Fast-growing companies are central to overall economic growth and the creation of new jobs. A KfW study now highlights the factors that can promote rapid corporate growth.
A recent KfW study examined the factors that determine whether the number of employees in a medium-sized company increases by at least 50 within a two-year period. The background: fast-growing companies are particularly important for economic development. But why do some companies grow faster and more successfully than others? Are there specific factors that contribute to this?
While the success of companies cannot be predicted with certainty, growth companies in Germany are nevertheless characterized by several features that distinguish them from the rest of the corporate landscape: Among the growth leaders are companies that employ academics, that engage internationally early on, and that have a business model based on research and development (R&D). The age of the owner also plays a significant role: Companies with young CEOs have an advantage. These are the key findings of a recent study by KfW Research based on the KfW SME Panel.
“Fast-growing companies are the spearheads of economic development and the guarantors of new, future-proof jobs,”
underlines KfW Chief Economist Dr. Jörg Zeuner the importance of growth companies. He continues:
"Our analysis shows that open markets, the availability of well-trained specialists, and an innovation strategy based on research and development are the key to their success. For Germany, creating, maintaining, and promoting these framework conditions is a key challenge."
The main results of the KfW study
Influencing factor skilled workers
The probability of being a fast-growing company increases by two-fifths for companies with university graduates on their staff compared to those without. The trend is also evident in the SME sector: the lack of skilled workers has serious consequences for company growth and thus for the entire economy. As the "baby boomer" generation increasingly retires from the workforce starting in the middle of the next decade, the resulting gaps in the labor force potential must be urgently closed to prevent the decline from resulting in a dramatic shortage of skilled workers.
Influencing factor international orientation
The probability of being considered a fast-growing company increases by a good third for companies with international sales compared to companies with only regional sales. This is due not only to the increased demand for their own products and services and the resulting economies of scale, but also to cheaper access to inputs and new knowledge from abroad. The differences between regionally and nationwide companies, in contrast, are negligible.
Influencing factor research and development (R&D)
Companies that conduct R&D are 45% more likely to be among the fast-growing companies than companies without their own R&D.
Influencing factor: entrepreneur age
Growth companies are primarily small and young businesses, often managed by young owners. Entrepreneurs younger than 40 have the highest probability of managing a growth company (4.2 percent). This probability decreases to 1.1 percent for those over 60.
The study “Success factors of growth companies” is Download here ready.
