A look at business growth and contraction in Europe

Using a new database on business growth dynamics to examine the distribution of business growth in Europe and compare it to that in the US, Bravo-Biosca finds that European countries have both fewer growing and shrinking firms than the US. This gap arises across all sectors and size classes. Moreover, there is a positive correlation between the share of high-growth and fast shrinking firms. And it is this ‘creative destruction’, rather than the share of high-growth firms per se, which is associated with faster productivity growth, particularly as countries get closer to the technology frontier.

The less dynamic business growth distribution in Europe, with a much larger share of static firms, points to less experimentation and a slower reallocation of resources from less to more productive businesses, both important drivers of productivity growth. The policy implications of these important findings were discussed.

Speakers

Speaker: Alberto Bravo-Biosca, NESTA

Discussant: Chris Allen, European Commission, DG Enterprise

Chair: Reinhilde Veugelers, Senior Fellow at Bruegel and Professor at KULeuven

Event materials

Alberto Bravo-Biosca, paper, A look at business growth and contraction in Europe here

Alberto Bravo-Biosca, presentation - Exploring business growth and contraction in Europe and the US here

Summary of the event here