Frontiers of Entrepreneurship Research
1997 Edition

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WHY DOES THE RELATIVE SHARE OF EMPLOYMENT STAY CONSTANT?

Zoltan J. Acs U. S. Small Business Administration
Bruce D. Phillips U. S. Small Business Administration

The Four Industry Clusters
Growing industries with increasing small firm employment share
Growing industries with declining small firm employment share
Declining industries with increasing small firm employment share
Declining industries with declining small firm employment share

Firm Employment Dynamics

Interpreting Firm Employment Dynamics

The Company Organization Survey
Influence of the business cycle
Incorrect association between employers and employees
Employees vs. Independent Contractors

Static vs. Dynamic Comparison

Summary and Conclusion

References

Table 1: Percentage of Employment in Firms by Firm Size for the United States, 1988-1994

Table 2: Total Employment Changes, and Corresponding Small Business Employment Changes, 1989-1993 (4 Digit Industries)

Table 3: Total Employment Changes, and Corresponding Small Business Employment Changes, 1988-1993 (4-Digit Industries)

ABSTRACT

The U.S. static share of employment in small and medium sized firms has remained close to fifty percent for a decade, even when measured by different data sets and for different time periods. This result is particularly surprising given the disproportionate creation of jobs by small and medium sized firms in the economy. If small and medium sized firms continue to create more than their share of employment in the economy, the static share of large firm jobs should decrease, other things being constant. The share of employment in small and medium size firms remains constant because many of the highest growth small firms become large firms, or get acquired by large firms.

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