Firm age, investment opportunities, and job creation
Manuel Adelino, Song Ma, David Robinson 12 February 2014
There is a strong link between entrepreneurship and growth – young firms were responsible for almost all net job creation in the US economy over the last 30 years. This column presents new research into the responsiveness of firms of different ages to investment opportunities. Firms aged 0–23 months create about twice the total number of new jobs in response to local income shocks than firms that are more than six years old.
Economists have long been concerned with understanding how firms respond to changing investment opportunities. Indeed, this question is central to ongoing policy discussions about economic growth and job creation, since the way firms create jobs is by increasing investment and employment in response to new economic opportunities. The startup process and economic growth are deeply interconnected – over the last 30 years, young firms were responsible for almost all net job creation in the economy (Haltiwanger et al. 2009, 2013, Stangler and Litan 2009).
Financial markets Labour markets Productivity and Innovation
employment, US, growth, entrepreneurship, job creation, firm age