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Entrepreneurship2.3 Firm Growth

2.3.1 High-growth firms (HGFs) by turnover

Evidence suggests that firm growth is associated with certain types of innovation.[47] However, exceptional growth is not some innate business characteristic, but rather a phase that some firms go through during their life cycle. Between 2008 and 2012, Australia's proportion of HGFs as measured by turnover was consistently above the median for all countries for which data are available. This was despite the decline of Australia's HGF proportion, which had already been under way since 2008. However, by 2013 the all-country median had lifted dramatically (to 11.8 per cent) while Australia's HGF proportion continued its decline (to 8.5 per cent at that stage). The most recent available estimates are for 2014, and put Australia's HGF proportion at 8.4 per cent compared to an all-country median of 12.5 per cent. [48][49] Further investigation may be warranted into the underlying drivers of these trends.

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2.3.2 High-growth firms (HGFs) by employment

Given their disproportionate economic contribution, there has been considerable policy focus on the potential of HGFs to support job creation and income growth. To date, however, there is but scant evidence to show that targeting HGFs has had a significant impact on economic performance.[50] Between 2008 and 2014, Australia's proportion of HGFs as measured by employment has remained consistently above the median of all countries for which data are available --- although the gap has narrowed somewhat over the period as Australia's HGF proportions steadily declined. In 2008, Australia showed the highest HGF proportion of any country at 6.5 per cent of total firms, compared to an all-country median of 4.6 per cent. By 2014, Australia's HGF proportion had declined to 4.7 per cent of total firms, still above the all-country median in that year of 4.0 per cent. At this value, Australia is on par with the United Kingdom, and above New Zealand (4.0 per cent) or Canada (2.7 per cent).[51][52]

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2.3.3 Businesses changing turnover size range

Firm growth patterns can be illustrated by the number of firms moving from smaller turnover size categories to larger ones over a given period. Some 290 of the 669,609 firms that started with turnover in the range $50,000-$200,000 in the year to June 2017 moved into the $5 million-$10 million range during the following year, and a further 260 of these firms increased their turnover to more than $10 million.[53] Such exceptional growth is clearly rare. However, all of the 94,272 businesses that started in the $50,000-$200,000 turnover range and increased their revenue to any one of the higher categories during the year (some 14.1 per cent of firms originally in that size category) could potentially be considered high turnover growth firms by the OECD definition --- as long as they remain in their higher turnover range for another two years.[54]

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2.3.4 Businesses changing employment size range

Firm growth patterns can be illustrated by the number of firms moving from smaller employment size categories to larger ones over a given period. Some 3,632 of the 551,127 firms identified as micro-businesses at June 2017 grew to become small firms by June 2018. A further 304 grew to become medium-sized firms and 14 firms moved up into the large size category over the course of 2017-18.[55] While only a tiny fraction recorded truly exceptional growth (such as those moving from 1-4 employees to 200+ employees), all of the 3,950 micro-businesses that moved up to any one of the larger size categories during the year (some 0.7 per cent of total employing micro-businesses) could potentially be considered high employment growth firms by the OECD definition --- as long as they remain in their new size category for another two years.[56]

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