Small vs. Young Firms Across the World: Contribution to Employment, Job Creation, and Growth

This paper investigates the contribution of small firms to employment, job creation, and growth in developing countries. While small firms (<20 employees) have the smallest share of aggregate employment, the SME sector's (<100 employees) contribution is comparable to that of large firms. Small firms have the largest shares of job creation, and highest sales growth and employment growth, even after controlling for firm age. Large firms, however, have higher productivity growth. Conditional on size, young firms are the fastest growing and large mature firms have the largest employment shares but small young firms have higher job creation rates.