Do small companies really create the most jobs? Put that puzzler aside. Instead, focus on a fact no one disputes: most new jobs come from a relative handful of fast-growing companies.
Some of those fast-growing companies are behemoths and are all the more noticeable because so many other giant companies are slashing their payrolls. But the vast majority of job-creating businesses are fast-growing smaller companies -- dubbed "gazelles" by David Birch of Cognetics Inc., a Cambridge, Mass., research firm. Gazelles aren't to be confused with small businesses. Most small businesses don't grow at all. Though gazelles start small, some grow out of the category pretty quickly. Birch estimates that the fast growers represent no more than 3% of U.S. businesses. But between 1990 and 1994, gazelles created 5 million jobs, enough to produce net employment growth of over 4 million in spite of the well-publicized downsizings elsewhere in the economy.
Gazelles defy easy understanding. Consider just a few of the paradoxes that Birch's research has uncovered:
What's a "gazelle"?
David Birch's research firm, Cognetics Inc., traces the employment and sales records of some 9 million companies with a Dun & Bradstreet file.
A gazelle, by Birch's definition, is a business establishment with at least 20% sales growth every year from 1990 to 1994 (the last year for which Cognetics has complete numbers), starting with a base of at least $100,000.
Source: Hot Industries, Cognetics Inc., Cambridge, Mass., 1995.
* * *Gazelles are widely dispersed throughout the economy
| Percentage of companies in sector that qualify as gazelles | |
| Agriculture, forestry, fishing | 2% |
| Mining | 4% |
| Manufacturing | 5% |
| Wholesale trade | 5% |
| Finance, insurance, real estate | 2% |
| Construction | 3% |
| Services | 2% |
| Retail trade | 2% |
| Transportation, communication, utilities | 2% |
Source: Hot Industries, Cognetics Inc., Cambridge, Mass., 1995.
* * * But they're not necessarily concentrated in the fastest-growing markets
Top three job-creating industries, 1990-1994.
| Industry | Jobs added (in thousands) |
Percentage that are gazelles |
| Business services | 1,199 | 2% |
| Health services | 887 | 2% |
| Eating and drinking places | 470 | 1% |
Instead, they're often found in flat or slow-growing industries
Top five industries by percentage of gazelles, 1990-1994
| Industry | Gazelles | Job growth |
| Chemicals, pharmaceuticals, etc. | 7.9% | Ñ2% |
| Electronic and electrical equipment | 7.9% | Ñ7% |
| Instruments | 7.8% | Ñ13% |
| Paper products | 7.8% | Ñ1% |
| Rubber and plastics products | 7.7% | 10% |
Sources: Bureau of Labor Statistics, Monthly Labor Review, Washington, D.C., October 1995; Hot Industries, Cognetics Inc., Cambridge, Mass., 1995.
* * * A typical gazelle
The Rug Barn Inc., Abbeville, S.C., manufactures and distributes decorative home products.
Has more than 20% -- in this case well more than 20% -- annual sales growth ($266,000 to $65 million, 1990Ñ1994)
Isn't high tech (only 2% of gazelles are in traditional high-tech industries)
Is a huge job creator (1990 payroll: 20; 1994 payroll: 625)
* * * Gazelles create more jobs than the economy as a whole
Jobs created by gazelles, 1990-1994 5.0 million
Jobs lost by other companies 0.8 million
Net employment growth 4.2 million
* * *Source: Who's Creating Jobs? Cognetics Inc., Cambridge, Mass., 1995.
Research assistance for this article was provided by Mary Furash.