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High Growth Firm in France

Friday 20 January 2012, by Romain Sautard

IRDEME, with the help of the pH Group (Experian), performed a study on the high growth firm in France (see definition below). It is the first time that such a study is done for France. Indeed, even OECD which has developed an observatory of high growth firm does not have data on such French companies as this kind of companies is not tracked by INSEE (French statistics office).

Definition of High Growth Firms

The most dynamic companies, called High Growth Firms (HGF) have the following characteristics (OECD definition):

  • At least 10 employees
  • At least 1 year old
  • Increased their number of employees by 20% by year over a three-year period

Data on the number of HGF being not available for France, we ask the pH Group to calculate the number of HGF in France as well as their impact on employment. Data provided by the pH Group are based on INSEE data on French companies.

This study compares the number of HGF in France and their impact on employment to HGF in United Kingdom. The main results are the following:

  • Whereas United Kingdom observed about 11.000 HGF for the 2005-2008 period, France observed only 5.200 over the same period; and
  • This kind of companies have created about 550.000 jobs in France, against 1.265.000 in the UK, ie 2,3 times more over the 2005-2008 period.

Overview

Policies to help firm creation are an important subject for the developed countries. Indeed, for the last 40 years and the first oil shock, most of the developed countries face a high level of unemployment. This unemployment is structural, meaning that a large share is fixed without the implementation of important political measures. Only a small part, the frictional unemployment, appears and disappears following economic cycles. In order to lower the structural unemployment, some countries (mainly Anglo-Saxon countries) decided to encourage firm creation. However, do all the firms contribute to job creation to the same extent? Is it only a share of newly created firms that creates the most of jobs? To answer this question, the OECD, in 2007, decided to create a roundtable on HGF to measure their impact on job creation. Only few OECD countries participated (including France, but did not provide data on French HGF). The main conclusions of the OECD were the following: only few firms are HGF (between 3% and 6% of 10+ employees firms) but they contribute to a very important share of jobs created by existing firms. Thus, the proportion of HGF in an economy and their dynamism could be a critical to the reduction of unemployment.

Comparison France – United Kingdom

French companies do not have to communicate their number of employees. Some do, some don’t. In order to identify the French HGF, the pH Group, under contract of IRDEME, has developed a small model allowing to evaluate the number of employees of companies, based on payroll data.

Thus, based on INSEE data, we have the following results:

  • There were 175.087 French firms with 10 or more employees in 2005, of which 156.045 were still active in 2008;
  • Among these firms, 121.012 have published their balance sheet and P&L accounts of which 94.471 published their number of employees (i.e. 78% of all companies with a known balance sheet);
  • The model developed by pH Group allows to evaluate the number of employees of the 26.541 firms with a known balance sheet but an unknown number of employees, leading to a sample of 121.012 firms, i.e. 77,5% [1] of the 10 and more employees firms population.

Within this sample, 4.057 firms, i.e. 3,4%, have performed an annual average employees growth of at least 20% over the 2005-2008 period. The number of HGF employees rose from 225.000 in 2005 to 650.000 in 2008. However, these results are based on 77,5% of the total population. Thus, assuming that our sample is representative of the 10 and more employees firms, we observed 5.200 HGF in France over the 2005-2008 period, with 290.000 employees in 2005 and 840.000 in 2008, i.e. threefold increase of the number of employees.

These results show the important impact of HGF on job creation. However, if we compare these figures to those observed in United Kingdom, we can see that French HGF performance are far from those performed by UK HGF. Indeed, a study performed by NESTA [2] shows that, over the 2005-2008 period, the percentage of HGF is higher in the UK (5,8% compared to 3,4% in France), as well as their number (11.500 in UK, 5.200 in France). These firms employed about 714.700 persons in 2005 and almost 2 millions in 2008, i.e. 1.265.000 jobs created over the period under review. Thus, even if HGF have the same growth dynamics, meaning a threefold increase of their number of employees in 3 years, the graph below highlight the gap in the number of jobs in HGF in France and in the UK:

Graph 1. Evolution of the number of jobs in HGF in France and United Kingdom over the 2005-2008 period

Source : pH Group

This gap raises the question of why such differences between these 2 countries? We will try to answer this question in a next article.

Footnotes

[1121.012 / 156.045 = 77,5%

[2M. Anyadike-Danes, K. Bonner, M. Hart, C. Mason ; October 2009 ; “Measuring Business Growth – High growth firms and their contribution to employment in the UK” ; NESTA

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