High growth firms and trade linkages: Imports do matter

Plain English Summary Import is an important attribute of high-growth firms. Those are firms that achieve outstanding growth performance in terms of turnover or number of workers. They are more prevalent among small and young firms and are an important driver of job creation. This paper uses a very comprehensive data from Tunisia to analyze the relationship between trade and high-growth firm status. Our results show that firms more exposed to external linkages through importing, exporting, or foreigner ownership are more likely to achieve high growth. More specifically, we find that increasing import barriers negatively affect the prevalence of high growth firms. Imports are widely affected by policy decisions through tariff and non-tariff measures. These results imply that facilitating access to import should be a relevant component when designing and implementing policies aiming to support firms with high-growth potential. Abstract This paper examines the association between high-growth firm status and global linkages with special focus on the role of imports. We rely on a rich panel data covering all formal firms in Tunisia between 1999 and 2015. Our results show that firms that import, export, have foreigner ownership, or benefit from offshore regimes are more likely to achieve high-growth status compared to other similar firms in terms of size, age, sector, and region. Among these channels, importing status has a robust positive association with high growth. We find that an increase in the import barriers led by changes in non-tariff measures reduces the likelihood of achieving high-growth status through import channel for firms that are in sectors facing relatively higher levels of exposure to the shock.