Neutralism and Entrepreneurship: The Structural Dynamics of Startups, Young Firms and Job Creation

Patterns of firm formation and survival help explain the extraordinary job creation by startups.

Abstract:

An increasing number of studies and reports have shown that new and young companies account for most net job creation in the United States. This empirically documented reality, however, is not exclusively a result of new and young companies being particularly prolific or idiosyncratically superior to other firms.

Indeed, concepts such as job creation and entrepreneurship increasingly are conflated with young and small firms. Yet the age breakdown of job creation is partly a reflection of the dynamics of firm accumulation—how firms enter and exit and survive over a period of time. In any given year in the U.S. economy, new and young companies represent a plurality of all firms in the economy. That is, they make up the largest bloc of firms by age category, meaning their considerable job creation record is partly structural. This does not mitigate the contribution of these companies to job creation, but that contribution must be seen in the proper structural context.