High-growth firms of the Inc. 5000

Today, I have a new report out at the Brookings Institution titled "High-growth firms and cities in the US: An analysis of the Inc. 5000." The Center for American Entrepreneurship generously provided funding for the study and Inc. Magazine provided the data.

You can read the entire report in more detail with the link above (it's a 15 minute read, max), but here are some takeaways.

To begin, Inc. 5000 companies have five major characteristics. They exhibit:

  • High rates of growth in revenue, employment, or both;
  • High ratios of revenue to employment, both in terms of level and growth (high productivity and productivity growth);
  • Relatively small in size;
  • Relatively young in age;
  • Concentrated in knowledge-intensive activities.

These two figures illustrate the above characteristics of Inc. 5000 companies.


Critically, these findings are consistent with the broader academic research literature on high-growth firms. I was happy to see that, as Inc. data are not drawn from official sources. Most people don't realize that a typical firm doesn't grow, and so the growth across the entire economy is really driven by a small number of companies.

What's interesting to note, is that although Inc. 5000 companies are disproportionately likely to be high-tech (29% of Inc. 5000 firms versus 5% of total firms across the economy), many of these fast-growing firms are not in high-tech (70%). And, while I can't confirm this, Leigh Buchanan at Inc. Magazine tells me that just 5% of Inc. 5000 companies receive venture capital funding. Given that just 0.5% of companies do overall, that provides a similar message—while Inc. companies are disproportionately likely to be venture backed (or high-tech) compared with all companies, the vast majority are not.

In terms of geography, Inc. 5000 companies are even more concentrated. In fact, 98% are found in metropolitan areas—the substantial majority of which are in large metros (those with greater than one million residents). That said, on a per-capita basis, medium-sized metros (those with between 250K and one million residents) have a higher "density". In fact, three of the top four metros are medium-sized.


Finally, I did some simple regression analysis to get a handle on what regional factors are most associated with regional Inc. 5000 high-growth firm density. The variables were selected from the literature review, and I tested more than 20 independent variables. However, five appeared the most robust when considered jointly with other factors:

  • The share of workers with college degrees
  • The share of workers employed in high-tech industries
  • The share of the population of prime entrepreneurship age (35 to 44 years)
  • The overall rate of business formation in the region
  • The number of patents per capita (negative)

I talk about these results in more detail in the report Appendix A. In there, you'll also see the inclusion and discussion around a few more variables, including creative class workers (which seem to have an impact above those listed above). My regression results table is here.


I hope you have a chance to read the report. And, don't forget to check out the data tabulations I'm providing for others too use. Enjoy!