High growth firms generate jobs

The Kauffman Foundation released its study High-Growth Firms and the Future of the American Economy today noting that startups pursuing growth generate 40% of all new jobs. But they also note that the ability to successfully pick winners and losers at the startup stage is rather difficult. So they recommend that regions who generate large number of firms are likely to produce the necessary high-growth companies that will enhance the local economy through job creation. Regions that remove barriers such as taxation and regulation burdens are more likely to produce more high-growth firms. And immigrants and universities are a key source for the generation of startups. In light of this report and countless others, it is difficult to understand why so many communities and regions pour dollars from taxes and private donations into efforts designed to promote the attraction of existing firms to the area. The old “rob thy neighbor” approach to economic development (luring firms from other regions to your area through various forms of financial give-aways) is simply a failed strategy. Yet, the old school method persists either out of ignorance or preservation of the status quo.

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