Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/235714
Authors: 
Coad, Alexander
Domnick, Clemens
Flachenecker, Florian
Harasztosi, Peter
Janiri, Mario Lorenzo
Pál, Rozália
Teruel Carrizosa, Mercedes
Year of Publication: 
2021
Series/Report no.: 
EIB Working Papers No. 2021/08
Abstract: 
High-Growth Enterprises (HGEs) have a large economic impact, but are notoriously hard to predict. Previous research has linked high-growth episodes to the configuration of lumpy indivisible resources inside firms, such that high capacity utilisation levels might stimulate future growth. We theorize that firms reaching critically high capacity utilisation levels reach a 'trigger point' involving either broad-based investment in further growth, or shrinking back to previous levels. We analyse EIBIS survey data (matched to ORBIS) which features a question on time-varying capacity utilisation. Overcapacity is a transitory state. Firms enter into overcapacity after a period of rapid growth of sales and profits, and the years surrounding overcapacity have higher employment growth rates. Firms operating at overcapacity make incremental investments (e.g. capacity expansion, process improvements, and modern machinery) rather than investing in R&D and new product development. We find support for the 'fork in the road' hypothesis: for some firms, overcapacity is associated with launching into massive investments and subsequent sales growth, while for other firms, overcapacity is negatively related to both investments and sales growth.
Subjects: 
High-Growth Enterprises (HGEs)
firm growth
investment
capacity utilisation
trigger points
JEL: 
L25
Persistent Identifier of the first edition: 
ISBN: 
978-92-861-5050-0
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.