The existing literature on the relationship between employment growth and firm characteristics (such as firm age, size, and sector) has been used to justify a variety of economic development policies and job creation programs. Some of the programs highlight the importance of small firms, others emphasize the importance of young firms, and others highlight the importance of older, more established firms. The fact that each of these programs can find something in the literature that supports its particular focus suggests problems in the connection between the literature and policy formation. The authors find that the empirical support for such programs is weak. The statistical significance of firm characteristics depends critically on the model specification and/or data set used. Moreover, these characteristics explain only a small fraction of the variation in job growth, leaving policy makers with relatively weak policy tools.
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