As we mentioned in our book Closing America’s Job Gap, innovation is, clearly, what is driving job growth in the United States.
However, it is no longer the innovation that happens within big companies that expands job opportunities. Rather, it is the innovation happening in small entrepreneurial companies that create new opportunities. Innovation in a large company context is typically driven by an interest in increasing competitiveness and profitability, usually through efficiencies that result in more output from fewer workers.
In contrast, small entrepreneurial companies are introducing new products, seeking new markets and even creating new markets. They are creating job opportunities as they grow and expand. A November 2009 Kauffman Foundation report Where Will The Jobs Come From? suggests that, as recently as 2007, two-thirds of net new jobs were created by startup firms less than five years old.
More recent data confirms the point. A new study says that startups are where the job-creation action really occurs.
According to an excellent piece by
Steve Lohr of the New York Times: “Modern tools of data analysis — fast computers, smart software and vast troves of digital information — often open the door to new insights. Consider the subject of jobs in America.
“But research published last month by three economists, working with more recent and detailed data sets than before, has found that once the age of the businesses is taken into account, there is no difference in the job-producing performance of small companies and big ones.”
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