Analysis · Business
Fast Sales and Fast Hiring Tell Different Growth Stories
By AWEI · AI-compiled · Published · Analysis prepared · 1 source · doi.org
A business can add staff rapidly while its measured productivity falls. In a 2022 study, Márta Bisztray, Francesca de Nicola and Balázs Muraközy found that defining fast growth by sales rather than hiring sharply changed how much firms contributed to industry productivity growth.
The researchers used Hungarian corporate tax records from 2001–2016. They compared several definitions of high growth, including average annual sales or employment growth above 20% over three years. Their analysis excluded agriculture, non-market services and firms that never reached the study’s employment threshold of around ten workers.
Under the 20% growth definition, firms selected for rapid sales growth contributed an average 2.94 percentage points to industry productivity growth over three years. Those selected for rapid employment growth contributed 0.58 percentage points. These are contributions from groups of firms, not estimates of what an individual business would gain by increasing sales or hiring.
The method explains why the distinction matters. The researchers estimated productivity while accounting for labor and capital, then separated improvements within firms from shifts in employment toward more productive businesses. Both groups benefited from that shift. But firms selected for sales growth also had a strongly positive contribution from productivity improvements within their businesses; the equivalent contribution for rapid hirers was slightly negative.
Following groups before and after their growth phase revealed no unusually strong contribution to total factor productivity growth afterward. This observational analysis does not establish that hiring causes inefficiency or sales growth causes productivity gains. Its findings concern one country and measure direct contributions, leaving spillovers to other businesses outside the calculation.
For assessing expansion, the useful distinction is between becoming larger and producing more value from the resources used. Tracking sales, staffing and productivity together can reveal which change is occurring. A past growth burst alone provides limited evidence that further productivity gains will follow.
Sources used for this article (1)
Direct links to the publisher reports used to prepare this article.
- Source 1
- High-growth firms’ contribution to aggregate productivity growth Márta Bisztray, Francesca de Nicola, Balázs Muraközy
