New Report on High-Impact Firms’ Job Growth

June 25, 2008

A recent study, "High-Impact Firms: Gazelles Revisited," conducted by the U.S. Small Business Administration (SBA) Office of Advocacy found that high-impact firms, or so-called “gazelles” are responsible for creating significant numbers of new jobs. The study, conducted by Zoltan J. Acs, William Parsons and Spencer Tracy, is a follow-up to the research conducted in the 1980s by David Birch who first coined the term gazelles. While Birch’s definition of a gazelle was based on revenue growth, the new study examines both revenue and employment growth.

According to the study, gazelles exist in a variety of industries across the nation, and tend to be younger than their low-impact counterparts, with an average business age of 25 years. The researchers found that in any given four-year segment, there are approximately 300,000 gazelles. During the 1994–2006 period, firms with fewer than 500 employees represented 99.8 percent of gazelles. While these firms represent only between two and three percent of all firms, they account for almost all private sector employment and revenue growth in the economy.

When comparing large and small gazelles, the study found that employment growth rates were similarly high, but due to large, low-impact firms’ steady declines in employment, the study’s results were consistent with SBA data citing small business’ role in creating a significant majority of all net new jobs. The trend of growing employment in large, high-impact firms is almost cancelled out by large, low-impact firms’ decline in employment. Conversely, small low-impact firms showed either no change or a slight increase in average employment size.

The long-term viability of these gazelles is very high as well. The study found that in the four years after a high-impact firm undergoes its high-growth phase, only about 3 percent die. Most remain in business and exhibit at least some growth.

The researchers defined a gazelle as a firm with sales that doubled over the most recent four-year period and significant employment growth in that same period. Firms were analyzed over three four-year periods from 1994 to 2006.

Please click here to view the full report.