A study has found that startups have a negative impact on job growth due to high failure rates, with only tech-based companies bucking this trend.
The report, by research and policy foundation Engine in partnership with the Ewing Marion Kauffman Foundation, analyses trends in young businesses over the past 30 years.
According to the report, the “up or out” dynamic means that while a high failure rate is shared across the range of new businesses, technology companies tend to either fail quickly, before creating many jobs, or expand quickly, creating sustainable jobs.
Dane Stangler, director of research and policy at the Kauffman Foundation, said: “The report confirms the dynamism of the technology sector and its disproportionate contributions to the US economy. It also underscores the need for policies that enable and support that dynamism.”
The research also found that lasting tech companies were increasingly geographically diverse, unlike other areas of the private sector where new companies did better when based in traditional commercial centres.
Figures in the report suggest young companies on average have a negative impact on employment figures.
Employment created by tech companies which last, however, more than makes up for the impact of early failures elsewhere.