Sep 122010

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.

For decades, the assumption has been that small business is the economy’s dynamic engine of job generation. Look at the numbers broadly, and that is the irrefutable conclusion: two-thirds of net new jobs are created by companies with fewer than 500 employees, which is the government’s definition of a small business.

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.

“Size plays virtually no role,” says John C. Haltiwanger, a co-author of the study and an economist at the University of Maryland. “It’s all age — start-ups are where the job-creation action really occurs.”

Start-ups account for much job destruction as well. Within five years, half of these businesses have folded. Yet the survivors are prime candidates to join the young, dynamic companies that make an outsize contribution to innovation, productivity gains and job growth, Mr. Haltiwanger says.

So any serious discussion of job creation, it seems, should look at the business tactics and policy steps that are most likely to nurture more of these promising corporate upstarts.

Read more . . .

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