High-employment-growth firms: defining and counting them
|Age in the base year||Total number of firms in the base year||Number of high-growth firms||Gross job gains by high-growth firms||HGFs as a percent of all firms||HGFs as a percent of all HGFs||Gross job gains by HGFs as a percent of all HGF gross job gains||Average number of jobs gained by HGFs|
1 year old
2 years old
3 years old
4 years old
5 years old
6 years old
7 years old
8 years old
9 years old
10 years or older
Sources: U.S. Bureau of Labor Statistics, Business Employment Dynamics research data, and authors’ calculations.
We see in table 2 that 13,561 of the 96,900 high-growth firms in the 2009–2012 timeframe were newly born firms. (In table 2, births are defined as those firms born after March 2008 and before March 2009). Expressed as a percentage, 14.0 percent of high-growth firms were newly born firms. The statistics in this table also tell us that the propensity to be a high-growth firm monotonically declines with age: 3.7 percent of newly born firms (age 0) in 2009 became high-growth firms in the 2009–2012 period and 3.1 percent of 1-year-old firms in 2009 became high-growth firms in the 2009–2012 period, whereas 1.3 percent of firms 10 years old or older in 2009 were high-growth firms in the 2009–2012 period.
Although younger firms are more likely to be high-growth firms, we also see that the younger high-growth firms contribute proportionally less of the total high-growth firms’ gross job gains.13 For example, also shown in table 2, 14.0 percent of high-growth firms were newly born in 2009, but these young high-growth firms contributed only 8.7 percent of the gross job gains during the 2009–2012 period. Similarly, 10.5 percent of high-growth firms were 1 year old, but these young high-growth firms contributed only 7.2 percent of the gross job gains. On the other hand, 34.1 percent of high-growth firms were 10 years old or older, and these older high-growth firms contributed 48.9 percent of the gross job gains. These statistics highlight that the average older high-growth firm created more jobs than the average younger high-growth firm. The average number of jobs created per high-growth firm generally increases with the age of the firm. High-growth firms that were less than 2 years old created, on average, 27–30 jobs per firm over the 2009–2012 period, whereas high-growth firms that were 10 years old or older created, on average, 62 jobs per firm over the same period.
In table 3, we present statistics on high-growth firms in the 2009–2012 period by firm size in 2009. These statistics are of interest because they show how our modification to the OECD definition affects the total number of high-growth firms. Over half of the high-growth firms in the 2009–2012 period that we identified in the BED data had fewer than 10 employees in 2009. To be specific, the statistics in table 3 show that 24,349 high-growth firms had 1–4 employees in 2009 and 24,307 high-growth firms had 5–9 employees in 2009. These 48,656 firms represented 50.2 percent of the total 96,900 high-growth firms. Recall that in the modified OECD definition, firms with fewer than 10 employees were classified as high-growth firms if they grew by 8 or more employees during the 2009–2012 period. The 24,349 high-growth firms that started with 1–4 employees grew by an average of 18.0 employees per firm, and the 24,307 high-growth firms with 5–9 employees in 2009 grew by an average of 16.5 employees per firm. At the other end of the size distribution, high-growth firms with more than 1,000 employees in 2009 grew by an average of 3,060 employees per firm.
13 We need to emphasize that in this paragraph we are discussing the contribution of younger and older firms to gross job gains and not their contribution to net employment growth. See Leming et al., “The Role of Younger and Older Business Establishments,” for a discussion of the relationship between age and net employment growth.