The Economy Is Spawning New, Fast-Growing Entrepreneurial Companies

WHY IS THIS IMPORTANT? The ability and willingness of entrepreneurs to take risks and start new, fast-growing companies, coupled with institutions and laws that support entrepreneurship, has sparked growth and job creation. In a quickly changing economy with a premium on innovation, the degree to which the economy is composed of new rapidly growing firms is indicative of innovative capacity. But it is not small firms per se that are the key; it is the relatively small number of fast-growing "gazelles" (companies with sales growth of at least 20 percent per year for four straight years) that account for the lion's share of net new jobs from small companies.

THE TREND: The economy is increasingly made up of these gazelles. Since 1993, the number of gazelles has grown 40 percent, to over 355,000. These companies are responsible for creating 70 percent of the net new jobs added to the economy between 1993 and 1996. The small share of gazelles with over 100 employees accounted for 46 percent of total job growth. Additionally, over the course of the last three decades, financial markets seem to have evolved to embrace entrepreneurial dynamism more than in the past. The trend is reflected in the fact that the number of initial public offerings (first rounds of companies' stock sold when they make their debut in the public markets) has been rising steadily, by a total of some 50 percent between the 1960s and the 1990s. Although, the IPO market has cooled considerably in the recent market volatility.

THE DATA:

Go to next indicator >>

Index Home | Introduction
SECTION I | SECTION II | SECTION III
Productivity Paradox | Knowledge Economy
Nine Myths | Data Sources | Endnotes | The Authors

The Progressive Policy Institute (PPI)
Technology, Innovation, and New Economy Project
600 Pennsylvania Ave., S.E., Suite 400, Washington DC 20003
Phone: (202) 546-0007

www.ppionline.org