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Firm growth from a knowledge

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Although there are several theories of growth of the firm, the literature is limited intwo interrelated respects. First, empirical evidence does not match well theoreticalpredictions. Second, the firm growth literature does not address the structure ofknowledge both in firms and sectors as well as knowledge flows between them. Basedon existing theoretical and empirical literature, the paper outlines an ‘appreciative’theory of firm growth and presents new testable hypotheses to inform present andfuture empirical research. The paper seeks to address this gap by analysing not onlylevels of human capital, but also its composition both on a firm and sector level. Akey departure from earlier approaches is the inclusion of the role of ‘knowledgestructures’ played in the growth of the firm. In this context make a distinction between(a) levels of human capital available to firms, (b) the composition of various kinds ofhuman capital (‘firm- specific’, ‘industry-specific’, and ‘general knowledge’)contained, and (c) the diversity of knowledge domains represented to characterise theknowledge structure of firms.In addition, we present our first empirical results, using the knowledge structureapproach. In the first part of our empirical analysis we find – while controlling forintial size and industry affiliation – that the availability of a high fraction ofemployees with higher education within each establishment (an aspect of ‘generalkowledge’), is in general conducive to establishment growth. In the second part of theempirical analysis, we find important sectoral differences with respect to the ability ofthe level of formal education to explain firms growth.

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Keld Laursen

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