11 February 2015

GROWTH BUSINESS ISSUES

Understanding Small Business Growth Workshop

Enterprise Research Centre

Aston Business

Paul D. Reynolds

Economics and Strategy Group

Aston University

[PaulDavidsonReynolds@gmail.com]

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Issues to Explore

• Conception of Contributions

– Fantasy of “permanent jobs”

– Attend to benefits of churning

• Track start-up activities

– Effect on growth trajectory

• Growth Firms and Regional Growth

– Which firms improve regional well-being

– Consequences of firm growth

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Permanent Job Myth

• Churning (firms, jobs) associated with

subsequent economic growth

• Job churn in US – 8 million jobs added or lost each month

– 6% of 129 million private sector wage, salary worker positions

• New firms a major source of job gains, and

losses, net additions are substantial

• Suggests more attention to dynamics

• Measure “job years” not jobs created

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Job Opening and Labor Turnover Survey (JOLTS) Quarterly Job Flow Estimates: US

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Bruyere, C. N,, G.L.Podgornik, and J. R. Spletzer. (2011) Employment Dynamics over the last decade. Monthly Labor Review, August

2011, p. 16-29.

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Effect of Start-up Process on Outcomes

(Profitability, survival, growth)

• Potential for a UK PSED – Initial pretest [Fall 2013]

– Partial effort underway

• Track the start-up process in detail

• Need follow-ups for 5-6 years

• Most significant firms may need longer

launch period

• Compare start-up history of new firms with

different outcomes

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Entry to Start-Up Activity: Lag and Prevalence (n=159)

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Which Firms Improve Economic

Outcomes for All?

• Which growth firms

– Improve productivity and reduce regional jobs

– Expand the economic pie and increase

regional jobs

• Examples from six two year periods,

– 1976-1978, 1978-1980, …

– Regional job growth in following five years

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Reynolds, Paul D. (2014) New Growth Firms and Regional Job Growth. Philadelphia, PA: Academy of

Management Annual Meeting. 4 August.

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Small Firm Births and Five Year Regional Job Growth

[Six 2-year periods, n=1,859; r=0.16, 430 cases omitted]

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Large Firm Births and Five Year Regional Job Growth

[Six 2-year periods, n=1,859; r= -.09, 430 cases omitted]

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