One of the richest surveys of business owners in the United States is the Survey of Business Owners from the Census Bureau.  Now researchers looking to use microdata can access a new public-use data set from their desktops from the 2007 collection.  Many other public reports are now available on this collection as well.  

In Starting Smaller; Staying Smaller: America's Slow Leak in Job Creation, we focus on declining contributions of new and young firms to employment in the U.S. over the last decade.  And when people ask why this matters I say because "what you are born with is what you have to live with."  This is the most important thing I have learned from studying business dynamics at the national level.

What do I mean?  Look to the following chart from the report:



When we follow businesses born in the same year over time it becomes apparent that they follow some steady trends.  Namely, your total cohort employment tends to be fairly sticky at age 2 (the solid red line above), about as many hirings as firings in total, but by age 5 the total employment of the cohort has dropped to 90 percent of its initial total (dotted red line above).  Anything below 1 on this graphic means that the cohort of businesses has lost jobs in comparison to what they were born with; above it means the cohort has gained jobs in total.  Notice that the lines on this graphic are almost always below 1.  So, when a cohort of new businesses starts with less employment, it keeps less employment as it ages.  The BLS and Census data show that in the last 35 years, what a business cohort has started with in terms of employment is likely to be that cohort's maximum employment over time.  

As we point out in the report, the cohort of businesses started in 2009 began with between 700,000 and 1,000,000 employees fewer than would have been expected historically.  There is also evidence from BLS that this slow down in employment generation has been going on for much longer.  Thus, it seems we have been accumulating recent new business cohorts with less employment potential.  And indeed, what people fail to realize is that the population of U.S. businesses is just like the population of U.S. - a steady accumulation of years of small changes which often go unnoticed at any point in time (see Neutralism and Entrepreneurship for a good discussion).  In the U.S. case, new businesses provide a new lifeblood of business activity, fueling hiring, entry of more productive business concepts, and the like.  Individual U.S. businesses come and go but on the average there is a steady and slow accumulation of businesses, driven by new entrants over time.  With fewer and fewer jobs at the start and declining rates of employment retention in cohorts of businesses, as shown above, America's slow leak in job creation accumulates into a major part of America's jobs crisis.  

One of my favorite parts of the research I did for Starting Smaller; Staying Smaller: America’s Slow Leak in Job Creation was the creation of business growth charts.  Any parent has seen growth chats in their doctor's office when they take in a child.  They are a means of benchmarking your child's growth against the trends of past generations, providing you an objective way of understanding if your child is growing slowly or somehow might be showing signs of sickliness.  The business growth charts where modeled on this concept, and while this piece of my analysis didn’t make it into the final paper, I wanted to offer a snapshot of it for some of my readers on Data Maven because I think it is a very simple format that can tell a powerful, if complicated message.

Anyone following my blog knows that I have been spending a lot of time looking at jobs numbers in the U.S. as of late and am happy to say today that my report is finally out.  Starting Smaller; Staying Smaller: America's Slow Leak in Job Creation is a look at long-term trends around job creation by young, U.S. employer firms.  Employer firms are important to track because they are the bigger starts, those with employees, and thus tend to have more of an employment impact on the larger U.S. economy.  I think for too long we have used tallies of new business starts as benchmarks of the health of the U.S. entrepreneurial system.  What this report shows is that young businesses have been undergoing some major change in the last decade, particularly related to their employment patterns, and that the immediate as well as accumulated effect of these changes is a major reason for the United State's current unemployment problem.  New businesses remain a critically important source for net job growth, but they are starting smaller and growing less in their first five years in comparison to historical trends. Throughout the week I'll be posting some portions of the report as well as some things that didn't quite make the final report but that I think are still very telling and of interest to a more technical audience.  Here are a few of the most important charts from the report.

The Census Bureau's largest survey of young and small businesses, done once every 5 years, is out with new, and close to it's final, data publications using the 2007 Survey of Business Owners.  Check out the following topics on their site today.

Characteristics of Businesses

Data on American FactFinder (by gender, ethnicity, race, and veteran status):

Jointly Owned or Operated by Spouses: (Industry Detail) (Receipts Size) (Employment Size)

Majority of Business Family-Owned: (Industry Detail) (Receipts Size) (Employment Size)

Number of Owners of Business: (Industry Detail) (Receipts Size) (Employment Size)

Year Business Originally Established: (Industry Detail) (Receipts Size) (Employment Size)

Sources of Start-Up or Acquisition Capital: (Industry Detail) (Receipts Size) (Employment Size)

Amount of Start-Up or Acquisition Capital: (Industry Detail) (Receipts Size) (Employment Size)

Home-Based Business: (Industry Detail) (Receipts Size) (Employment Size)

Operated as a Franchise: (Industry Detail) (Receipts Size) (Employment Size)

Owned by a Franchise: (Industry Detail) (Receipts Size) (Employment Size)

Sources of Capital to Expand Business: (Industry Detail) (Receipts Size) (Employment Size)

Type(s) of Customer Categories: (Industry Detail) (Receipts Size) (Employment Size)

Percent of Total Sales Exported: (Industry Detail) (Receipts Size) (Employment Size)

Operations Established Outside United States: (Industry Detail) (Receipts Size) (Employment Size)

Outsourced Business Function Outside United States: (Industry Detail) (Receipts Size) (Employment Size)

Language(s) Used in Transactions: (Industry Detail) (Receipts Size) (Employment Size)

Type(s) of Workers Employed: (Industry Detail) (Receipts Size) (Employment Size)

Employer-Paid Benefits Offered: (Industry Detail) (Receipts Size) (Employment Size)

Company Had a Web Site: (Industry Detail) (Receipts Size) (Employment Size)

E-Commerce as Percentage of Total Sales: (Industry Detail) (Receipts Size) (Employment Size)

Company Made Purchases Online: (Industry Detail) (Receipts Size) (Employment Size)

Seasonal or Part-Time Business Status: (Industry Detail) (Receipts Size) (Employment Size)

Business Operating or Reason Ceased: (Industry Detail) (Receipts Size) (Employment Size)

Press Release

Summary of Findings

Characteristics of Business Owners

Data on American FactFinder (by gender, ethnicity, race, and veteran status):

How Initially Acquired Business

Year Acquired Ownership of Business

Primary Function(s) in Business

Average Hours Per Week Spent Working

This Business Primary Source of Income

Prior Experience Owning a Business

Highest Level of Education Completed

Age of the Owner in 2007

Owner Born in the United States

Service-Disabled Veteran Status

I just came across a blog from the Guardian, DataBlog, which could give way to hours or days of exploration - if only I had that luxury.  Perhaps my only complaint is that DataBlog seems to be covering everything and in every direction.  They have a database of databases that cuts across countries and topics from business registrations to abortion.  But as such, it's ironic that I'd find out about a major U.S. database on a U.K.-based site but that's just how the world works these days.  

The new database is from the Federal Emergency Management Association (FEMA) and provides state-level details about every declared emergency since 1953 in the United States by type of emergency (tornado, flood, etc.).  If you were wondering, Texas looks to hold the title of most declared emergencies in that time period at 3,293 - mostly hurricane related.  I can only imagine that this data will lead to finer-grained forthcoming data about these emergencies at a more local level or more metadata about the emergencies at the state level.  

So what does this have to do with entrepreneurship and innovation?  Well, it's probably more of interest to entrepreneurship scholars but from my perspective there remains opportunity to tell the story of how businesses rebuild, new businesses come in, and the general business dynamics recover after natural disasters.  The existing FEMA data looks to lend itself well to potential marriage with other data now available tracking cohorts of businesses over time at the state level that are available from the Census Bureau and Bureau of Labor Statistics.  Indeed, in my opinion, we are going to be seeing a lot of research looking at state-level impacts on entrepreneurship in the coming years.  I know I've reviewed two such papers this month, both of very good quality that make use of the confidential Kauffman Firm Survey data file.

Two additional concluding thoughts:

1. I'm introducing a new tag - state - in my tag cloud to start tracking state-level data sources which I come across.
2. On the very important topic of what we know about entrepreneurship and natural disasters, if you've got research or data in this area, please let me know as we get a lot of media requests on this topic, and it'd be great to be able to point to some quality academic work in this area.  

 

The Bureau of Labor Statistics continues to improve their presentation of information relevant to the study of entrepreneurship.  "Entrepreneurship and the U.S. Economy" is a must read for policy-makers as it presents some very important aggregate trends in an up-to-date and simple to understand way.  That said, just once caution, as I am currently writing and researching using these data.  Some of the jobs trends seen in the BLS statistics and Census Bureau statistics are quite different and need to be looked at together.

A particular chart that stood out to me in BLS's publication is the following which really charts how the most recent recession most significantly impacted large and small businesses and medium-sized businesses weathered somewhat better:

The Census Bureau has released new tabulations for its Business Dynamics Series that show in stark detail how the recession has not only significantly impacted job destruction in the U.S. but also the rate of job creation.  2009 brought job creation rates in the U.S. to their lowest level on record (in 29 years).  Read an overview report or explore the data (which is available by SIC and state, as well as what is included in the report).  

On the heals of the Kauffman Index release, I want to call on the Census Bureau to produce more information on immigrant entrepreneurs.  In my other posting I pointed to some of the big shifts which have occurred in the composition of new entrepreneurs over the last decade but I think it's worth repeating that here:



As the Kauffman Index shows  immigrant entrepreneurs made up almost 30 of all new entrepreneurs in 2010, more than doubling over the last decade and a half, and yet this is a group which we know very little about systematically at the national level and especially at the sub-national level. There are competing streams of research (see Wadwha, et. al and Hart, et. al), some of which Kauffman has funded, that point alternatively to the importance or the normalcy of immigrant entrepreneurs.  Regardless of which stream of research you believe more, the Kauffman Index numbers make it strikingly apparent that we need to know more about rapidly growing population of new entrepreneurs.  

I specifically suggest to Census that it consider adding a report to the current production schedule for the Survey of Business Owners which is the largest survey of small business owners.  In 2007 this survey added a question about immigrant status of business owners (a good move!) but currently there are no plans to specifically provide a detailed overview of immigrant entrepreneurs (see SBO release schedule here).  The SBO already provides detailed overviews of Black, Hispanic, Native American, American Indian or Alaska Natives, Native Hawaiian or Pacific Islanders, Asian, Women, and Veteran-owned businesses.  The immigrant data will be part of the June release of the report "Characteristics of Business Owners" but today I want to call on Census to consider adding a separate and more detailed Immigrant overview.  The SBO could provide detailed sub-national estimates of the type and impact of immigrant-owned businesses and help to understand what has been a seemingly large shift in the composition of new entrepreneurs.  The data exists; all that is needed is a recognition of this important group among entrepreneurs.  

With unemployment rates stubbornly high and the global economy increasingly competitive, the United States needs to better understand businesses, policies to support businesses, and, ultimately, how to spur job creation. Jobs don’t just appear or disappear; they are created (and destroyed) by businesses that are reacting to market conditions and opportunities. While our national statistical system is increasing its capacity to produce statistics on these dynamic processes, policymakers could better target job creation programs if the statistical system collected more data about how businesses finance operations and investment in innovation, especially at the regional/local level. Further, to bolster the value of data currently produced, we need to nourish active data user communities to advance the substantive scientific understanding of job creation policies and educate policymakers about the importance and utility of the data.

Read more on the AmStat website.