Small businesses and entrepreneurs have long been recognized for the important role they play in our economy. As recently as the first quarter of 2015, small businesses with fewer than 50 employees accounted for more than a quarter of total employment in Ohio, while nearly one in ten jobs were in businesses five years old and younger. Yet, even more important than the total job numbers, small businesses and entrepreneurs play a critical role in the dynamic evolution of the economy through job creation and job destruction. Simply, small business and new business development is a lot like a lottery; while many won’t be successful, if there are enough small business start-ups, the greater the chance that one will be successful and create scores of jobs and wealth. Even if many small start-ups fail, a key advantage is that a greater intensity of start-ups builds up a culture that celebrates entrepreneurship and better informs government as to how to create a climate to foster their success.
To better understand the health and vitality of Ohio’s economy, we explore and evaluate the health of small businesses and start-up economies. Our findings provide reason for concern about the health of the Ohio economy. On every metric, Ohio ranks among the states with the smallest share of employment in small businesses and new businesses. To take measure of the vitality of Ohio’s small businesses and entrepreneurs, we also consider the rates of job creation and job destruction, a measure of economic dynamism. We find that Ohio’s small businesses and new businesses lack dynamism when compared to the U.S. as a whole, creating and destroying fewer jobs in 2014 than would be expected. Our analysis suggests that just in 2014 alone, if Ohio small businesses had grown at the national average, there would have been 8,000 more net jobs created.
Monday, August 1, 2016