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Kauffman study says: Startups Are Major Job Creation Engine
January 15, 2009
January 15, 2009
The Business Dynamic Statistics also indicate that while business startups decline slightly in most of the cyclical downturns, startups remain robust even in the most severe recession over the sample period (in the early 1980s).
"Job growth is essential for our economy to rebound, and this study shows that new firms have historically been an important source of new jobs in the United States," said Robert E. Litan, vice president of Research and Policy at the Kauffman Foundation, which funded the BDS.
"Our research into the early years of business formation consistently shows how vital new firms are to our economy, and this data should give policymakers and budding entrepreneurs alike great hope for how we can solve our current crisis?create and grow jobs through entrepreneurship."
The BDS data show that employment accounted for by
While still a small fraction of overall employment, these jobs from startups reflect new jobs, which is a large percentage compared to the average annual net employment growth of the
This pattern implies that, if you exclude the jobs from new firms, the
Micro firms (firms with one to four employees) accounted for a large percentage of new jobs in any given year?about 20 percent on average.
Although substantially larger startup firms (those with 250 to 499 employees) created a considerably smaller percentage of jobs in any given year?about 1.3 percent of employment in this firm-size class?their numbers still are substantial relative to net growth.
Although the overall business startup rate in the BDS does not exhibit much of a trend, the data do reveal a declining trend in the micro-firm business startup rate.
This may reflect compositional changes in sectors such as retail trade, where there is ample evidence of substantial shifts away from small, single-establishment firms to large, national firms.
Further information about the study can be found at: