Winning the Hardware Software Game Winning the Hardware-Software Game - 2nd Edition

Using Game Theory to Optimize the Pace of New Technology Adoption
  • How do you encourage speedier adoption of your product or service?
  • How do you increase the value your product or service creates for your customers?
  • How do you extract more of the value created by your product or service for yourself?

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The BLS provides data on US employment by firm size. These data include information by size class (number of employees) for the following elements:

  • Job Gains
    • Total
    • Expansions
    • Openings
  • Job Losses
    • Total
    • Contractions
    • Closings

The US Census provides data on total employment by firm size.

This analysis employs these two data sets to analyze how job gains, losses, and total net jobs by firm size have changed over time.

Figure 1 provides private firm employment by firm size. Figures in parentheses are category growth over the period. The data indicate that largest firms (those with 500+ employees) have captured most of the job growth during the period.

Figure 1

1 empl by size 

Figure 2 presents the distribution of employees across firms by firm size. Figures in parentheses are the category distributions at the beginning and end of the period. In accordance with the information provided in Figure 1, the distributions in Figure 2 indicate that increasing percentages of employees have been employed in large firms, at the expense of employees in small firms.

Figure 2

 2 distrn by size

Figures 3 and 4 present, respectively, the numbers and relative percentages of annual net job gains (total job gains less total job losses) across firms by firm size.

Figure 3 indicates that the largest firms have the largest gains during expansions and largest losses during contractions in number of employees. However, Figure 4 shows that the relative gains and losses at the largest firms tend to be the smallest. That is, the largest firms tend to expand relatively less during expansions, but contract relatively less during contractions than do firms with fewer employees. In this sense, we can say that the largest firms tend to be the most robust with respect to numbers of employees during changes in the economic environment.

Figure 3

 3 net gains by size

Figure 4

 4 net gains by size

Figure 5 presents total job gains (openings plus expansions) and total job losses (closings plus contractions) by firm size. Figure 5 shows that the smallest firms generate more job gains and losses each year than do the largest firms. However, Figure 3 confirms that the largest firms generate more net job gains (total gains less total losses) than the smallest firm. So while the smallest firms generate more job activity (gains and losses) each year, the largest firms generate the largest net gains (gains less losses).

Figure 5

 5 gains losses by size

Figure 6 presents total job gains (openings plus expansions) relative to total jobs and total job losses (closings plus contractions) relative to total jobs by firm size. The data indicate that total job activity has been decreasing over time, especially since 2001. That is, the economy has become less dynamic than it was during the 1990s, with relatively greater decreases in job activity at smaller firms.

Figure 6

 6 gains loss by size

Figures 7A and 7B present (Figure 7B is a “zoom-in” of Figure 7A):

  • Job gains from existing firm expansions relative to new firm openings and
  • Job losses from existing firm contractions relative to existing firm closings.

The data in Figures 7A and 7B indicate that in all but the smallest firms, job gains have increasingly come through existing expansions (e.g., new hires and M&A), rather than new firm openings. That is, new firm creation has increasingly come from openings of smaller firms, while consolidation has been rampant among the largest firms.

Figure 7A

 7A expand open contract close1

Figure 7B

7B expand open contract close2 

Conclusions

Data on job gains and losses by firm size provide the following information:

  • Increasing percentages of employees have been employed in large firms, at the expense of employees in small firms.
  • The largest firms tend to expand relatively less during expansions, but contract relatively less during contractions than do firms with fewer employees.
  • While the smallest firms generate more job activity (gains and losses) each year, the largest firms generate the largest net gains (gains less losses).
  • The economy has become less dynamic than it was during the 1990s, with relatively greater decreases in job activity at smaller firms.
  • New firm creation has increasingly come from openings of smaller firms, while consolidation has been rampant among the largest firms.

Taken overall, the data are consistent with economic/market conditions that

  • Are less hospitable to firms overall, and
  • Favor small firms for new innovations, but large firms for continued market success.

Factors consistent with this environment include

  • More regulations, capture by special interests, and/or uncertainty over-all that inhibit business activity;
  • Regulations, capture by special interests, and/or uncertainty that favor large firms over small firms (e.g., Obamacare, bank regulations that favor large and/or less risky loans over small/more risky loans, minimum wage laws, etc.)
  • Bureaucracy in larger firms that prevents new ideas from developing and/or gaining traction; and

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