Study: High-impact firms key to S.C. job growth
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The solution to job growth may lie with local, high-impact firms, according to a study released Thursday (Aug. 25) by the Darla Moore School of Business at the University of South Carolina.
These enterprises are considered high-impact because they register strong sales growth and are headquartered in South Carolina.
The study, conducted by economists in the school’s Division of Research (DOR), found that local, high-impact firms accounted for only 2.7 percent of private-sector firms in South Carolina, but contributed 66.8 percent of all net employment gains. The study also found that small firms, those with fewer than 20 employees, account for 26 percent of all firms in South Carolina, but 51 percent of all net job generation.
“For years, it has been widely believed that small businesses create nearly all the jobs in the United States. However, recent research suggests something different,” said Dr. Douglas Woodward, economics professor and director of the DOR. “New data indicate that it’s actually a small number of fast-growing, locally-based small and medium companies that are responsible for the majority of U.S. employment gains.”
Woodward, along with fellow Moore School economist Dr. Paulo Guimaraes and research analyst Veronica Watson, examined the growth and activity of all South Carolina private-sector firms and the contributions made by firms deemed as “high-impact” from 2004 – 2008. Their work is the first analysis of this data, which is compiled from a State of South Carolina survey of businesses.
The Moore School study found:
• South Carolina high-impact firms in the professional/technical services and construction-related industries experienced high employment growth.
• A select group of high-impact firms with more than 250 employees have been especially successful in net employment generation.
• Thirty percent of high-impact firm employment are located in traded clusters or regions with concentrations of products and services that are sold. Firms in these clusters tend to pay higher wages and are more innovative. This share in traded clusters is higher than the overall South Carolina and national average share of employment in traded clusters, which is about 27 percent.
• During the 2004-2008 economic expansion, high-impact firms associated with machine tool products, distribution services, plastics, processed metals and automotive products experienced significant employment growth
• High-impact firms are found in all regions of states.
Woodward said understanding the success of, and potential for, these locally-based, high-impact firms is important given the continued erosion of the job base since the recession in 2007 – 2008.
He said the study suggests that South Carolina has done well with firms in early entrepreneurial and incubation phases and has been less successful in building small enterprises into thriving locally headquartered firms. It also showed traded clusters as offering the most promise for “growing” these firms.
“High-impact firms merit our continued attention,” Woodward said. “We must broaden employment prospects for South Carolinians. The state needs local firms that start up, grow and develop into regional and national champions.”
The Moore School partnered with the S.C. Department of Commerce, New Carolina, and CTC Public Benefit Corporation on the study, which was funded by the U.S. Economic Development Administration, the South Carolina Research Authority and AdvanceSC.
The complete study is available online at http://www.moore.sc.edu/facultyandresearch/researchcenters/divisionofresearch.aspx
About the Darla Moore School of Business
The Darla Moore School of Business is among the highest-ranked business schools in the world for international business education and research. Founded in 1919, the school has a history of innovative educational leadership, blending academic preparation with real-world experience through internships, consulting projects, study-abroad programs, and entrepreneurial opportunities. The Moore School offers undergraduate, master’s and doctoral degrees, as well as distinctive executive education programs. In 1998, the school was named for South Carolina native and New York financier Darla Moore, making the University of South Carolina the first major university to name its business school after a woman.
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