Too Fast to Live? Effects of Growth on Survival Across the Growth Distribution

Abstract

Several theories suggest that excessive fast growth may lead to failure. We explore survival across the growth rate distribution for a cohort of 6579 new ventures, tracked over their first 10 years, using customer records data from a major UK bank. We measure failure though termination of the business account (as opposed to either continuation or switching the account to a rival bank), or through entry into financial default. Unconditional bar charts show that it is the 7th or 8th decile of the growth distribution that has the highest survival chances. Although growth enhances survival on average, the highest decile of the growth distribution never has the highest survival, and there are significant non-linearities beyond the quadratic case (specification tests prefer higher-order polynomials). Our findings have implications for the current policy interest in high-growth firms.

Keywords: Firm growth; survival; failure; Penrose effects; high-growth firms; post-entry growth; scale-up

JEL Classification: L25, L20