Index of Fast-Growing Companies

General information about the goals and objectives of calculating the index

Research by various Russian and foreign authors (including the OECD and the World Bank) indicate that fast-growing companies (FGCs) make the main contribution to economic growth and job creation. The results of studies [1], [2] by the Institute of Innovation Management of HSE Graduate Business School show that in Russia as well, it is FGCs that drive economic growth: between 2017 and 2019, FGCs, while accounting for less than one-sixth (15%) of all companies, generated 60% of revenue growth. Various researchers also note their significant contribution to exports and their role in the innovation process and in increasing labor productivity. In this regard, changes in the development of FGCs can serve as a good barometer for tracking the state of development of the country's economy in general.

In Russia, reviews of changes in the composition of FGCs and their characteristics appear regularly. However, as a rule, they are published once a year, which does not provide a full understanding of the dynamics of development of this segment. It is necessary to move the analysis of trends in the development of Russian FGCs from the mode of episodic observations to the mode of regular monitoring. A regularly compiled "Fast-Growing Companies Index" could serve as a useful tool for this.

Description of the methodology

The purpose of forming the Index is to identify changes in trends in the economic activity of fast-growing companies (FGCs) of the Russian Federation on the basis of regular observation. Since it is FGCs that make the main contribution to the economic growth of national economies, changes in the trends of their development make it possible to assess the prospects for growth of the economy in general.

FGCs are defined as companies that meet the following criteria:

• founded at least 3 years before the date of preparation of the latest annual report;
• registered as a legal entity;
• during the period over the last 3 years before the date of preparation of the latest annual report, the company's average number of employees was more than 10 people;
• the average annual revenue growth rate over the last 3 years before the date of preparation of the latest annual report, calculated using the CAGR formula, exceeded 20%.

The basis for conducting the survey is a representative sample from the population of FGCs formed in accordance with the above criteria.

The formed sample ensures a close correspondence of its structure to the structure of the general population according to three criteria (strata):

• revenue size,
• industry affiliation,
• region (federal district of the Russian Federation).

The Index is formed on the basis of quarterly surveys of FGCs using the telephone interview method. The questions in each cycle (quarterly) remain unchanged and make it possible to detect changes in the following performance indicators of FGCs:

1. Changes in revenue (component "Revenue", CR);
2. Changes in the number of employees (component "Number of employees", CNE);
3. Changes in the costs of financing business development (component "Financing of development", CFD);
4. Changes in the availability of loans, external investments, and subsidies (component "Raised funds", CRF);
5. Changes in the product portfolio (component "New products", CNP).

The composite FGC Index is calculated as the average value of the 5 components that form it, using the formula:

FGC Index = (CR + CNE + CFD + CRF + CNP) / 5

The Index is within the range of values from 0 to 100, with an Index below 50 signaling a decline in business activity, while above 50, on the contrary, confirms growth in activity. In addition to the 5 recurring questions, the survey questionnaires may include additional variable questions that can provide additional information about the activities of FGCs. The detailed methodology, including calculation formulas, can be provided to specialists and experts upon request at the email address imi@hse.ru

List and description of data sources for the index

The sources for calculating the FGC index include data from specialized information and analytical databases and databases prepared by specialists of the Institute of Innovation Management (for forming the sample) and data obtained through surveys of enterprises (for forming the index).

Opportunities that the use of index data will provide to different categories of users (researchers, representatives of federal executive authorities, business)

Based on the results of forming the next Index, the compilers plan to prepare a quarterly press release reflecting the dynamics of the Index and various analytical findings on the causes of the changes that occurred and the influence of individual factors on them. An analysis by various groups of companies may also be offered: by size, technological sector, and regions. Infographics related to the Index are also planned to be posted on the Index page.

In addition to the fixed list of questions for companies participating in the survey, each questionnaire may offer several variable questions that reflect in more detail a particular area: finance, management, market, innovation, exports, etc. This will make it possible, based on the results of an annual cycle of such surveys, to form an understanding of the phenomenon of Russian FGCs.

Also, in the course of compiling the Index, cases may be prepared describing the development trajectory and experience of solving growth problems of FGCs from various sectors. The subjects for preparing the cases are expected to be selected from among the FGCs participating in the surveys.

Based on the results of the annual cycle of compiling the Index, the release of an annual report with a summarizing analysis of trends in the FGC sector is planned.
 

Questions concerning the FGC Index can be sent to the Institute of Innovation Management of HSE Graduate Business School.

E-mail: imi@hse.ru

Tel: +7 495 6888588