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Company Size Has More to do with Job Creation Than You Think

The Close School’s resident sage sheds light on prospects for entrepreneurs in the U.S. job market.

October 28, 2014

By Dr. Roy Carriker

A very interesting 2009 study by the Kauffman Foundation using United States Census Bureau data looked at job creation as a function of company age. Their findings were very illuminating:

  • Since 1980 nearly all net job creation in the U.S. occurred in firms less than five years old.
  • Without startups, net job creation for the American economy would have been negative in all but a handful of years.
  • 2007 census data showed firms aged between one to five years accounted for roughly two-thirds of job creation.
  • The net job creation year-to-year principally comes from three sources: startups; firms of between one and five years of age; and the oldest (and largest) companies, creating a “barbell" in jobs created vs. company age.
  • The Kauffman researchers suggested this barbell effect might be explained by the well-recognized dynamic of larger companies (thus older, taking time to attain size) fueling their own growth by absorbing startups and younger companies for their innovation and technology.

Why this matters:

To have a better shot at a job, being more attractive to where the majority of jobs are created (i.e., startups and entrepreneurial young companies) and knowing and understanding entrepreneurship can be a big plus.

Says Carriker: An entrepreneur friend of mine once told me: "Learn, earn, return." After 55 years of learning and earning around the world, I am returning.

Roy Carriker is a Teaching Professor and Director of Technology Entrepreneurship in the Charles D. Close School of Entrepreneurship. He is also a School of Biomedical Engineering, Science and Health Systems senior executive in residence.

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