Education and Industrial Variety Power High-Growth Companies Nationwide
January 15, 2016 | Pennsylvania State UniversityEstimated reading time: 3 minutes
Access to capital is another factor for creating a business environment for high-growth firms, according to the researchers. However, the advantage of having more banks is not felt initially, but becomes an advantage to a community once it already hosts several of these businesses.
"Once a non-metro county is home to one or more of these Inc. 5,000 firms, there will be more Inc. 5,000 if you have more banks," said Goetz. "It may be that the more banks you have, the more they will be competing with each other on loans, which should help these businesses."
A community's tax policy did not seem to be correlated with the presence of fast growing companies, according to Goetz.
The researchers suggest raising awareness about and promoting entrepreneurship may be a way for communities to increase the likelihood of hosting high-growth firms.
"More generally, talking about entrepreneurship and creating a culture of entrepreneurship in communities are very helpful," Goetz said. "We are not measuring that directly in the study, but we feel this may help create the general conditions that are favorable for entrepreneurship."
The researchers used data from the magazine's 2012 list of 5,000 fastest-growing companies based on revenue. Companies that are included on the list must be privately owned and not subsidiaries or divisions of other companies. The firms must provide the magazine with revenue figures to be considered for the list.
"It is important to note that we focus on revenue growth and not growth in employment or profits, for example," the researchers said. "The advantage of using revenue as the growth metric is that it measures both expansion in the scale of operation and improvement in efficiency."
Mark Partridge, professor in agricultural, environmental and development economics, and Swank Chair in Rural-Urban Policy, Ohio State University and David A. Fleming, research scientist, Black Mountain Laboratories, Australia, worked with Goetz and Li on the study.
The U.S. Department of Agriculture's National Institute of Food and Agriculture and Penn State College of Agricultural Sciences supported this work.
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