Understanding the Economic Impact of High-Growth Firms

Understanding the Economic Impact of High-Growth Firms

(Kansas City, Mo.) June 7, 2016 -With labels like “gazelles,” “cheetahs” and “unicorns,” high-growth firms are a rare phenomenon in entrepreneurship that have a big impact on the economy. According to a new Entrepreneurship Policy Digest released today by the Ewing Marion Kauffman Foundation, given their outsized contributions to the economy, it is important to understand high-growth firms and how their impacts are measured.

The Digest highlights findings from the Kauffman Index of Growth Entrepreneurship, including the top 40 metro area high-growth business rankings, and these national trends:

  • Growth entrepreneurship is increasing, though not at historic highs
  • High-growth average employment growth rose
  • High-tech is not a pre-requisite for high-growth; other sectors are growing too
  • The number of high-growth firms varies within industries from year to year

High-growth firms expand to numerous locations and encourage employment growth, accounting for as much as 50 percent of new jobs created. The Policy Digest explains how defining high-growth businesses using firm attributes – venture capital funding and participation in accelerators – will capture different results than defining them by business performance metrics – revenue growth, employment and exits.

The Digest recommends these strategies to encourage an environment for growth entrepreneurship:

  • Increase college completion rates
  • Welcome and retain immigrant entrepreneurs
  • Limit non-compete agreements

The Kauffman Foundation’s Policy Digests consist of summaries of findings around relevant policy issues that will inform and educate policymakers. To read the entire Policy Digest on high-growth firms and to sign up to receive subsequent Digests, go to www.kauffman.org/policydigest.