High-growth firms concentrate in larger metros, around talent

New research from Ian Hathaway of the Center for American Entrepreneurship confirms a common theory in economic development circles: that high-growth firms are predominantly found in large and mid-sized cities with high densities of talented workers and a culture of entrepreneurship. Hathaway’s research uses data from Inc. Magazine’s Inc. 5000 lists for each year from 2011 to 2017, with a focus on the 14,000 unique companies from the lists that meet the OECD definition of high-growth – annualized revenue growth of 20 percent or more each year during a three-year period.

Hathaway finds that nearly 95 percent of these businesses are located in either large or medium-sized metropolitan areas, and that more than half are in just six mostly services-oriented industries, led by IT. Using a linear regression analysis, Hathaway finds that the density of high-growth firms is heavily associated with high levels of educated workers, high-tech employment, mid-career professionals, and new business formation. The metropolitan areas with the highest density of high-growth Inc. 5000 firms are Boulder (367 per one million residents), Provo (341), Washington D.C. (329), Huntsville (297), Austin (289), and Salt Lake City (232), according to the analysis.

Additional data is downloadable in excel format from the Brookings website: https://www.brookings.edu/research/high-growth-firms-and-cities-in-the-us-an-analysis-of-the-inc-5000/