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As the American economy stumbles towards recovery, the nations small startups have often been heralded as the key to a sustainable recovery. It was feared that because of the recession, entrepreneurship in America would suffer greatly, but the young business-minded of America have proven resilient and have sought to prove right the age-old adage that out of every crisis there comes numerous opportunities. Whereas policies aimed at generating more jobs are vital to helping the American economy back on its feet, Washington must also focus policies on creating a favorable environment for high-growth entrepreneurship, because top-performing companies are the most fertile source of new jobs. A new study by the Kauffman Foundation titled, High-Growth Firms and the Future of the American Economy has underlined the importance of new startups to generating new jobs. It found that, in any given year, the top-performing one percent of firms generate roughly 40 percent of all new jobs. Furthermore, it showed companies that were between three and five years old (so-called "gazelle" firms) make up less than a single percent of companies yet they generate around ten percent of new jobs in a year. Increasing Job Creation Robert E. Litan, vice president of Research and Policy at the Kauffman Foundation, was quoted by the Insurance Journal as saying, "Because fast-growing young firms account for a disproportionate share of net job creation, policymakers who are worriedly poring over unemployment projections might instead seek to foster the creation of more high-growth firms." "While some new companies will undoubtedly fail, high-growth firms must be started somehow, and the more quickly they are launched and in larger numbers, the faster both output and employment will grow," he added. Among the advice given to policymakers, the Kauffman study suggested removing all potential barriers that potentially block the emergence of high-growth companies among existing firms. These could include access to capital, taxation and regulatory burdens. "Without startups, our research shows that net job creation in most years would be negative, so policies that expand firm formation could increase both job creation and the number of high-growth firms," Stangler concluded. |
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