Report: Tech-Focused Small Businesses Fuel Job Growth

Susan Hall
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Tech-savvy small business are the real job-creation engines in this economy, according to a study released Tuesday by the Technology CEO Council.

 

The report is based on an analysis of third-party studies on entrepreneurship. Catherine L. Mann of Brandeis University found that jobs grew at a rate of 5.1 percent from 2001 to 2009 at service companies that were "intensive users of IT" while overall employment shrank by 0.5 percent.

 

One of the studies cited, by the McKinsey Global Institute, found that small and midsize companies in industries ranging from retail to manufacturing that rely heavily on the Internet create twice as many jobs as companies that rely on it less.

 


New technology has greatly lowered the barrier to entry for startups. As PC Advisor put it:

High-speed broadband connectivity, low-cost, high-capacity storage and on-demand computing resources together have facilitated a new breed of startup business that can far more easily compete with and even dislodge its more established rivals. ...
Surveying employment rates over the past decade, the authors of the study found that small services firms with fewer than 100 workers that rely heavily on IT to run their business accounted for only a small share of overall employment, but a significantly larger proportion of job growth. From 2002 through 2008, those small, IT-intensive businesses employed between 5 percent and 6 percent of all U.S. workers, but accounted for 34 percent of the new jobs created over that time, according to the report.

The Wall Street Journal also mentions that startups are launching with even fewer people these days, an average of 4.9 employees, down from 7.5 in the 1990s, according to the Ewing Marion Kauffman Foundation.

 

In a forum sponsored by the CEO Council on Tuesday night, Michael Dell told attendees that job growth in this country won't come from manufacturing - despite all the talk of bringing manufacturing jobs back - but from technology. IBM's former CEO Sam Palmisano also argued that job growth will come through the supply chain with large companies helping smaller ones, according to Computerworld. Palmisano said "there is a lot of motivation" for IBM to help smaller companies, adding,

We want them to be better because we're more competitive if they are.

The report calls for boosting the graduation rates in STEM fields (science, technology, engineering, mathematics), easing immigration restrictions on skilled foreign workers and a number of government policy changes to aid startups.



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