Small Firms and Employment Growth : A Cross-Regional Study of Sweden

Abstract: In the last decades, small firms have accounted for a disproportionately large share of new jobs. Using data from 1993 to 2009, the concern of this thesis is to examine regional differences in employment growth in Sweden, with  a focus at the role of small firms. The author employs findings from previous studies and theoretical discussions on advantages and disadvantages of small firms to derive a number of variables to use in two multiple regression models on regional employment growth, one for the period 1993-2001 and one for the period 2001-2009. The results show that, unlike increases of well educated workers and the population growth, increases in small firm employment is significant in explaining employment growth in both periods, with a positive relationship. For both periods, changes in small firms’ share of employment is not significant in explaining employment growth. Although many new jobs have been generated in service industries, changes in the service sectors’ share of employment is highly insignificant as an explanatory variable for employment growth. Moreover, an increased share of highly educated workers is negatively related to employment growth.