Fast-Growing Businesses

Abstract: This article investigates the employment effects and the growth potential of newly established businesses. It is argued that the main mechanism of job generation by newcomer firms rests on a small number of fastgrowing businesses. Therefore, the crucial question is whether there are any characteristics of a new firm predisposing it to become a fast growing business. Our empirical work is based on a retrospective study of a cohort of 1,849 newcomer firms in Upper Bavaria (Germany). Wefind that only 4 percent of all newly founded firms show rapid growth, but over one-third of all jobs created by this cohort are located in these rapidly growing firms after four years.