Question

Discuss the job creation capabilities of small firms

Answer 1

Small organizations grow faster than larger organizations, so small organizations have more capability in job creation than large organizations. But the failure rate of small firms is higher than the large firms, so the effect of job creation by small firms and large firms is balanced out. Large organizations provide better job security compared to small firms.

The age of the firm also impacts job creation. According to the research conducted by Congressional Research Service in 2019, small firms, especially startups, with fewer than 20 employees have a negligible impact on job creation, as fewer than half of the small firms do not survive after five years. The same research provides insights that small businesses having 20-500 employees have the greatest impact on job creation in the US.

The bottom-line is that small firms have capability to generate new jobs in the USA in years 1-5 of their establishment.