August 25, 2011

Small, High-Impact Firms Could Help State's Recovery

Staff report  /  Charleston Regional Business Journal

Finding ways to attract and nurture small high-impact firms can be South Carolina's path to economic recovery, according to a study released Thursday by the Darla Moore School of Business at the University of South Carolina.

High-impact firms with less than 20 employees have added workers at a higher rate than large companies, according to a study by the school's Division of Research economists.

"For years, it has been widely believed that small businesses create nearly all the jobs in the United States. However, recent research suggests something different," said Doug Woodward, economics professor and director of the research unit. "New data indicate that it's actually a small number of fast-growing, locally based small and medium companies that are responsible for the majority of U.S. employment gains."

High-impact firms are defined as those that register strong sales growth and are headquartered in South Carolina.

Researchers also found that the highest concentration of high-impact firms was in the state's metropolitan areas. For example:

¡Greenville and Spartanburg counties combined for 938 firms that employed 18,206 people.
¡In the Midlands, Lexington and Richland counties had 836 firms with 18,268 employees.
¡Charleston County had 638 firms with 12,660 workers.

According to the study, local high-impact firms accounted for only 2.7% of privately owned S.C. businesses, but had 66.8% of all net gains in employment. The study also found that small firms account for 26% of all businesses in the state, but accounted for 51% of all net gains in jobs.

Woodward, Moore School economist Paulo Guimaraes and research analyst Veronica Watson looked at growth and activity of all S.C. private-sector firms and focused on firms deemed as "high-impact" from 2004 to 2008. Their work is the first analysis of this data, which is compiled from a State of South Carolina survey of businesses.

Woodward said that high-impact firms in the professional and technical services, and construction-related industries experienced high employment growth.

Other findings were:

  • 30% of high-impact firm employment are in areas with concentrations of products and services that are sold.
  • High-impact firms associated with machining, distribution services, plastics, processed metals and automotive products experienced significant employment growth
  • High-impact firms are found in all regions of states.

Woodward said understanding the success of, and potential for, these locally-based, high-impact firms is important given the continued erosion of the job base since the recession in 2007–2008.