So-called ‘gazelle’ companies creating employment opportunities

After years of decline in the number of so-called ‘gazelle companies’, the Swedish economy has experienced a significant increase in these rapidly expanding enterprises. Although only 1% of Swedish workers are employed by gazelle companies, they accounted for as many as 20% of workers hired over the past three years. Some business actors have remarked that this trend can contribute to higher economic growth and lower unemployment; however, the trade unions have yet to comment in this regard.

Gazelle concept

The concept of ‘gazelle companies’ was first devised by the American scientist David Birch in the 1980s, describing small, fast growing companies that create many new job opportunities. They usually refer to companies with annual sales revenue that has grown 20 percent or more for four straight years. At this time, a large proportion of the American economic development and increase in employment was created by a few high-achieving small flexible enterprises. These companies were named ‘gazelles’ as opposed to the large rigid ‘elephants’ and small defensive ‘mice’. As documented in a Dagens Industri newspaper article (in Swedish), a gazelle company must meet the following criteria:

  • publish at least four annual reports;
  • register an annual turnover that exceeds SEK 10 million (about €1.05 million as at 19 December 2007);
  • hire at least 10 employees;
  • have had a continuous increase in turnover in the last three years;
  • have recorded a turnover that has increased by at least 100% in the last three years;
  • have had a positive, cumulated working capital for the last four financial years;
  • experience mostly organic growth, in other words, resulting from its business rather than through takeovers or acquisitions;
  • have healthy finances.

Shift in trend towards more gazelles

These stringent criteria apply to a very small proportion of Swedish companies. In 2007, a total of 1,088 companies met these criteria and only about 1% of the Swedish labour force were employed by these enterprises. On the basis of these figures, it could easily be mistakenly concluded that such companies are a marginal phenomenon within the Swedish economy. However, statistics show that as much as 20% of employee recruitment over the last three years has been by gazelle companies.

Between 2001 and 2005, Sweden experienced a steady decline in the number of gazelle companies, but this trend shifted in 2005. In 2007, according to the Dagens Industri article, Sweden has experienced an impressive 40% increase in the number of this type of enterprise.

Number of gazelle companies, 2000–2007

Number of gazelle companies, 2000–2007

Source: Dagens Industri, 2007 and NUTEK, 2006

Number of gazelle companies, 2000–2007

Sectoral distribution of gazelle companies

In a recent report from 2006 (in Swedish), the Swedish Agency for Economic and Regional Growth (Verket för näringslivsutveckling, NUTEK) has shown that gazelle companies can be found within all sectors of the economy. Nonetheless, the retail sector, followed by construction and business services – notably consulting services, has the largest share of gazelle companies. NUTEK also concludes that considerable annual differentiations emerge in terms of the predominant sectors of the economy for gazelles.

Reaction from social partners

The social partners within the retail sector, which is the main sector affected by the prominence of gazelle companies, have yet to comment on the possible effects of the increasing numbers of gazelles on industrial relations and on the employees working for such enterprises.

Meanwhile, the Swedish Trade Federation (Svensk Handel) welcomes the strong development that many of its member companies have experienced in recent years, while a report (in Swedish, 236Kb PDF) from the Swedish Retail Institute (Handelns Utredningsinstitut, HUI) highlights the economic prosperity and work opportunities associated with this development. Neither organisation is convinced that the increased significance of the gazelles in the retail sector will require any change to collective bargaining structures; HUI states that the ‘gazelle trend’ is only one of many simultaneously occurring trends. A contradictory trend is that the largest companies within the sector have gained importance in relation to employment, according to the President of HUI, Fredrik Bergström.

The Negotiating Secretary of the Union of Commercial Employees (Handelsanställdas Förbund), John Haataja, admits that the subject of the gazelle trend has been on the agenda for discussion between the social partners, but that the matter has not required any shift in collective bargaining policies at this time.

Commentary

Although it is difficult to say, at present, if the trend towards a higher number of gazelles will be consistent in the coming years, a contentious trend in this direction may have implications for collective bargaining as well as public policy. Traditionally, the labour market has been relatively dependent on a few large companies. However, an increased importance for these small flexible enterprises could trigger a debate on decentralised collective bargaining and a higher degree of flexibility within labour legislation.

Michael Wahman and Thomas Brunk, Oxford Research

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