Small Firms and Job Creation during a Recession and Recovery

Abstract

This paper reports on a comprehensive study of the role of SMEs for job creation and regional economic well-being in Sweden during the 1990-93 recession period as well as the years immediately preceding and following that period. It is found that SMEs were over-represented as job creators across business cycle stages and industries. Relatively little of systematic differences in SMEs role over the business cycle was detected. However, it was primarily very small, single-establishment firms that performed relatively well during the deep recession. Multi-establishment SMEs’ development was more akin to that of large firms. With regard to regional economic well-being it is concluded that relatively vivid SME activity has a positive or at worst neutral effect.