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

51 Pages Posted: 6 Jul 2017

See all articles by Alex Coad

Alex Coad

CENTRUM Catolica Graduate Business School

Julian Frankish

Independent

David Storey

University of Sussex - School of Business, Management and Economics

Date Written: July 4, 2017

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

Suggested Citation

Coad, Alex and Frankish, Julian and Storey, David, Too Fast to Live? Effects of Growth on Survival Across the Growth Distribution (July 4, 2017). Available at SSRN: https://ssrn.com/abstract=2997193 or http://dx.doi.org/10.2139/ssrn.2997193

Alex Coad (Contact Author)

CENTRUM Catolica Graduate Business School ( email )

1801 Universitaria Avenue
San Miguel
Lima, Lima Lima32
Peru

Julian Frankish

Independent ( email )

No Address Available
United States

David Storey

University of Sussex - School of Business, Management and Economics ( email )

Falmer, Brighton BN1 9SL
United Kingdom

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