Gazelles as job creators: a survey and interpretation of the evidence
Magnus Henrekson
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1
Dan Johansson
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JEL Classifications O
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D. Johansson The Ratio Institute
,
Stockholm, Sweden
1
M. Henrekson (&) Research Institute of Industrial Economics
,
Stockholm, Sweden
It is often claimed that small and young firms account for a disproportionately large share of net employment growth. We conduct a meta-analysis of the empirical evidence regarding whether net employment growth rather is generated by a few rapidly growing firmsso-called Gazellesthat are not necessarily small and young. Gazelles are found to be outstanding job creators. They create all or a large share of new net jobs. On average, Gazelles are younger and smaller than other firms, but it is young age more than small size that is associated with rapid growth. Gazelles exist in all industries. They seem not to be overrepresented in high-technology industries, but there is some evidence that they are overrepresented in services.
1 Introduction
Research on the economic importance of small firms
was negligible until Birch (1979) claimed that they
generated a disproportionately large share of new net
jobs.1 Birchs findings have been criticized by, e.g.,
Brown et al. (1990), Davis et al. (1996a, b), and
Haltiwanger and Krizan (1999), but they sparked
small business research. It is now a vigorous research
field with a wide coverage, encompassing issues such
as the importance of entrepreneurship, firm
demography, and firm dynamics for job creation and
economic growth.2 Van Praag and Versloot (2008)
review the empirical literature on the economic
contribution of entrepreneurial firms, i.e., small and
young firms, which are found to have positive effects
on employment, productivity, innovation, and utility.
With reference to employment Van Praag and
Versloot conclude (p. 135): Entrepreneurs create
more employment than their counterparts, relative to
their size. This result is unambiguous. Small and
young firms are required to boost employment.3
1 See also Birch (1981, 1987).
2 See, for instance, Kirchhoff and Greene (1998) for a
summary of the discussion.
3 Moreover, they maintain that the methodology of the critics
strengthens this conclusion (p. 135): The results from studies
following the DavisHaltiwanger methodology, which are not
reported here, only add credibility of this result.
The purpose of this article is to go one step
further and survey the empirical evidence on
whether, in fact, net employment growth is generated
by a few rapidly growing, not necessarily small and
young, firms, so-called Gazelles. The term was
coined by Birch some 20 years ago (Landstrom
2005, p. 170) to denote a small group of high-growth
firms that, according to him, generated most of the
new net jobs in the economy. This stands in contrast
to the few large (often publicly traded) companies,
known as Elephants, which according to Birch
had a large employment share, but generated few
new jobs, and to the vast majority of all firms that
started out small, grew very little and hence
contributed only marginally to employment growth.
The latter firms were termed Mice.4 In addition,
we are interested in whether Gazelles, in fact, are
young and small, and whether Gazelles are
overrepresented in high-technology industries.5 Much
economic policy has been targeting high-technology
firms since politicians have relied on
high-technology firms and industries to boost economic growth
and job creation. The research questions may be
stated as four propositions:
Proposition 1: In a population of firms, net
employment growth is generated by a small
number of high-growth firms, so-called Gazelles.
Proposition 2: On average, Gazelles are younger
than other firms.
Proposition 3: On average, Gazelles are smaller
than other firms.
Proposition 4: Gazelles are overrepresented in
high-technology industries.
4 Gallagher and Miller (1991) instead use the terms flyers
and sinkers to denote high- and low-growth firms,
respectively.
5 There is an extensive literature studying micro level
characteristics of (high-)growth firms. In his wide-ranging
survey of this literature Storey (1994, p. 122) identified 35 such
factors, which he classified into three categories: (i) the
resources of the entrepreneur(s), e.g., motivation and
education; (ii) the firm, e.g., age and size; and (iii) strategy, e.g.,
management training and market positioning; see Barringer
et al. (2005) for a recent survey of this literature. The studies
identified in our survey generally do not report on any other
characteristics than firm age, size, and industry affiliation. Still,
it is interesting to include those three characteristics in the
survey considering the discussion on the importance of new
and small firms and considering the expectation by many on
high-technology firms to generate employment (and growth).
In the next section we discuss the definition of
Gazelles and the method used in our survey.
Section 3 reports the results from the identified
studies. These results are ana (...truncated)