"The Small Business Administration (SBA) administers several programs to support small businesses, including loan guaranty programs; disaster loan programs; management and technical assistance training programs; and federal contracting programs. Congressional interest in these programs has increased in recent years, primarily because they are viewed as a means to stimulate economic activity, create jobs, and assist in the national economic recovery. This report examines the economic research on net job creation to identify the types of businesses that appear to create the most jobs. That research suggests that business startups play an important role in job creation, but have a more limited effect on net job creation over time because fewer than half of all startups are still in business after five years. However, the influence of small business startups on net job creation varies by firm size. Startups with fewer than 20 employees tend to have a negligible effect on net job creation over time whereas startups with 20-499 employees tend to have a positive employment effect, as do surviving younger businesses of all sizes (in operation for one year to five years). This report then examines the possible implications this research might have for Congress and the SBA. For example, the SBA provides assistance to all qualifying businesses that meet its size standards. About 97% of all businesses currently meet the SBA's eligibility criteria. Given congressional interest in job creation, this report examines the potential consequences of targeting small business assistance to a narrower group, small businesses that are the most likely to create and retain the most jobs."
CRS Report for Congress, R41523