A new Kauffman Foundation study shows that startups are resilient in job creation and durability. Previous research had confirmed that and again that startups are responsible for net new job growth in the U.S. economy. This new study, After Inception: How Enduring is Job Creation by Startups? , reveals another reason to be optimistic about higher startup creation rates: the majority of the employment startups generate remains as new firms age. This special characteristic further confirms that startups have a lasting impact on the economy.
Yes, failure is part of the entrepreneurial process and many startups inevitably evaporate, but the new findings suggest that, while many new firms fail, destroying jobs, others also thrive and create jobs, partially balancing out the jobs lost by closing and shrinking firms. In 2000, for example, startups created 3,099,639 jobs. By 2005, the surviving firms (half of those that had started) had total employment of 2,412,410, or about 78 percent of the jobs that existed when these firms were born.
At a time when our economy faces a 9.5 percent unemployment rate, this study sends an important message to policymakers about support for young firms so they can grow into viable job creators. We must continue to strengthen America’s entrepreneurial ecosystem to turn employment around.