(FORTUNE Magazine) – If you think ''creative destruction'' is just a quaint figure of speech from a dead Austrian economist, think again. Two recent studies of job formation by Donald A. Hicks, a political economist at the University of Texas at Dallas, suggest that there's far more destruction and creation in the process than even Joseph Schumpeter imagined. The insecurity everyone expects to characterize the Nineties, it turns out, has ample precedent. Hicks used business credit and state tax records to follow the fate of manufacturing and service companies in the Dallas metropolitan region, and manufacturers throughout Texas. First, the findings from Dallas: From the beginning of 1986 through early 1989 -- a span covering a regional recession and subsequent recovery -- net employment changed very little. But what a transformation stirred beneath that placid surface. Hicks found that almost 27% of all private-sector jobs at the onset of the recession had disappeared by the beginning of 1989, replaced by nearly as many new ones. Where did the jobs come from? Fully 61% were created by entrepreneurs who started new businesses. Jobs added by extant small companies contributed 25%, with hiring by large employers accounting for the balance. Nearly all the new positions were home grown. Despite energetic efforts by local officials to lure employers from elsewhere, only 3.3% of the total migrated into Dallas. Concludes Hicks: ''The Greater Dallas regional economy has a continuing capacity to regenerate itself.'' Those findings were echoed in greater detail when Hicks analyzed longer-term trends in the Texas manufacturing economy. From 1970 through 1991, the Lone Star State's population of goods-producing companies more than doubled from 12,437 to 28,413. But the dead far outnumbered the survivors. During the same 22-year period, more than 94,000 manufacturing firms opened and folded. The turnover has been accelerating in recent years. Some 44% of manufacturing companies at the start of 1985 had been founded before 1980. But only 32% of the companies in business in 1990 had been incorporated before 1985. Nearly 19% of the manufacturers operating when Hicks did his study were formed in 1991 alone. Hicks calls the number of failed businesses that must be replaced each year the ''churn zone.'' From 6.8% in 1970, it rose to a peak of 21% in the mid-Eighties before narrowing to 12.5% in 1991. Is that fevered cycle of life and death healthy for an economy? Yes, says Hicks. The robust churning purges marginal businesses in favor of more productive and diverse new ones. The upheaval in Texas's manufacturing economy enriched the mix of high-tech goods producers; in the Dallas economy total output per worker jumped 11% from 1982 through 1989. What does it all mean for local economies? Hicks advises politicians not to waste a lot of effort trying to attract companies from other areas. Instead, ''create an environment friendly to the formation of new businesses,'' with low taxes, less regulatory red tape, and a sound education system.

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