Revisiting Firm Size and Job Creation

Date of Original Version



Working Paper

Abstract or Description

This paper revisits the lively discussion of the relationship between firm size and job creation and the relationship between firm size and firm growth. We find that the relationship between firm size and firm growth is mediated by the industry conditions: In declining or low-growth industries smaller firms grow faster than larger ones but that relationship reverses for faster growing industries. This effect seems to be caused by a greater ability of larger firms to adapt to the economic climate. Small firms are always job creators while large firms switch from job destroyers to job creators as industry conditions improve. We also find that adapting firm growth to industry growth has impor- tant implications on firm survival. These results have important implications for public policy and the theoretical foundations of firm growth.