Understanding the Theoretical and Empirical Content of Critiques of U.S. Job Creation Research

Document Type

Article

Publication Date

1-1-1998

Abstract

Although the hypothesis that small firms create the majority of net new jobs is widely believed, a number of researchers have attacked this using empirical data. Since these attacks have been presented as corrections of past methodological errors, their authors may influence policy makers. This paper argues that the substance of these attacks is a difference in theoretical perspectives even though the researchers claim to focus on methodological differences. This paper explains the two underlying economic theories and then reviews the job creation research to demonstrate the relationship between theory and methodology. The theory discussion and methodological results demonstrates that all methodologies used to calculate small firms' share of net new jobs are incorrect for analyzing the dynamics of capitalism. The appropriate methodology for understanding economic growth is analysis of new employment created over time by cohorts of newly formed firms. Recognition of this fact, combined with describing the empirical research supporting this approach, reinforces the use of economic development policies designed to promote entrepreneurship.

Identifier

0032358847 (Scopus)

Publication Title

Small Business Economics

External Full Text Location

https://doi.org/10.1023/A:1007901132681

ISSN

0921898X

First Page

153

Last Page

169

Issue

2

Volume

10

Fund Ref

Economic Development Administration

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