Understanding How Businesses Start and Grow
Prepared by the National Commission on Entrepreneurship , March 2001

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Entrepreneurial growth companies make up only a minute portion of all companies in the United States, and just a small percentage of the new businesses started each year, yet they play a surprisingly large role in terms of creating jobs and fueling the economy. In fact, these entrepreneurial growth companies (EGC) were a major contributor to the economic boom of the 1990s and are an important complement to the success of both large businesses and traditional small businesses that are their close cousins.

Despite the growing prominence of entrepreneurship, understanding of its key features and developmental stages lags far behind. Mainstream media coverage frequently emphasizes the most unusual successes, creating misconceptions about the nature and evolution of most successful growth companies. There is relatively little academic research focusing on the distinctive features of growth companies. And in many respects, EGCs are indistinguishable from small businesses until they enter a growth phase during which they are transformed into something almost entirely different.

All too often, confusion about fast-growing businesses results in diffuse or misdirected efforts to support this key economic sector. This confusion creates tremendous problems for policymakers who are interested in helping promote entrepreneurship. For these reasons, a description of some of the key features of successful EGCs, both in their earliest stages and during their transition to established companies, is needed.

To address this need, the National Commission on Entrepreneurship conducted its own series of nationwide focus groups with entrepreneurs and turned to Amar Bhidé's invaluable study, The Origin and Evolution of New Businesses1 (2000). An economist and business professor formerly at Harvard Business School and now with Columbia University, Bhidé has researched entrepreneurship for more than 10 years, including in-depth analysis of leading business figures and interviews with scores of the most successful entrepreneurs in the nation.

The following sections describe the key features of entrepreneurship, dispel common myths about what makes EGCs successful, and explore broad policy considerations that may be important to supporting the continued growth of entrepreneurship in the United States.

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