The Federal Reserve Bank of Minneapolis has a nice piece out examining many of the same issues we looked at in Starting Smaller; Staying Smaller: America's Slow Leak in Job Creation but from a five state perspective.  I particularly enjoyed their interviews with some local entrepreneurs and service providers to provide additional reaction and context to some of their findings.  The five states they examine, because of their geographic responsibilities, are quite interesting on this topic - Minnesota and Wisconsin (not doing that well) and North Dakota, South Dakota, and Montana (doing better).  But even those states doing OK by the measures examined are only just holding steady.  Indeed, it's not that you're seeing better survival rates, better job creation, or better numbers of starts but that those things are trending down for the latter states.  This piece is worth a read and if you're doing a similar type of analysis at the regional level in the U.S. please let me know.  

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.

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:

This morning we released the 2010 Kauffman Index of Entrepreneurial Activity.  The Kauffman Index is a rather unique measure of entrepreneurship as it relies on a quirky design of the U.S. Current Population Survey to come up with a monthly measure of the number of households transitioning into entrepreneurship from other labor force statuses.  

Since we are working from a household survey, the Kauffman Index has the advantage of being able to give very detailed demographic information about who is becoming an entrepreneur.  Indeed, it's from this perspective that these current year findings arise:

• The immigrant rate of entrepreneurial activity increased substantially – from 0.51 percent in 2009 to 0.62 percent in 2010 – and declined slightly for the native-born. This increase expanded the large positive gap that already existed between immigrant and native-born entrepreneurial activity rates. 
• A growing immigrant population and rising entrepreneurship rate contributed to a rise in the share of new entrepreneurs that are immigrant, from 13.4 percent in 1996 to 29.5 percent in 2010.
• Entrepreneurial activity increased slightly for men and decreased slightly for women. For men, the entrepreneurial activity rate increased from 0.43 percent in 2009 to 0.44 percent in 2010. The female entrepreneurship rate decreased from 0.25 percent to 0.24 percent.
• The African-American entrepreneurial activity rate decreased from 0.27 percent in 2009 to 0.24 percent in 2010. The white entrepreneurial activity rate decreased from 0.33 percent to 0.31 percent.
• The entrepreneurship index was highest among the least-educated group, moving from 0.49 percent in 2009 to 0.59 percent in 2010, suggesting an increased number of people entering entrepreneurship out of necessity. The largest decrease in entrepreneurial activity occurred for high school graduates.

On Data Maven, I wanted to specifically point out two new features of this year's report.  First, and most importantly, is the expansion of the report to utilize the Business Employment Dynamics (BED) series data from the Bureau of Labor Statistics.  One of the limitations of the CPS as a data source is that we are not able to disaggregate the type of businesses whose start is captured in the Kauffman Index.  Thus, the Kauffman Index captures both transitions to self-employment as well as the start of larger businesses.  In an attempt to add more depth of understanding to the current state of entrepreneurship in the United States, an aggregate measure of new employer establishment starts was computed this year from the BED.  The resulting picture, shown below, gives a much more accurate national picture, in my view:

Taking the Kauffman Index and BED-based measures both into account gives the picture of an economy with the highest number of people becoming entrepreneurs on a monthly basis but most of them only going into self-employment or starting lower employment-potential businesses.  

The second change that I wanted to highlight this year was something which I originally wrote about last year in a blog post - a look at the changing look of entrepreneurs, in the aggregate.  This takes into account both the proclivity to become an entrepreneur (the Kauffman Index) and also the changing demographic composition of the U.S. to look at changing total numbers of new entrepreneurs.  For three categories in particular, this measure is quite telling.  

Thursday new data from the Bureau of Labor Statistics's Business Employment Dynamics program was published covering the U.S. economy through the first quarter of 2010.  It's quite a puzzling picture that it paints overall and for looking at entrepreneurship specifically. 

First, BLS finds that from December 2009 to March 2010 the gross job losses in the U.S. economy hit their lowest point on record for this particular time series.  This means, that the 6.4 million private sector job losses in the quarter were lower than any other quarter since 1992.  When looking at gross losses as a percentage of total employment in the economy, total losses, along with each of its components - losses in contracting establishments and losses from closing establishments - hit or tied series lows.  Taking both of these things together then it seems the mass layoffs and closings of the previous couple of years might have peaked - something we can find much reason to celebrate.

But, this severe downturn in downturns is not mirrored by increases in hirings.  Indeed at the same time, the gross job gains from opening establishments hit its second lowest point (by percentage) on record and its lowest numerical point.  This means that opening establishments in this period only contributed a little more than 1.1 million jobs to the economy, down from 1.9 million jobs in 2000. 

I will be spending a lot of time with this data in the coming couple of months along with expected data from the Census Bureau's Business Dynamics Series.  Obviously there is a lot of important information to be garnered here.

Task 1: the full linking of the retrospectively-collected data across the many rounds of collection to all relevant previously-collected data

 

Task 2: a follow-up question in 2012 to clarify any discrepancies in the responses of respondents over time.

Apologies to my readers as I’ve been an absent blogger for the last couple of weeks with other work priorities.  But it’s exciting that I’ve only been absent a couple of weeks and there is so much to update on regarding entrepreneurship and innovation data!  So, I hope to catch up on postings in the coming week.

One of the biggest data releases of the year is a new series from the Bureau of Labor Statistics.  This is an extension of their population Business Employment Dynamics but one that adds more detail on two important measures – business age and survival – into their publically available series.  Dive into the data or read their overview of the release.

I plan to spend more time with this data in the next few weeks as it fits nicely into a paper I am writing.  For the time being, I looked at the data mostly to see if there was anything that looked really off or significantly different from a similar data release from the Census Bureau and I am pleased to not have many problems to report.  Perhaps the table that I found of most interest employment in surviving establishments.  BLS has done an outstanding job of presenting the data in a logical manner so that each cohort of establishments can be followed over time without difficulty.  So with this perspective, it becomes easy to see that on average after more than 15 years, only about a quarter of establishments are surviving but that these establishments have grown in employment over time from an average of 7 to about 17 employees.

The BLS release of this data continues a trend at U.S. statistical agencies to add age as a component of ongoing business measurement and public release.  It's a very exciting trend to see continuing and should bring more research in this area.  Also of note in the last few weeks on this topic is the publication of a "Who Creates Jobs? Small v.s Large vs. Young" by Haltiwanger, Jarmin, and Miranda.  This is a good overview of why looking at business age as a component of analysis in government data is an important issue when studying job creation. 

I should note that this is establishment data – not firm level data – so it doesn’t match perfectly with Census in that regard and will include both new companies and new locations of existing companies.   

The 2010 Kauffman Interagency Forum on Entrepreneurship and Innovation Data (on June 4) brought together more than 50 representatives from the federal statistical community, academia, and other interested parties to talk about upcoming changes to ways in which the federal statistical agencies will be collecting data.  The level of interaction among the agencies at the Forum and real interest in overall improvements was heartening to see.  We were privileged to be the conveners of this conversation but clearly the hard work of making progress on entrepreneurship and innovation measurement is underway at the agency level.  The Forum was mostly meant for in-person conversations and interaction but the agencies presenting did consent for us to post their PowerPoints for those interested.  Below are the presentations and a couple of highlights from my perspective of their work.

Bureau of Labor Statistics (QCEW PPT and NLSY PPT)

• BLS plans to release a new series of tables on age and survival of the establishment (and firm, I believe) in August 2010 as a part of the Business Employment Dynamics series.  This will add to the flood of new data becoming available on cohorts of firms and should prove interesting to compare with the Census Bureau's Business Dynamics Statistics. 
• Birth and Death counts, without suppressions, by detailed industry and county are in the works.  The concept of county-level business data without suppression is something which should excite a lot of local researchers and economic development agencies as most county-level data has to be aggregated to a level which is frustrating for looking at specific industries.
• The National Longitudinal Survey of Youth is collecting data on their 1979 cohort related to activities in business ownership and patenting.  While not available for another two years it should be rich data for researchers.

Census Bureau (PPT)

• Updates are underway to the Business Dynamics Statistics that will bring it up to the end of 2008 and likely produce more useful tables for following cohorts of firms over time at the state level.  
• Synthetic microdata will be available through the Cornell RDC in the fall for the Longitudinal Business Database.  This will be interesting to watch as synthetic microdata isn't actual data but rather a data set which has been built off of real data but with crucial changes to aspects of the data to ensure confidentiality of individual responses.  I think the consensus on synthetic microdata is still out but its definitely one of the emerging solutions to providing microdata access to government data in an era of increasing confidentiality concerns with putting public-use microdata files on the Internet.
• I am really excited to see that the integration of characteristics of business owners into the business data is finally on the agenda in an ongoing manner.  There is so much potential for new useful public products here like women in high-tech businesses or high-growth minority businesses.  Many policy interventions are aimed at underrepresented minority groups in entrepreneurship and this has the potential to finally allow for tracking of changes in this arena annually, not just every five years, which is currently the most up-to-date data available matching business and ownership characteristics.

Federal Reserve Board (PPT)

• The Federal Reserve didn't have huge updates for the room but did talk about their impromptu panel of households from the 2007 Survey of Consumer Finance who were contacted in 2009 again.  Specific questions were included relating to the changes in business ownership among the panel which will help to inform some aspects of our understanding about the impact of the financial crisis on business-owning households.

National Science Foundation (PPT)

• Anyone following NSF's innovation surveys over the last decade knows that this is a time of huge payoff for them.  After much review, planning, and pain, the new Business  R&D and Innovation Survey (BRDIS) is finally available to the public.  And while the current releases are on 2008 collections, improvements made in 2009 look very positive are likely to provide even more meaningful information.
• Quite a bit of the discussion came around what to do on measuring technology commercialization in the university space.  NSF indicated a new report should be coming out soon from an external group with recommendations for them on that topic.  I'll be following up with that and adding more commentary then.
• The Microbusiness Innovation Survey is very early in development but still promises to be the most exciting possible change underway in the next few years in our understanding of innovation in the U.S.    NSF is showing real leadership in taking on this survey and considering what topics are most appropriate to get innovation activities in very small businesses.  More expert meetings and user groups are planned for this fall into 2010.

Patent and Trademark Office(PPT)

• Did you know that the Patent and Trademark Office now has a chief economist?  Well, Stuart Graham, the first occupant of this seat, is really taking the lead in improving the data the PTO makes available from their work.  
• The PTO has recently done a bulk upload of information to Google and has plans for many future transfers of patent and trademark data. 
• The PTO is also actively looking at what other agencies would make sense to partner in matching PTO data into more traditional statistical agency products.  The PTO isn't really a statistical office (at least yet) so I think they are smart to look at partnerships that could produce really meaningful new information.