HGE HGE HGE Age 0.900*** 0.906*** 0.906*** 0.906*** 0.906*** (0.000899) (0.000904) (0.000904) (0.000909) (0.000909) Base = 10- 14 employees 15-19 employees 0.844*** 0.846*** 0.846*** 0.846*** 0.846*** (0.00769) (0.00765) (0.00765) (0.00769) (0.00769) 20-49 employees 0.937*** 0.940*** 0.940*** 0.939*** 0.939*** (0.00766) (0.00760) (0.00760) (0.00764) (0.00764) 50-249 employees 1.019* 1.017* 1.017* 1.016 1.016 (0.0104) (0.0102) (0.0102) (0.0103) (0.0103) 250+ employees 1.187*** 1.178*** 1.178*** 1.177*** 1.177*** (0.0204) (0.0200) (0.0200) (0.0201) (0.0201) Base = Manufacturing Electricity 1.348** 1.275** 1.275** 1.268* 1.268* (0.167) (0.156) (0.156) (0.157) (0.157) Water Supply 1.407*** 1.390*** 1.390*** 1.382*** 1.382*** (0.0538) (0.0522) (0.0522) (0.0523) (0.0523) Construction 0.806*** 0.805*** 0.805*** 0.806*** 0.806*** (0.0116) (0.0114) (0.0114) (0.0115) (0.0115) Wholesale and Retail Trade 0.993 0.992 0.992 0.991 0.991 (0.0109) (0.0108) (0.0108) (0.0108) (0.0108) Transport and Storage 1.180*** 1.174*** 1.173*** 1.173*** 1.173*** (0.0202) (0.0198) (0.0198) (0.0199) (0.0199) Accommodation 1.036** 1.041*** 1.041*** 1.038*** 1.038*** (0.0143) (0.0141) (0.0141) (0.0142) (0.0142) Information and Communication 1.509*** 1.489*** 1.489*** 1.477*** 1.477*** (0.0249) (0.0241) (0.0241) (0.0241) (0.0241) Financial and Insurance 0.981 0.976 0.976 0.967 0.968 (0.0242) (0.0237) (0.0237) (0.0236) (0.0236) Real Estate 0.865*** 0.848*** 0.848*** 0.844*** 0.844*** (0.0201) (0.0194) (0.0194) (0.0195) (0.0195) Professional, Scientific and Tech. Act 1.109*** 1.105*** 1.105*** 1.098*** 1.098*** (0.0145) (0.0142) (0.0142) (0.0143) (0.0143) Admin, support services 1.188*** 1.181*** 1.181*** 1.179*** 1.179*** (0.0170) (0.0166) (0.0166) (0.0167) (0.0167) Arts, Entertainment and Recreation 1.163*** 1.152*** 1.152*** 1.148*** 1.148*** (0.0223) (0.0217) (0.0217) (0.0218) (0.0218) Other Service Activities 1.026 1.020 1.019 1.015 1.014 (0.0185) (0.0181) (0.0181) (0.0181) (0.0181)
  7. 7. Employment growth (t-1) 1.204*** 1.203*** 1.203*** 1.203*** (0.0105) (0.0105) (0.0106) (0.0106) Turnover growth (t-1) 1.274*** 1.274*** 1.273*** 1.273*** (0.00845) (0.00845) (0.00849) (0.00849) Average TEA 1.657** 1.650** 1.690** (0.335) (0.337) (0.346) % of working pop with NVQ4+ 1.002** 1.002** (0.00114) (0.00114) % of working pop that are ethnic minorities 0.999 0.999 (0.00166) (0.00166) % of working pop that are Non-UK Born 1.005* 1.004* (0.00258) (0.00258) netemployment 1.004*** (0.000768) Base = North East North West 1.080*** 1.077*** 1.071*** 1.052** 1.050** (0.0239) (0.0235) (0.0235) (0.0237) (0.0236) Yorkshire and the Humber 1.042* 1.041* 1.025 1.006 1.005 (0.0239) (0.0235) (0.0239) (0.0239) (0.0238) East Midlands 1.069*** 1.066*** 1.064*** 1.034 1.034 (0.0248) (0.0243) (0.0243) (0.0251) (0.0251) West Midlands 1.040* 1.037 1.031 1.007 1.005 (0.0236) (0.0231) (0.0231) (0.0239) (0.0238) East of England 1.084*** 1.078*** 1.062*** 1.020 1.019 (0.0242) (0.0236) (0.0241) (0.0255) (0.0255) London 1.190*** 1.174*** 1.152*** 0.954 0.951 (0.0255) (0.0248) (0.0258) (0.0429) (0.0428) South East 1.084*** 1.079*** 1.064*** 1.001 1.001 (0.0232) (0.0227) (0.0232) (0.0245) (0.0246) South West 1.083*** 1.078*** 1.063*** 1.026 1.023 (0.0244) (0.0239) (0.0244) (0.0246) (0.0245) Wales 0.883*** 0.882*** 0.879*** 0.871*** 0.870*** (0.0233) (0.0229) (0.0228) (0.0229) (0.0229) Scotland 1.049** 1.049** 1.047** 1.004 1.004 (0.0243) (0.0238) (0.0238) (0.0248) (0.0248) Northern Ireland 1.321*** 1.318*** 1.316*** 1.299*** 1.306*** (0.0353) (0.0347) (0.0346) (0.0360) (0.0362) Constant 0.623*** 0.553*** 0.541*** 0.501*** 0.506*** (0.0157) (0.0138) (0.0144) (0.0179) (0.0181) Observations 1,108,837 1,108,837 1,108,837 1,095,858 1,095,858 Number of ID 161,318 161,318 161,318 160,657 160,657 SE form in parentheses *** p<0.01, ** p<0.05, * p<0.1
  8. 8. Conclusion and Future Research โ€ข Age, size, sector and average TEA play an important role in determining HG โ€ข Previous growth is important in determining future high growth. โ€ข When adding regional controls for skills and dynamism, most come out insignificant but change the importance of regional differences โ€“ no โ€˜Scottishโ€™ effect โ€ข Future research will add in growth ambition (do you anticipate growth in your business in the next 3 years) from GEM. โ€ข Will also re-run the model without London and also with a continuous dependent variable looking at employment and turnover growth over a 1 year period.
  9. 9. Thank you! Questions/Comments? Dr Neha Prashar (n.prashar14@aston.ac.uk) The data used here is from the Jobs and Turnover version of the Longitudinal Business Structure Database which can be accessed through the Secure Lab. The use of these data does not imply the endorsement of the data owner or the UK Data Service at the UK Data Archive in relation to the interpretation or analysis of the data. This work uses research datasets which may not exactly reproduce National Statistics aggregates

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