unemployment. However, there are some special circumstances affecting the results
concerning the comparison with to the total job growth and to total unemployment. Foremost,
during the time period Sweden went through the worst depression in modern times, showing
negative GDP growth for three consecutive years (1991–93). In fact, aggregate employment
decreased during the studied time period. As Davidsson and Delmar point out this sharply
influences their results. Also, the large government sector in Sweden, accounting for roughly
one third of total employment, lowers the potential job contribution of private firms.
particularly true for the service sector, from which private entrepreneurs were largely barred
(see, e.g., Henrekson 2005 and Johansson 2007 for a discussion).
As regards the comparison with the employment contribution of new firms, Davidsson
and Delmar (2003) report new firms to generate approximately 40,000 new jobs and high-
growth firms to generate 45,000 new jobs in 1996.
The result is in line with Halabisky et al.
(2006), who report the net employment effect of churning (job gains in entries less job losses
in exits) to exceed that of high-growth firms. The results may rather reflect the importance of
new firm formation than the modest effect of high-growth firms.
Davidsson and Delmar (2003) and Delmar et al. (2003) do not base their conclusion about
the modest contribution on a comparison with the non-high-growth firms in their
Relating the job contribution of Gazelles to that of other firms in the population
examined, it is clear that high-growth firms are major job contributors; see
. While the
other firms lost more than 250,000 employees during the studied period, high-growth firms
expanded by more than 180,000 employees (organic and acquired growth). Even if the
analysis is restricted to organic growth, high-growth firms make a substantial job
contribution. We therefore modify Davidsson and Delmar’s inference and conclude that high-
growth firms are most important in the studied population.
This is in accordance with the
findings in the other studies reaching the conclusion that Gazelles are important.
The investigated firm population also only covers about 60 percent of private employment (Davidsson and
The new firms in 1996 are separate from the population including the Gazelles.
There are numerous studies documenting the importance of new firm formation. Compare, for instance, the
previously mentioned result by Kirchhoff (1994) who reports the 1977–78 cohorts of firms to account for four
percent of total U.S. employment in 1984.
Davidsson and Delmar (2006) relate to the non-growth firms and conclude that high-growth firms contribute
significantly to net employment growth, although insufficiently to single-handedly solve the severe aggregate
underemployment problem in Sweden in the mid 1990s.
The performance differences between high-growth and non high-growth firms were even more pronounced in
the depression years. The performance of high-growth firms was only marginally affected by the depression,
while the rest of the economy suffered massive job losses.
The seemingly paradoxical result that Gazelles are important net job creators compared to other private firms,
but not markedly so when related to aggregate employment growth, is consistent with the Swedish institutional
Employment growth broken down by organic and acquired employment, 1987–96.
Growth by group
Firms; 10% highest growth
Total employment growth
: Davidsson and Delmar (2003, Table 2.2, p. 13).
: This table just reproduces the parts of Davidsson and Delmar’s table that are relevant for our survey.
Firm size, firm age and industry affiliation exhibit a significant relationship with firm growth.
Studying total growth, large firms are overrepresented among high-growth firms. According
to Davidsson and Delmar (2003, 2006) this is expected due to the choice of studying absolute
employment growth. Firm age has a negative influence on rapid growth. While high-growth
firms exist in all industries, service industries are overrepresented: the professional service
sector has twice as a high representation among the top 10 percent firms compared to its share
of the entire population.
Studying organic growth, the result for size is altered, while the results for age and
industry are strengthened. Smaller firms grow organically to a greater extent, while larger
firms mainly grow through mergers and acquisitions. High-growth company groups even
exhibit negative growth in organic terms. Hence, independent firms loom larger when the
focus is on organic growth. In high-growth firms younger than five years, 80 percent or more
of employment growth is organic, while the corresponding share for high-growth firms older
than 10 years is a mere 16 percent. High-growth firms are overrepresented in young and
growing industries with a large inflow of new firms, especially in knowledge-intensive
business-to-business services, education and health care. About two thirds of the high-growth
firms were established during the period covered by the analysis.
Delmar et al. (2003, p. 210–211) conclude: “In relation to previous research, these results
largely support a view that organic growth is more associated with young and small firms, and
that acquisition growth is more common among larger and older firms, and firms in stagnant
or low-tech industries.” Moreover, they conclude that age, rather than size, determines rapid
growth and, hence, that new firm formation and early growth of new firms are crucial for net
employment growth, particularly in young and growing industries. Davidsson and Delmar
setup. For most of the post-war period Swedish economic policy disfavored entrepreneurship and private wealth
formation (e.g., Henrekson and Johansson 1999; Henrekson and Jakobsson 2005). Hence, at the same time as
Gazelles may be important job creators compared to other private firms, economic policy may dampen the
growth of Gazelles and other private firms so that their contribution to total employment becomes modest (e.g.,
Davidsson and Henrekson 2002).
(2006) write that the results indicate that renewal leads to organic growth as well as growth in
the whole economy.
The purpose of Littunen and Tohmo (2003) is to investigate the factors involved in the
start-up and first years of existence of firms that also experience rapid growth, e.g.,
characteristics and motives of the founding entrepreneur. They study a sample of Finnish
metal-based manufacturing and business service firms founded in 1990. The firms are
followed until 1997. To be classified as high-growth, a firm has to more than double its
turnover in real terms over the 1990–97 period. In addition, its turnover has to be at least FIM
500,000 by 1997. In 1997, overall employment in the sample studied had increased.
Employment of non-high-growth firms was reduced. Employment of high-growth firms
increased not just to offset the decrease, but also to increase total employment (Table IV, p.
196). It is noteworthy that Finland was in a deep recession when the study was conducted.
Fritsch and Weyh (2006) study the employment trajectories in the 18 cohorts of start-ups
founded from 1984 to 2002 in West Germany. The data are taken from the German Social
Insurance Statistics. They cover all private sector industries and include start-ups with at least
one employee. Start-ups that have more than 20 employees in the initial year are excluded, a
main motivation advanced for this decision is to avoid including firms that are not genuinely
new but a result of the reorganization of large firms. The median start-up only has one
employee. Employment growth is measured in absolute terms. A particular definition of
Gazelles or high-growth firms is not used, but employment shares of the largest 1, 5, 10 and
25 percent firms in different cohorts are reported. Fritsch and Weyh (2006) observe that the
cohorts have a propensity to start by expanding employment. However, employment growth
ceases quite soon; employment in a cohort stagnates or declines after one or two years. On
average, total employment in a cohort has fallen below its initial level after eight years. This
has two causes. First, mortality of individual new firms is high, and after 10 years just about
half of manufacturing firms in a cohort survive. The corresponding figure in services is even
lower, about one third. Second, most surviving firms do not grow.
Just a few firms do. On
the other hand, these firms generate a significant number of new jobs. The authors conclude
that a small fraction of firms dominate job creation. By the end of the period one percent of
the firms accounted for about 44 percent and five percent of the firms accounted for close to
This resembles, for instance, the point made by Storey (1995) that the essential issue is how many small firms
grow into large firms when criticizing Harrisson’s (1994) view that the importance of small firms is exaggerated.
See also Acs (1995).
The impact of firm size is not discussed in the study.
On average, the median size of surviving firms is four employees in manufacturing and three employees in
services at the end of the period.
three quarters of the jobs in the initial cohort. In 2002, employment in the 18 studied cohorts
made up about one fourth of total employment in the private sector industries. Fritsch and
Weyh (2006) also test Gibrat’s Law for all studied cohorts for all years. Gibrat’s Law is
rejected for all cohorts and for all years.
Halabisky et al. (2006) study the job contribution of hyper- and strong-growth firms in
Canada from 1985 to 1999. Data from the Longitudinal Employment Analysis Program
(LEAP) and the Small Area File (SAF) are used. The data include all firms with employees,
except in health, education and government. Hence, firms with zero employees are excluded.
The study focuses on firms in full-year operation in 1985 and still in business in 1989, i.e.,
continuing firms. A hyper-growth firm is defined as a firm growing by 150 percent in terms of
employment in the four-year period 1985 and 1989, and a strong-growth firm is growing
50−150 percent in the same period. The job contribution of hyper- and strong-growth firms
and other types of firms is related to the overall job creation in the private sector and to the net
employment effect of churning (job gains in entries less job losses in exits). The job
contribution in different phases of the business cycle is of particular interest. The hyper- and
strong-growth firms, representing seven percent of the population, accounted for 56 percent of
net job growth in the private sector (nearly one million out of 1.8 million new jobs). Small
firms (less than 100 employees) dominated among rapid growers.
High-growth firms were
resistant to recession and hardly lost any jobs as a group (employment stayed roughly
constant) in the downturn that occurred during the period. In particular, high-growth firms
contribute tremendously to job creation in provinces experiencing weak overall employment
performance. Rapidly growing firms are found in all industries, and high-tech is not
overrepresented. If anything, services are overrepresented. The net effect of churning over the
period resulted in 1.3 million new jobs.
Hence, entry is found to be of crucial importance for
total job growth.
Acs and Mueller (2008) study the employment effect of business dynamics in a regional
context. They combine data from the Longitudinal Establishment and Enterprise Microdata
(LEEM) with data from the Current Employment Statistics (CES) survey. Every U.S. private
sector (non-farm) business with employment is covered. The analysis is carried out for 320
U.S. Metropolitan Statistical Areas (MSAs) and covers the 1990–2003 period. Growth is
The study does not report any results pertaining to firm age. Hence, it is not possible to investigate the finding
in several other studies that this is largely driven by firm age.
Hence, hyper- and strong-growth firms together with the net effect of churning added about 2.3 million net
jobs. Slow growth firms added about another 380,000 net jobs, while declining (not exiting firms) lost 850,000
jobs. Altogether, the private sector grew by 1.8 million jobs.
measured as percentage change of employment in the MSAs over a three-year period. The
start-up rates in the MSAs are used as a measure of business dynamics. The start-up rates in
one year and each of the preceding six years are regressed on growth in order to analyze the
long term effect of business dynamics on employment. New firms are differentiated according
to their size, measured as the number of employees in the year of entry. Gazelles are defined
as new firms having 20–499 employees in the year of establishment and experiencing
persistent employment growth over time. New firms have a strong effect on employment in
the year of entry. The effect fades after six years. Only Gazelles located in large diversified
Metropolitan Areas exhibit pronounced long-term job effects.
Acs et al. (2008) revisit some of the earlier conclusions of Birch’s work on rapidly
growing firms with new and better data: The Business Information Tracking System (BITS)
and the Corporate Research Board’s American Corporate Statistical Library (ACSL). Rapidly
growing firms are referred to as high-impact firms, which are defined as enterprises (p. 4):
“with sales at least doubling over the most recent 4-year period and which have an
employment growth quantifier of two or greater over the same period”. The employment
growth quantifier is, in turn, defined as the product of absolute and relative change in
employment over a four-year period. They look at four sets of questions: high-impact firms
compared to non-high-impact firms, the location by industry and region of high-impact firms
and what type of firms high impact firms are before and after they become high-impact firms.
The data include all firms in all industries and cover the period from 1994 to 2006. The main
period of analysis of the high-impact firms is 1998–2002. The 1994 to 1998 period is used to
study the nature of high-impact firms before they become high-impact firms and the 2002 to
2006 period is used to study high-impact firms after they have become high-impact firms.
High-impact firms exist in all industries and regions accounting for 2–3 percent of all firms
depending on industry and region. High-tech industries are not overrepresented. They are of
all sizes and create almost all employment growth in the whole economy. High-impact firms
with less than 500 employees and high-impact firms with more than 500 employees create
about half of the new jobs each. The rate of high-impact firms that continues as high-impact
firms is double in the 500+ size class compared to smaller high impact firms. These are called
super Gazelles. Close to all job losses are due to non-high-impact firms with more than 500
employees. High-impact firms are not young; their average age is around 25 years. This is,
however, considerably less than the average age of non-high-impact firms. A conclusion is
that a diversified economy enhances the creation of high-impact firms since such firms can be
found in all industries and since the growth of industries shift over time.
Deschryvere (2008) studies the job contribution of high-growth firms in Finland. He
applies the definition proposed by OECD (2006) and defines high-growth firms as firms with
an average employment growth greater than 20 percent p.a. over a three-year period, and with
10 or more employees at the beginning of the period. The investigated period covers the
three-year period 2003–06 and the analysis is based on the firm and establishment data from
the Finnish Business Register. Continuing firms are analyzed. According to the definition,
high-growth firms make up 5.4 percent of the total stock of firms with more than 10
employees, corresponding to 750 firms. When the definition is based on organic growth the
number of high growth firms is reduced to 642, corresponding to 4.6 percent of the
population. Most high-growth firms start out small but medium-sized rapidly growing firms
create most jobs. There is a negative relationship between initial firm size and organic growth.
Firm age is not reported. During the studied period the Gazelles in total added 62,000 net jobs
to the economy, whereof 65 percent (about 40,000 in absolute terms) through organic growth.
High-growth firms generated about 90 percent of all net jobs created in the Finnish economy
during the studied period. High-growth firms are represented in most industries.
4. Discussion and Conclusions
It is apparent from our survey that the studies differ in their definitions of Gazelles, measures
of growth and time periods. They also differ regarding industries, firm sizes, firm ages,
methods used and geographical coverage. Sometimes this is a drawback since comparability
may be impaired. However, in this case the large variation should be seen as an advantage,
since the results regarding the importance of Gazelles turn out to be quite robust. Regardless
of definition, method, time period etc. some findings emerge.
is supported. A few rapidly growing firms generate a disproportionately
large share of all new net jobs compared to non high-growth firms. This is a clear-cut result.
All studies find Gazelles to generate a large share, all or more than all net jobs (in the case
where employment shrinks in non-Gazelle firms taken as a whole). It is noteworthy that this is
particularly pronounced in recessions when Gazelles continue to grow.
is also supported. The results regarding age are unambiguous. All studies
reporting on age find that Gazelles tend to be younger on average. Super Gazelles are also
3 the results are ambiguous. Gazelles can be of all sizes, small
firms are overrepresented but larger Gazelle firms are important job contributors in absolute
terms, in particular a small sub-group of so-called Superstars or super Gazelles. These are
both large firms and major net job creators. It appears that newness is a more important factor
than small size.
is not supported There is no evidence that Gazelles are overrepresented in
high-tech. Gazelles exist in all industries. If anything, they appear to be overrepresented in
All studies but the ones based on Swedish data and the new Finnish study investigate total
growth. Since organic growth is supposed to generate new employment to a larger extent than
acquired growth, the conclusions may be altered when organic growth is studied. However,
the Swedish and Finnish studies show that the conclusions are similar irrespective of whether
organic or total growth is studied. Rather, the conclusions are more pronounced when organic
growth is the object of study. It is also noteworthy that the growth of young and small firms is
more organic compared to large and old firms. Hence, they make a larger contribution to net
employment growth. We have little reason to surmise that the pattern in other similar
countries would be different. Moreover, the studies focusing on single establishments – where
acquired growth is likely to be insignificant – report similar results.
This survey of existing studies clearly shows that a small number of high-growth firms are
particularly important for net job creation. Moreover, it is clear that Gazelles more often than
not are young firms.
Nevertheless, this conclusion still rests on a fairly small number of
studies. Additional studies would therefore be of great value. There are a number of ancillary
aspects that could be dealt with concurrently such as the importance of spatial localization
(e.g., Stam 2005) and whether other performance measures such as the growth in sales lead to
similar conclusions (e.g., Moreno and Casillas 2007). One should also use alternative
econometric approaches, such as quantile regression techniques, to examine whether more
accurate estimates can be obtained (e.g., Coad 2007). Yet another interesting expansion would
be to study the economic significance of firms showing exceptional growth rates in more
detail (e.g., Markman and Gartner 2002).
The results also provide additional perspectives on two discussions raised in several
papers. The first discussion concerns the question whether it is the entry of many new firms or
the rapid growth of a few firms that generate employment growth, the so-called “Mice vs.
Gazelles debate” (cf. Davidsson and Delmar 2003, 2006). Our survey suggests that the two
views are complementary. The studies in this survey indicate that employment in new firms
Even though acquired growth is supposed to have less effect on new employment it may have a strong effect
on productivity growth, and therefore be of great economic importance.
This is in line with, for instance, Haltiwanger (2006), who reports a negative relation between firm age and
firm growth and that young firms exhibit rapid net growth and high volatility.
are crucial for total employment growth and seems to be at least of equal importance as the
net job contribution of continuing (Gazelle) firms. The positive employment effect of new
firm cohorts tends to decline over time. Thus, continuous entry of new firms is required to
achieve net job creation.
Parker et al. (2005) also report that only a small subset of the
Gazelles show sustained growth. Hence, it seems plausible that a high inflow of new firms
increases the likelihood to generate young Gazelles (with sustained growth), which tend to
have a larger impact on aggregate employment than older Gazelles, since the former are more
likely to grow organically.
The second discussion concerns the assertion that small businesses contribute
disproportionately to job creation. The critics of this claim have pointed to the quality of data,
the narrow emphasis on net job contribution, and the disregard of gross job flows and
regression-to-the mean effects (e.g., Haltiwanger and Krizan 1999).
An often overlooked
part of the critique, and in our opinion perhaps the most important one, is that net employment
growth has to be viewed in a broader perspective of creative destruction, where net
employment growth entails considerable churning and restructuring in a dynamic process of
firm entry, expansion, decline and exit.
Hence, gross job flows are critical for net job
growth, since they are part of, and a prerequisite for, the discovery procedure of new business
opportunities that create jobs in the long run. It may therefore be misleading to narrowly focus
on a particular piece of this process and claim that it alone contributes a disproportionately
large share of net employment growth.
This is not to deny that some firms are more important than others in the process of
creative destruction, in the same sense that some entrepreneurs are more important than
others; cf. Acs’ (2008) discussion of high-impact entrepreneurship. However, a prerequisite
for the growth of these firms is also that the process of creative destruction functions so that
efficient new and expanding firms can attract resources from inefficient firms, resources that
are released through contraction and exits. Without this dynamic reallocation the growth of
firms will be hampered, irrespective of their inherent growth potential.
Fritsch and Mueller (2004) find that the employment effect from new entry follows a “wave pattern”. Initially
employment increases due to the direct effect on employment from entering firms, thereafter it declines as a
result of exits of failed entrants and crowding out of incumbent firms with lower productivity than the successful
newcomers. Finally, positive supply-side effects increase employment in the long run. See Fritsch (2008) for a
summary of the empirical evidence and a discussion. Fritsch (2008, p. 12) argues that the positive supply side
effects only show up if economic policy supports a “selection of the fittest” scenario. This means that policy
distorting the market selection process should be avoided.
See also Davidsson (2004) for an elaboration on numerous pertinent methodological issues.
See Johansson (2005) for a recent example.
Cf. Davidsson and Delmar (2006) who argue that economic policy should be focused on renewal in the form
of entry of new firms, particularly in young and expanding industries.
implications are in line with the OECD’s (2007) recent assessment that the evidence of
favorable policy impact is more clear-cut for macro/institutional policies than for various
types of targeted micro policies.
Further support of our conclusions that different views are complementary in the two
discussions, is given by the increasing evidence that turbulence in itself, i.e., the entry and exit
of firms, boosts job creation (e.g., Bartelsman et al. 2004, 2005; Brown et al. 2006; Birch
2006; Fogel et al. 2008; Caballero 2007). Turbulence is a natural effect of an accelerated
search for new business opportunities and a rapid reallocation of resources from unsuccessful
to successful firms, and when an industry evolves and becomes more mature it is natural that
the market selection process reduces the number of firms, in some cases to a very small
number (Klepper 2002). This implies that an employment-enhancing policy should aim at
lowering barriers to new firm entry and firm exit to support an experimental process
increasing the number of trials (new firms) from which potential Gazelles can be “recruited”,
and not hindering the closure of failures.
We thank Niclas Berggren, Carl Magnus Bjuggren, James Chrisman, Per Davidsson, Simon
Parker, Mikael Stenkula, Michael Wyrwich, participants at a Ratio seminar, and participants
at a seminar at the 12
International Schumpeter Conference in Rio de Janeiro for useful
comments and suggestions. Henrekson acknowledges financial support from the Gustaf
Douglas Research Program on Entrepreneurship at the Research Institute of Industrial
Economics, and from Catarina and Sven Hagströmers Stiftelse. Johansson acknowledges
financial support from Sparbanksstiftelsen Alfa.
Acs, Z.J. (1995). Symposium on Harrison’s ‘Lean and Mean’. Small Business Economics 7(5), 333–
Acs, Z.J. (2008). Foundations of High Impact Entrepreneurship. Foundations and Trends in
Entrepreneurship 4(6), 535–620.
Acs, Z.J. & Mueller, P. (2008). Employment Effects of Business Dynamics: Mice, Gazelles and
Elephants. Small Business Economics 30(1), 85–100.
Acs, Z.J., Parsons, W. & Tracy, S. (2008). High Impact Firms: Gazelles Revisited. An Office of
Advocacy Working Paper, U.S. Small Business Administration.
Ahmad, N. (2006). A Proposed Framework for Business Demographic Statistics. OECD Statistics
Working Paper Series, STD/DOC(2006)3, Paris.
For a thorough discussion of key institutions and macro policies likely to foster Gazelles, see Henrekson and
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