H200818

High-Growth SMEs

Evidence from the Netherlands

G. de Wit

N.G.L. Timmermans

Zoetermeer, September 2008

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High-Growth SMEs

Evidence from the Netherlands

G. de Wit

N.G.L. Timmermans

Zoetermeer, September 2008

4

5

1 Introduction

Fast growing firms – commonly referred at as gazelles in the literature – are

believed to be important for an economy. For example, they appear to be

important job creators. See for a survey of the literature Henrekson and Jo-

hansson (2008). Furthermore, they are believed to be important innovators

and to have a relative high labour productivity. Finally, they can act as a

role model for other firms.

In this paper we investigate what aspects characterize these gazelles in the

Dutch economy. As such, it fits in a larger project taken up by the OECD, in

which such an exercise is done for many OECD countries.

The structure of this paper is as follows. First, we present in section 2 how

many gazelles are present in the Dutch economy and compare this with

some benchmark countries. Subsequently, we state in section 2 the re-

search questions posed by the OECD that are central in this paper. In sec-

tion 4 we describe the data set on which our analyses are based. Section 4

and 5 contain analyses. Section 5 gives a simple comparison between ga-

zelles and non-gazelles, in which characteristics are compared on a one by

one basis. Section 6 contains a multivariate logit regression. Finally, we dis-

cuss the research questions of this paper in section 7 on the basis of our

findings of sections 5 and 6.

6

2 Gazelles in the Dutch economy

How many gazelles are present in the Dutch economy and how does this

compare to other countries? Figures 1 and 2 give the most recent informa-

tion on this. They are taken from Timmermans et al. (2008).

Figure 1. Percentage fast growing firms, measured by employment, 2002-2005 *

2,0

5,6

6,8

7,5

7,8

8,8

10,9

11,6

13,2

20,1

0 5 10 15 20 25

Japan

Belgium

France

Netherlands

Germany

Finland

United Kingdom

Denmark

Italy

USA

percentage fast growing firms

* Fast growing firms based on growth in number of employees: average growth over past

three years is 20% per year or more. The data refer to the whole business sector excluding

agriculture, fishery, financial and other services (NACE C-K excl. J). Percentage refers to

the number of fast growing firms in the population of firms with 50 – 1000 employees.

Source: EIM on basis of AMADEUS, Jade en Compustat.

From figure 1 we see that in the Netherlands about 7.5% of all firms with

size between fifty and thousand employees were gazelles, that is: they had

an average employment growth of more than 20% per years over the past

three years. Compared to the other countries in the figure this is somewhat

below average.

Figure 2 (on the next page) presents the same information but now firm

growth is measured in terms of turnover instead of employees. It turns out

that in these terms there were 11% gazelles in the Netherlands in the same

period.

From both figures we can conclude that - relative to the other presented

countries – the Netherlands have relative few fast growing firms.

7

Figure 2. Percentage fast growing firms, measured by turnover, 2002-2005 *

6,8

10,6

11,0

11,7

12,3

16,3

16,9

17,3

19,8

24,3

38,4

0 5 10 15 20 25 30 35 40 45

Japan

Germany

Netherlands

Belgium

France

Italy

Denmark

Finland

United Kingdom

Ireland

USA

percentage fast growing firms

* Fast growing firms based on growth in turnover: average growth over past three years is

20% per year or more. The data refer to the whole business sector excluding agriculture,

fishery, financial and other services (NACE C-K excl. J). Percentage refers to the number of

fast growing firms in the population of firms with 50 – 1000 employees.

Source: EIM on basis of AMADEUS, Jade en Compustat.

8

3 Research questions

This paper tries to answer questions for two different themes, viz. innova-

tion and business practices.

With respect to innovation the OECD states the following research ques-

tions:1

− Is there a relationship between gazelles and their innovation activity?

− Is there a relationship between gazelles and other factors besides inno-

vation?

− What is the role of innovation versus the other factors of growth?

− Do different types of innovation have different effects on firm growth?

With respect to business practices the OECD states the following research

questions:

− What are the specific activities gazelles perform in terms of: leadership

and planning, customer focus, employee relations, quality and supplier

focus, innovation and technology, and information and benchmarking?

− In which ways gazelles' practices differ from non-gazelles?

− Is there a difference between gazelles and non-gazelles in terms of their

ability to strategize?

− Which of the business practices result in innovative products/services?

Finally, the OECD is interested in possible sectoral differences with respect

to these relationships.

1 The OECD has also questions about firm survival and internationalization but due to lack of

data these cannot be answered on the basis of this study.

9

4 Data

4.1 Sample selection

In this paper we make use of the sample "Determinants of Businesses' Per-

formance" of the Dutch research program on Entrepreneurship and SMEs

(www.entrepreneurship-sme.eu).

The sample actually consists of three groups of businesses:

− businesses that were contacted in 2005 and again contacted in 2008;

− businesses that were contacted in 2006 and again contacted in 2008;

− businesses that were only contacted in 2008.

See table 1. As is clear from the table total sample size comes to 2500

businesses in this way.

Table 1 Response overview

Year of first contact 2005 2006 2008 total

Total attempted businesses 2.481 2.333 7.920 12.734

Not reachable 861 722 3.754 5.337

number of reached businesses 1.620 1.611 4.166 7.397

Rejected 941 870 3.086 4.897

Completed interviews 679 741 1.080 2.500

At the moment of the first interview businesses were chosen to have less

than 100 employees, that is, they were small or medium sized according to

the Dutch definition.

Four industries are not represented is the sample, viz. mining, public utili-

ties, healthcare and government. Mining and public utilities were excluded

because there are mainly large companies in these industries, while health-

care and government were excluded because they do not deal with real

market competition.

4.2 Measurement of high growth

In this paper businesses are considered to have high growth if:

− their average growth – measured by the number of employees - over the

past three years were 20% or more per year

− their size at the beginning of the period was 10 employees or more.

As is common in the literature we will call such businesses "gazelles".

We are able to measure firm growth in two different ways. We will label

these "perception" method and "objective" method in this paper.

In the perception method we use information from the 2008 interview only,

viz. the firm's number of employees in 2008 and the firm's estimate of the

change in employment over the previous three years. Hence, we can com-

pute the firm size at the beginning of the three years period, viz. 2005. If

we restrict ourselves to firms with firm size of 10 employees or more back

10

in 2005, we are left with 944 firms, of which approximately 10% appear to

be gazelles (growth of 60% or more between 2005 – 2008). See table 2.

In the objective method we restrict our sample to the firms that have been

contacted before 2008. We are left then with about 60% of the sample

(1420 firms to be exact). See the previous section. For these firms we have

their size for 2005 or 2006 from the first interview. If we restrict ourselves

further to firms with firm size of 10 employees or more at the beginning of

the period (that is: 2005 or 2006), we are left with 569 firms, of which ap-

proximately 10% are considered to be gazelles.1 See table 2.

Table 2 Growth performance of firms with starting size of 10 employees or more

Firm type Perception method Objective method

n % n %

Fast growing firms (gazelles) 91 10% 67 12%

Moderately growing firms 398 42% 213 37%

Stable firms 336 36% 99 17%

Declining firms 119 13% 190 33%

Total 944 100% 569 100%

Both methods have their advantages and disadvantages. A strong point of

the perception method is its relatively large resulting sample size. As draw-

backs can be mentioned: (i) the inaccuracy of the respondents in their es-

timate of the change in employment over the last three years and (ii) the

selection bias in the group of firms that were interviewed in 2008 for the

first time, due to the fact that this group was restricted to have no more

than 100 employees.

Strong points of the objective method are (i) relative accuracy in determin-

ing firm growth and (ii) no selection bias. As drawbacks can be mentioned:

(i) relatively small resulting sample size and (ii) for part of the sample firm

growth is only measured over a 2 years period so that the gazelle status of

a firm can only be approximated.

Given the above, we do not restrict ourselves to only one method in this

paper. Instead, we use both of them and will present results also for both of

them.

4.3 Available firm characteristics

All firm characteristics that are included in our analysis come from the 2008

questionnaire.

In this questionnaire firms are asked information about five topics: their in-

novative activities, their strategy, their marketing, their human resource

management, and their entrepreneurial activities. There is also information

about the industry in which the firm operates. In the next tables the precise

questions are presented.

1 Firms are considered to be gazelles if they have grown 60% over the period 2005 -2008 or

40% over the period 2006 – 2008.

11

Innovation Key-word Precise question

New products Did your company introduce new products in the past three years?

New for industry Were those new products also new for the industry?

Self innovated Were those new products developed by the company or copied from other companies?

Improved process Did your company make some improvements in production- or distribution methods?

Own Improvement Were those improvements developed by the company or copied from other companies?

External networks Does your company make use of external networks for sharing knowledge, for example

universities, competitors or advisors?

Cooperation Does your company cooperate with other companies for innovation projects?

Innovation employees Are there employees, including managers or shareholders, who work daily on innovation?

R&D activities Did your company have R&D activities in the last three years?

Innovation budget Does your company have a budget for innovation?

Strategy

Marketing

Key-word Precise question

Marketing employees Are there employees, including managers or shareholders, who work daily on marketing?

Marketing plan Does your company have a marketing plan which is written down?

HRM

Key-word Precise question

HRM managers Are there employees who work daily on Human Resource Management?

Flexible working hours Are there possibilities for working at flexible hours? *

Working at home Are there possibilities for working at home? *

Job description Are there job descriptions made? *

Personal targets Are there personal targets made? *

Periodic evaluations Are there periodic evaluations? *

Development plans Are there personal development plans made? *

Training Are there budgets for training or education? *

Periodic work meetings Are there periodic work meetings? *

Sharing profits Does a majority of the employees share in the profit of the company?

Buying shares company Are there possibilities for buying stocks of the company? *

Selection of fringe benefits Are there selection systems for fringe benefits? *

* for a majority of the employees

Entrepreneuria l act iv it ies

Key-word Precise question

My entrepreneurial activities are best described as:

Managing managing the current activities within the company

Finding opportunities finding and exploiting market opportunities

Being innovative being innovative

Taking risks making calculated risks

Key-word Precise question

Strategy plan Does your company have a strategy plan which is written down?

Focus on innovation Our strategy focuses the most on innovation of product, services or processes

Focus on sales Our strategy focuses the most on marketing for improving sales

Focus on costs Our strategy focuses the most on cost minimization

Focus on service Our strategy focuses the most on offering excellent services

12

5 Simple comparison of characteristics

We begin our analysis by a simple comparison of the group gazelles to the

group of non-gazelles. Which firm characteristics occur more (or the re-

verse: less) frequently with gazelles? See table 3.

Table 3 Comparing gazelles to non-gazelles (percentages of occurrence)

Firm characteristic Perception method Objective method

% non

% gazelle

sig.

% non

% gazelle

sig.

Innovation

New products 45 54 46 54

New for industry 27 34 28 30

Self innovated 30 42 ** 32 45 **

Improved process 64 66 65 69

Own improvement 39 51 ** 38 43

External networks 53 52 52 55

Cooperation 45 55 * 45 48

Innovation employees 53 63 53 69 **

R&D activities 37 43 35 42

Innovation budget 24 32 * 22 30

Strategy

Strategy plan 58 68 * 57 72 **

Focus on innovation 65 69 63 64

Focus on sales 59 67 59 70

Focus on costs 86 73 *** 87 79

Focus on service 97 93 ** 96 93

Marketing

Marketing employees 51 63 ** 49 67 ***

Marketing plan 26 33 23 36 **

HRM

HRM managers 40 54 ** 39 52 **

Flexible working hours 55 65 * 57 64

Working at home 17 26 ** 19 27

Job description 87 89 86 94 *

Personal targets 55 67 ** 54 70 **

Periodic evaluations 84 93 ** 85 88

Development plans 49 63 ** 48 51

Training 46 57 ** 44 54

Periodic work meetings 91 89 92 93

Sharing profits 38 51 37 46

Buying shares company 3 10 *** 3 9 **

Selection of fringe benefits 24 24 22 15

Entrepreneurial activities

Managing 37 30 39 40

Finding opportunities 17 32 *** 16 26 *

Being innovative 19 20 19 15

Taking risks 26 18 27 18

Industry

Manufacturing 25 12 *** 23 5 ***

Construction 8 7 5 5

Trade 22 18 26 25

Hotels, restaurants 3 4 2 2

Transport, communication 8 17 *** 7 16 ***

Banking and insurance 3 3 2 2

Other commercial services 19 29 ** 23 31

Personal services 6 8 4 8

Non private 7 3 9 8

Significance level: *10%, ** 5%, *** 1%

13

With respect to innovation the first thing that strikes the attention is that

gazelles are more engaged in nearly all distinguished ten innovative activi-

ties. There is only one negligible exception. That is not to say that the dif-

ference with the non-gazelles is always significant. However, what is signifi-

cant – according to both methods – is the fact that gazelles develop more

than other companies their new products themselves. Other significant dif-

ferences – according to one of the methods – are that (i) gazelles introduce

more often self-developed improvements in their production process, (ii)

gazelles cooperate more often with other companies in innovation projects,

(iii) gazelles have more often employees that work daily on innovation and

(iv) gazelles have more often a budget for innovation.

With respect to strategy it appears that gazelles write down their firm strat-

egy more often. This is significant in both methods. Furthermore, according

to the perception method, gazelles pay significantly less attention to cost

minimization and offering excellent services than their non-gazelle counter-

parts.

Gazelles appear to have more often employees who work daily on market-

ing. This is significant in both methods. Also, significantly according to the

objective method, gazelles write down their marketing plan more often.

With respect to human resource management gazelles appear to be differ-

ent in most investigated aspects. To begin with, gazelles have more often

employees who work daily on HRM. This is significant in both methods. With

respect to flexibility in work – that is: flexible working hours and the possi-

bility to work at home – employees in gazelles enjoy this more often than

employees in non-gazelles. This appears in both methods, although the dif-

ference is only significant in the perception method.

This freedom with respect to when and where an employee should work, is

compensated by more attention to other aspects of HRM. In fast growing

firms more often job descriptions are made for employees, more often per-

sonal targets are set, more often periodic evaluations are held with employ-

ees, more often personal development plans are made, and more often

budgets for training and education are available. For all these aspect this is

significant in at least one method. The fact that gazelles set more often per-

sonal targets for their employees is even significant for both methods.

Finally, in gazelles more often employees share in the profits of the com-

pany or there are even possibilities to buy stocks of the company. The latter

is significant in both methods.

The companies in the interviews are also asked how their entrepreneurial

activities could be best described. There was a choice between four catego-

ries: managing current activities, finding and exploiting market opportuni-

ties, being innovative, and making calculated risks. It appears that the sec-

ond characterization – finding and exploiting market opportunities – is the

one that characterizes gazelles best with respect to their non-gazelle coun-

terparts. In both methods gazelles characterize themselves significantly

more often as such than non-gazelles.

Finally, there is information about the industry in which companies are op-

erating. It appears that there are relatively few gazelles in manufacturing,

14

while relatively many gazelles operate in transport and communication and

other commercial services.

15

6 Logit regression

In this section we investigate further the dependence between the fact

whether or not a firm is a gazelle and the other distinguished firm charac-

teristics. We do this by undertaking a multivariate regression analysis. Be-

cause the dependent variable is dichotomous – a firm is either a gazelle or

it is not – it is appropriate to use a logit regression. See table 4 for the re-

sults.

The first thing that strikes the attention is the fact that there are fewer firm

characteristics significantly different for gazelles in this multivariate analysis

than was the case in the previous section where we made simple one by one

comparisons. There can be various reasons why this is the case. We will

discuss them at the end of this section. First, we will describe the significant

results that remain.

With respect to innovation and marketing there are no significant differ-

ences found between gazelles and non-gazelles in this multivariate analysis.

With respect to strategy it appears that gazelles focus less on minimizing

costs than their non-gazelle counterparts.

With respect to human resource management it appears that gazelles set

more often personal targets for their employees, while providing more often

the possibility for their employees to buy shares in the company. On the

other hand, periodic work meetings are held less often in gazelles and they

provide less often a selection system for fringe benefits.

Gazelles characterize their entrepreneurial activities more often than others

as "finding and exploiting market opportunities".

Finally, there appear to be relatively few gazelles in manufacturing, while

there are relatively many gazelles in the transport and communication in-

dustry.

There are various possible causes why in a multivariate analysis fewer char-

acteristics are significant than in a one by one comparison of characteris-

tics:

1 If characteristics are too much correlated with each other, it is impossi-

ble to isolate their separate effects in a multivariate analysis, resulting

in insignificant results that do no justice to reality.

2 The simple model underlying the logit regression – that is: all independ-

ent firm characteristics influence the gazelle/non-gazelle dependent

variable beside each other in exactly the same way – does no justice to

reality. If this is the case then it is possible that no significant result is

found while it would have been found in a more complex model that

does justice to reality.

3 The relationship found in the one by one comparison is not due to a di-

rect cause-effect relationship but is the result of other "underlying" firm

characteristics that influence the firm characteristic under investigation

and the firm's gazelle status at the same time. Hence, at the moment

16

we control for these underlying firm characteristic by means of a multi-

variate analysis the originally found relationship disappears.

Of course, the last possible cause is the justification to do multivariate

analysis in the first place.

Table 4 Multiple logit regression results Firm characteristic Perception method Objective method

coeffi-

cient

standard

error

sig.a coeffi-

cient

standard

error

sig.a

Innovation b

Self innovated 0,28 0,31 0,42 0,37

Own improvement 0,29 0,28 0,09 0,35

External networks -0,28 0,28 0,07 0,33

Cooperation 0,42 0,28 -0,18 0,34

Innovation employees 0,00 0,28 0,62 0,38

R&D activities -0,12 0,30 0,09 0,36

Innovation budget -0,13 0,31 -0,02 0,40

Strategy

Strategy plan 0,16 0,30 0,38 0,36

Focus on innovation -0,32 0,30 -0,56 0,35

Focus on sales 0,02 0,26 0,03 0,34

Focus on costs -0,76 0,30 ** -0,53 0,40

Focus on service -0,68 0,52 -0,66 0,66

Marketing

Marketing employees 0,26 0,30 0,37 0,37

Marketing plan -0,30 0,30 -0,01 0,37

HRM

HRM managers 0,25 0,28 0,19 0,34

Flexible working hours 0,30 0,27 0,34 0,34

Working at home -0,09 0,33 -0,40 0,42

Job description -0,11 0,43 0,83 0,62

Personal targets 0,18 0,31 0,70 0,38 *

Periodic evaluations 0,69 0,51 -0,57 0,50

Development plans 0,38 0,30 -0,54 0,36

Training 0,35 0,26 0,40 0,32

Periodic work meetings -0,83 0,45 * -0,44 0,58

Sharing profits 0,22 0,27 0,19 0,34

Buying shares company 1,00 0,50 ** 0,80 0,62

Selection of fringe benefits -0,35 0,29 -0,79 0,41 *

Entrepreneurial activi-

ties

Managing 0,29 0,36 0,55 0,41

Finding opportunities 0,87 0,37 ** 0,89 0,46 *

Being innovative 0,45 0,40 0,30 0,51

Industry

Manufacturing 0,20 0,81 -1,74 0,80 **

Construction 1,06 0,88 0,06 0,86

Trade 0,76 0,79 0,01 0,59

Hotels, restaurants 1,28 0,98 -0,86 1,21

Transport, communication 1,85 0,81 ** 1,48 0,67 **

Banking and insurance 1,05 0,79 0,19 0,60

Other commercial services 1,03 1,03 -0,08 1,37

Personal services 1,13 0,86 0,17 0,75

Constant -3.03 1,09 ** -2,47 1,15 **

number of observations 944 569

Nagelkerke R-square 0,17 0,22

a. Significance level: *10%, ** 5%, *** 1%

b. Not surprisingly, the variables "new products" and "new for industry" appear highly corre-

lated to the variable "self innovated". Therefore the former two variables were left out of

the logit regression to avoid multicollinearity. For the same reason the variable "improved process" was left out because it was highly correlated with the variable "own improve-

ment".

To check out whether our regression analysis might be hampered by the

first mentioned cause we have experimented quite a lot by using fewer in-

dependent firm characteristics in our analysis. For example, we reduced the

number of firm characteristics in our regression (i) by leaving out firm char-

acteristics that had a relatively high correlation with other characteristics,

17

(ii) by using only one or two representative characteristic per theme or (iii)

by constructing one variable per theme out of the present theme variables.

However, all these trials did not lead to essentially different results.

It is beyond the scope of this paper to experiment with more complex mod-

els, for example models with more than one structural equation. Hence, we

do not know whether more complex models would give other results.

All in all, we acknowledge the fact that our multivariate analysis does not

confirm all of the relationships that we found in the simple one by one com-

parison. Hence, we cannot conclude decisively from our analysis that these

non confirmed relationships really exist. However, we cannot prove that

they don't exist either. All we can say that there is an indication that they

exist. In this respect the paper is somewhat inconclusive.

18

7 Discussion

In this final section we will confront our empirical results from sections 5

and 6 with the research questions of section 3. Section 7.1 discusses the

questions on innovation, section 7.2 those on business practices, while sec-

tion 7.3 discusses sectoral differences.

7.1 Innovation

Is there a relat ionship between gazel les and their innovation ac-

t iv ity?

We find that gazelles are more engaged in nearly all ten innovative activi-

ties that are distinguished in this paper. There is only one negligible excep-

tion. That is not to say that differences with non-gazelles are always signifi-

cant for these ten activities. However, what is significant – according to

both methods that are used in this paper – is the fact that gazelles develop

more than other companies their new products themselves. Other signifi-

cant differences – according to one of the methods – are that (i) gazelles

introduce more often self-developed improvements in their production proc-

ess, (ii) gazelles cooperate more often with other companies in innovation

projects, (iii) gazelles have more often employees that work daily on inno-

vation and (iv) gazelles have more often a budget for innovation.

The above results are found in a simple analysis, in which - one by one -

separate innovative firm characteristics are compared between gazelles and

non-gazelles. These relationships appear to break down in a multivariate

logit analysis. Hence, we cannot prove decisively that these relationships

really exist. At the other hand, we cannot prove that they don't exist either.

All we can say is that there is an indication that they exist. In this respect

the paper is somewhat inconclusive.

Is there a relat ionship between gazel les and other factors besides

innovation?

Beside the innovation – gazelle relationship, we investigated in this paper

also the relationship between the gazelle status of a firm and a lot of other

firm characteristics. These other firm characteristics involve the following

topics: the firm's strategy, the firm's marketing, the firm's human resource

management, the firm's entrepreneurial activities, and the industry in which

the firm is operating.

For the results we refer to section 7.2 below, where they are extensively

discussed.

What is the role of innovation versus the other factors of growth?

As observed above, we find – when comparing firm characteristics between

gazelles and non-gazelles separately on a one by one basis – a rather

strong relationship between innovation and the gazelle status of a firm. Be-

cause this relationship is not confirmed in a multivariate logit regression,

we cannot prove decisively that this relationship really exists. At the other

hand, we cannot prove that it does not exist either. All we can say is that

19

there is an indication that it exists. In this respect the paper is somewhat

inconclusive.

Do different types of innovation have different effects on f irm

growth?

In this paper we investigated ten different innovative activities of a firm. As

observed above, gazelles are more engaged in nearly all of these ten activi-

ties as compared to their non gazelle counterparts. However, not all these

ten activities are to the same extent associated with the gazelle status of a

firm. The following five are strongly associated with the gazelle status, in

the sense that gazelles engage in these activities significantly more often:

− the firm introduced new products that were developed by the firm itself;

− the firm made improvements in the production or distribution process

that were developed by the firm itself;

− the firm has employees that work daily on innovation;

− the firm cooperates with other firms in innovation projects;

− the firm has a budget for innovation.

The other five investigated innovative activities are less strongly associated

with the gazelle status:

− the firm introduced new products (not necessarily new for the industry

and/or developed by itself);

− the firm introduced new products that were also new for the industry

(but not necessarily developed by itself);

− the firm made improvements in the production or distribution process

(not necessarily developed by the firm itself);

− the firm makes use of external networks for sharing knowledge;

− the firm has R&D activities.

7.2 Business practices

What are the specif ic act iv it ies gazel les perform in terms of:

leadership and planning, customer focus, employee relat ions,

qual ity and supplier focus, innovation and technology, and infor-

mation and benchmarking?

In section 7.1 we have discussed extensively differences between gazelles

and non-gazelles with respect to their innovative activities. We will discuss

here differences in three other fields of business practices: marketing activi-

ties, HRM activities, and entrepreneurial activities. For differences with re-

spect to strategy activities we refer to the third question in this section be-

low.

Gazelles appear to have more often employees who work daily on market-

ing. They also write down their marketing plan more often. Note, however,

that – like in the case of innovation – these relationships break down in the

multivariate logit analysis.

With respect to human resource management gazelles appear to be differ-

ent in most investigated aspects. To begin with, gazelles have more often

employees who work daily on HRM. With respect to flexibility in work – that

is: flexible working hours and the possibility to work at home – employees

in gazelles enjoy this more often than employees in non-gazelles.

20

This freedom with respect to when and where an employee should work is

compensated by more attention to other aspects of HRM. In fast growing

firms more often job descriptions are made for employees, more often per-

sonal targets are set, more often periodic evaluations are held with employ-

ees, more often personal development plans are made, and more often

budgets for training and education are available.

Finally, in gazelles more often employees share in the profits of the com-

pany or there are even possibilities to buy stocks of the company.

In the multivariate logit analysis two of the above relationships remain sig-

nificant, viz. the fact that gazelles set more often personal targets for their

employees and provide more often the possibility for their employees to buy

shares in the company. In this respect, these relationships can be seen as

quite robust. Interestingly, the logit analysis reveals also two relationships

that were not apparent on first sight. It appears that periodic work meet-

ings are held less often within gazelles and that gazelles provide less often

a selection system for fringe benefits.

The companies in the interviews are also asked how their entrepreneurial

activities could be best described. There was a choice between four catego-

ries: managing current activities, finding and exploiting market opportuni-

ties, being innovative, and making calculated risks. It appears that the sec-

ond characterization – finding and exploiting market opportunities – is the

one that characterizes gazelles best with respect to their non-gazelle coun-

terparts. Actually, this is a very robust result that comes forward in all

analyses used in this paper.

In which ways gazelles' pract ices dif fer from non-gazel les?

This question is already extensively answered in section 7.1 with respect to

innovative practices, in the previous question with respect to marketing,

HRM, and entrepreneurial practices, and in the following question with re-

spect to strategy practices. Hence, we refer to the answers to these ques-

tions.

Is there a difference between gazel les and non-gazel les in terms

of their abi l i ty to strategize?

Gazelles appear to write down their firm strategy more often. Furthermore,

gazelles focus less on cost minimization or offering excellent services than

their non-gazelle counterparts. Clearly, they think it is more worthwhile to

focus on other strategy aspects.

In the multivariate logit analysis the result that gazelles focus less on cost

minimization is confirmed. The fact that this particular result is robust

stands to reason. High growth firms have less time to focus on costs than

firms that have a moderate growth or less.

Which of the business pract ices result in innovative prod-

ucts/services?

From the analyses in this paper it is not possible to give a firm answer to

this question. This is because for many investigated business practices the

problem of "reversed causality" is far from imaginary. For example, the pa-

per suggests a relationship between lack of focus on cost minimization and

innovative activities. However, it is more likely that because of their innova-

tive activities firms focus less on cost minimization than that it is the other

way round: that a lack of focus on cost minimization would result in innova-

tive activities.

21

Maybe you could say that firms that characterize their entrepreneurial ac-

tivities as "finding and exploiting market opportunities" are more likely to

innovate. However, this statement has a bit of a tautology.

7.3 Sectoral differences

Because the limited number of observation in our data set it is not possible

to do a full analysis on possible sectoral differences with respect to the is-

sues raised in this paper. Nevertheless, we can observe the following:

− In the Netherlands there are significantly fewer gazelles in manufacturing

as compared to other industries, while there are significantly more ga-

zelles in transport and communication.

− We split up the data set of our paper in two sub sample: (i) manufactur-

ing and construction and (ii) services in a broad sense. Subsequently, we

repeated our analysis on these two sub samples. Results appeared not

very different. However, noteworthy is the following. In the service sec-

tor gazelles appeared to develop their new products more often them-

selves than non gazelles. This result came up not only in the one by one

analysis but also was confirmed in the multivariate logit analysis.

22

References

Henrekson, Magnus, and Dan Johansson, 2008, Gazelles as Job Creators – A

Survey and Interpretation of the Evidence, Small Business Economics,

forthcoming.

Timmermans et al., 2008, Internationale benchmark ondernemerschap,

EIM, Zoetermeer, freely downloadable from www.ondernemerschap.nl (in

Dutch).

23

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