High Growth Firms in Employment and Productivity: Dynamic Interactions and the Role of Financial Constraints?

Using a panel of Spanish firms over the period 2002-2012, we investigate the interactions between high growth episodes in terms of size and productivity. We find that high growth in productivity (size) increases the likelihood of high growth in size (productivity). However, the effect from size to productivity is smaller than the effect from productivity to size. We also explore the potential role of firm-level financial constraints using information from the Central Credit Register (CIR) of Banco de Espana. Our results indicate that credit constraints hamper high growth episodes in terms of both size and productivity.