Who’s creating jobs? “Gazelles,” according to MIT small-business guru David Birch.
“Gazelle” is the term Birch uses to describe the mostly small but rapidly growing firms that account for most of America’s job growth. Gazelles are contrasted with “Elephants,” the large, publicly traded firms that have shed more than 4 million jobs during the past decade, and “Mice,” the millions of small firms that create jobs when they start up but then grow very little.
According to Birch, “It is not the new firms that will be the major source of growth in the ’90s. It will be the growing firms. I think of them as large firms that happen to small at the moment.”
Out of more than 20 million business enterprises in the U.S., Birch calculates that a mere 500,000 are generating more than 75% of the new jobs — with mid-size companies — those in the $5 million to $150 million range — accounting for the lion’s share.
Who are the Gazelles? Gazelles are small firms that take-off and become major players in their industries. Examples: AST Research in computers; software makers such as Lotus and Microsoft; wholesaler turned retailer like Staples, Inc.
What’s the difference between Gazelles and Mice? Most important is their outlook and sophistication. Most small business owners think small. They often run family- owned businesses and don’t know how to grow — or don’t want to grow.
I remember talking to a Tucson man who ran a very successful business doing desert landscapes for residential and commercial customers. Many people wanted to invest in his business, to help him make it grow. But, he said, “Why should I grow my business? I like doing landscapes. Today, I can show my kids all kinds of places around town that I created. If I grow my business, I will be managing people and money and dealing with investors and a board of directors, not doing landscapes. So, growth is not something I want to do.”
I suspect that many small business men and women remain Mice because of job satisfaction or other lifestyle considerations, not because they don’t know how to grow.
Gazelles are a different sort of animal. They are motivated to grow their business and to look beyond local markets to national and international markets. They use technology. They seek new talent. They build organizations and delegate authority to people outside the family.
Birch’s study shows that the new jobs created by Gazelles between 1987-92 are generally good jobs: About 40% of the new jobs are in companies paying above-average wages; less than 30% pay below average and the rest fall in the middle ranges.
Birch also found important regional differences. Examples: Entrepreneurs in the West produced new jobs at a rate 2.5 times higher than their counterparts in New England. Also, while larger firms downsized in many places (especially in New England), they prospered in the northern Great Plains region: Minnesota, Iowa, Nebraska, Kansas, and the Dakotas.
Punchline: The idea that smaller firms are producing “junk jobs” just doesn’t hold water. Gazelles are on the leading edge of innovation, hire above average people, and raise wage levels through their growth.
Good jobs at good wages are still being produced in America.