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Minding Your Business Blog Index
August 27, 2008
"Gazelles" key to Maine job growth

Economic development officials and business leaders often make sweeping statements about how to grow commerce in Maine.

They'll say things like "high-technology is the future of our economy" or "small business is the economic engine that generates jobs" or "we've got to make our state an attractive place for businesses looking to relocate."

They sound like givens.

However, a report published by the Small Business Administration Office of Advocacy calls a lot of these truisms into question.

The 87-page study, "High-Impact Firms: Gazelles Revisited," finds that a tiny fraction of all businesses account for all the new jobs created and revenue growth seen across the economy.

For the purposes of the study, "high-impact" businesses are those that have seen their revenue double during a four-year period and their employment rise rapidly as well, under a calculation made by researchers.

The study supports the assertion made by former MIT economist David Birch that, in the economy, "gazelles" matter a heck of a lot more than small-business "mice" that don't create many jobs and big-business "elephants" that are shedding workers. In other words, there are plenty of big and small companies that are not moving the meter very much.

Nationally, between 2 and 3 percent of all businesses with employees fall into the high-impact group. (The study didn't give a precise figure, and that number wasn't immediately available from SBA.)

Maine actually fares quite well in the number of these high-impact firms, placing 15th out of the 50 states, with 2.36 percent of all its firms falling into that grouping. In northern New England, Vermont placed 24th, New Hampshire 31st.

(Alaska was tops in the country; New York at the bottom.)

Unfortunately, Maine also has a lot of the declining so-called "low-impact" businesses of more than 500 workers that accounts for all the job losses across the economy.

That's why Maine's job picture has been so stagnant in recent years, despite a fairly robust number of high-growth companies.

The study also found that high-impact firms were found in all industries, calling into question the belief that high-tech companies are the ones generating most of the job growth.

The average age of the companies is 25 years, so we're not typically talking about entrepreneurial start-ups here.

The electric/electronic industry fared very well, as you might expect. But rubber and plastics were just as likely to have job-creating gazelles. Heavy construction and metals-related businesses also did very well.

(Pipelines and agriculture are two areas that weren't particularly dynamic, in terms of revenue and job growth.)

And while high-impact firms were more likely to be small, large companies also had a robust presence and created half the new jobs.

"The data suggest that local economic development officials would benefit from recognizing the value of cultivating high-growth firms versus trying to increase entrepreneurship overall or trying to attract relocating companies when utilizing their resources," the study argued.

Posted by Eric W Blom at 03:39 PM

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Eric Blom has been a journalist in Maine for 20 years, much of it as a business reporter and editor. He's been inside factories, office buildings and retail shops throughout the state, meeting with workers, shoppers, investors and executives about their hopes and fears. These days, as local and business news editor, he has a bird's eye view of what's happening in Maine commerce.

Eric, who was born in Rhode Island, has been heading north for some years now. He graduated from Boston University, edited a weekly newspaper in Belmont, Mass., and worked at the now-defunct Peabody Times in Massachusetts before coming to Maine. He lives in Portland with his wife and two children.

Knowing Maine's Business is a gathering spot for the respectful exchange of information and ideas about the marketplace.



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