11/14/2011 12:03:21 PM By
E.J. Reedy
The OECD has a new version of their timely indicators on entrepreneurship available today at the national level for 10 countries.
These data show that new business formation continues to operate in most countries at the new levels which were reached after the 2008 recession (Australia stands out for its continued positive performance). These are the most timely indicators available internationally and seem to show anemic start-up rates continue in most countries although the rates haven't worsened for the most part.
This release is timed around the start of Global Entrepreneurship Week. I would just note that there is much more data available from the OECD on more complicated and nuanced views of entrepreneurship. Most of that data is current through 2007 or 2008.
9/19/2011 7:58:50 AM By
E.J. Reedy
In studying entrepreneurship, one typically has to make a choice of orientations – to study through the business, to study through the household, or to study through an intermediary (like a venture capital fund). Most of the time, I deal with data that comes from the business, like with the Kauffman Firm Survey, but this week I will be offering three posts on recent data updates that have been looking at entrepreneurship through household surveys. Household surveys as a mechanism for studying entrepreneurship commonly measure self-employment as a means of quantifying individual-level entrepreneurial activities. Self-employment is convenient, although not typically ideal, in that it is somewhat internationally comparable and in most official statistics have included self-employment response options for years. Each household surveys I will focus on this week is extending beyond self-employment to offer new and different means of looking at entrepreneurship, still using household frames.
While I have blogged on the Federal Reserve’s Survey of Consumer Finance before (see summary of 2007 and 2010 changes), I haven’t touched upon their efforts to create a panel of households. While I am sure the Fed has had the idea to do a household panel before (panel data is more helpful to many scholars/analysis), it is amazing what an impetus like the Crisis can do to take a concept and turn it into a reality. Their panel data will consist of 2 points in time as their 2007 respondents were resurveyed in 2009. To date, the Fed has only released a summary paper analyzing the 2007 SCF panel. In this paper the Fed highlights the important role than changes in business equity, along with values of homes and stock, appear to have on driving household wealth.
The Fed has only done a portion of what could be done in looking into these topics with such rich data. But good news - they know this! From my conversations with the Fed, it appears they are likely to release a public-use data file for the panel data at some point in late 2011 or early 2012. This should be a very interesting file for researchers interested in examining financing activities during this Crisis period and quite unique among data available.
Additionally, I wanted to blog on this anticipated data opportunity as it fits well with a recent call for funding issued by the National Bureau of Economic Research. To my knowledge no other forthcoming data set presents such a ready-made opportunity for studying household financing with a details on business equity included that has a longitudinal component.
NBER Household Finance Working Group
Call for Research Proposals 2011
The Household Finance (HF) Working Group at the National Bureau of Economic Research aims to advance understanding of household financial behavior and to provide a firm foundation for related policy discussions. The working group defines household finance broadly, to include the many financial decisions made by households, including the financial functions of payments, saving and investing/portfolio-choice, borrowing/credit, and risk management, as well as related decisions by businesses and government.
In addition to sponsoring conferences that bring together the various researchers working on household finance, the working group seeks to promote new research in the field, especially by young researchers. To this end, through a generous grant from the Sloan Foundation, we can provide four to five research grants, of $10,000-$20,000 each, directly supporting household finance projects. These grants can be applied only to non-salary costs (e.g., travel, data, research assistants, etc). Applications are especially welcome from untenured faculty members and advanced doctoral students, and for projects that would eventually generate public data that could also be used by other researchers.
Applicants should submit: a research proposal not to exceed 2 pages; a 1-page itemized budget (e.g., travel, data, etc), with brief justification as appropriate; and their curriculum vitae. These
components should be complied into a single pdf file and emailed to Denis Healy at dhealy@nber.org, with "HF research grant" in the subject line.
In cases where a substantial part of a grant goes towards data collection or production, grantees will be encouraged to make the resulting data publicly available to the extent possible, e.g., without violating confidentiality agreements, and to briefly discuss this possibility in the proposal.
Applications from doctoral students should be accompanied by a one-page letter of recommendation from a senior researcher who is knowledgeable about the project (and ideally, but not necessarily, an NBER affiliate). This letter can be emailed separately to the above address, again with "HF research grant" in the subject line (or the letter writer can submit the entire proposal in one email).
The application deadline is October 17, 2011. Applicants will be notified by early December.
Grantees will be required to deliver a preliminary working paper by August 15, 2012, and should be prepared to present the resulting research at a subsequent working group meeting (in Fall 2012 or later), if selected by the conference organizers. A complete working paper will be due by December 1, 2012.
6/27/2011 7:09:04 AM By
E.J. Reedy
Updated Post - June 27, 2011
Babson College has published results from a new alumni survey on entrepreneurship and given Babson's ability to reach the presses, I am sure this will bring some renewed interest to alumni surveys on entrepreneurship. While I am hesitant to even mention the research as I can't locate the actual paper which this is based on, and hence also can't locate the survey they used, this is in the press. The authors come down strongly behind the value on entrepreneurship education, not something that most other alumni surveys of entrepreneurs have been able to address because of lack of matched course data and the relatively recent explosion of entrepreneurship classes. They find more impact in this regard on a student having taken actual courses than just having completed a business plan.
Alumni surveys remain a strong vehicle for research right now, partially because of recent successes at some key locations with the design, but I have to also believe in an era of austere budgets this is one collection mechanism that a lot of schools could find donors or internal support to collect. I know we currently have a small amount invested in an effort at Stanford to collect similar information so should be more coming out on this topic in the next year.
Original Post - March 4, 2009
A week or so ago, we released a report based on an alumni survey of Massachusetts Institute of Technology (MIT) graduates which looked at the their incidence of entrepreneurship. It had some interesting findings, including:
- An estimated 6,900 MIT alumni companies with worldwide sales of approximately $164 billion are located in Massachusetts alone and represent 26 percent of the sales of all Massachusetts companies.
- 4,100 MIT alumni-founded firms are based in California, and generate an estimated $134 billion in worldwide sales.
- States currently benefiting most from jobs created by MIT alumni companies are Massachusetts (estimated at just under one million jobs worldwide); California (estimated at 526,000 jobs), New York (estimated at 231,000 jobs), Texas (estimated at 184,000) and Virginia (estimated at 136,000).
While MIT is without a doubt an anomalous university in the U.S. and globally, the power of this survey was to quantify for the first time a portion of the entrepreneurial impact MIT has had over the last several decades. I say a portion because this survey only looked at companies started by MIT alumni, not all the other effects in terms of inventions, human capital creation, etc. While I haven't talked to the MIT authors about why they started this survey, I suspect it had something to do with wanting to know how entrepreneurship from MIT was contributing to local, national, and international economies. As universities have become more of a focus for economic growth, being able to quantify these effects would naturally become more of a focus.
This morning I ran across a similar new alumni survey out of Iowa State University that also looks at incidence of entrepreneurship among other topics such as those who created a non-profit or report having filed for a patent. They find that Iowa State alumni have created businesses that employ about 35,000 in Iowa and more than 220,000 in the United States. This is interesting to have along with the MIT report because Iowa State is an example of a public university that also has a significant historical focus on entrepreneurship through the Pappa john Center for Entrepreneurship. Their methodologies don't appear identical, but should prove interesting to compare in this seemingly emerging area of study.
Are there other alumni surveys that I have missed that cover entrepreneurship? Please send them my way. In the meantime, the MIT survey instrument is available online for those wanting to take a closer look. If you are considering undertaking a similar study at a specific university, let us know so perhaps there can be more comparability among disparate efforts.
6/9/2011 5:11:58 AM By
E.J. Reedy
Formal is better; informal the scourge. While I still remain largely in that camp, I have to say that an article in today's Financial Times gave me some pause on this question. Growing up in a middle class household in the U.S. Midwest left me with a world view that is intrinsically oriented to the formal economy - or at least I thought. My grandmother, may she rest in peace, was an amazing woman and indeed the main entrepreneur who I have had in my life and yet I doubt very much that she always reported all of her income. A highly ethical woman in my estimation, she was widowed with three children (one under 1) at about the age of 30 and went on to send all of them to college while living independently and only remarrying briefly. At the age of 88 she was still running her own seasonal business for most of the year and beating me handedly at any game that we engaged before her death. Just as she probably used a bit of creative accounting to get by at certain times, today's article points out some of the ways in which certain economies are likely surviving currently because of their informal economies.
I have spent a lot of time in Spain in the recent year which has brought me head long into contact with the informal economy. Indeed, when first here I have to say I nearly burst a blood vessel trying to deal with some of the things which could only be done in the informal economy which I was used to being formal. I had some of my most heated arguments and grandstanding trying to deal with people who by all appearances were part of the formal economy but apparently were not. As the article rightly points out, Spain's informal economy must be among the biggest in the developed world. And yet, with all of the economic pain and tumult in the Spanish economy, by my reading of currently available data Spain is the hardest hit country anywhere in terms of pre-Crisis and post-Crisis impact on new business formation and the existing small business sector, the Spanish economy is still functioning. Yes, there have been some significant protests, but as I think the article correctly identifies if Spain didn't have some of this informal economy there is no way that it would not be in a revolutionary state. (I am not sure it won't reach that state but it's not there currently.) If the government wants to bring some of this informal economy into the formal economy, which seems necessary for longer-term growth potential, then it needs to face facts about the repressive regimes which remain in place for many formal business and other activities. That said, in my opinion, Spain has no choice but to live with its informal economy currently as the changes that it needs to make to much of its burdensome regulatory and other regimes will take time and seem deeply, deeply rooted in culture and society.
Well, that is all a bit of an aside probably for most of my readers. I offer it only in the way of saying, this topic of informal economy measurement is extremely important. Many of the data projects we have funded only focus on the formal economy because high-growth companies need to be operating formally ( OECD and World Bank), but I am sure that this set of measurement issues is important and indeed will likely be incorporated by many scholars as a measure of institutions in different countries. The Financial Times article is data driven, offering estimates from Friedrich Schneider that appear to be the going standard in this area, but it also has a nice discussion of the dangers of measuring the informal economy over time. I would expect that we will see a lot more measurements of the informal economy as the markers of business and household activity (all the data we are leaving in our daily activities) explode in the coming years; it is these data or things like electrical consumption that seem most common bases for estimating the actual business activity in a country. Those interested in this area should check out the article or the longer journal article which I have been told by experts at the World Bank is where they currently draw from:
Schneider, F. and D. Enste, 2009. Shadow economies: Size, causes and consequences. Journal of Economic Literature, 38(1): 77-114.
Here is a sneak peak at some of the data the Financial Times presents:
6/3/2011 6:43:23 AM By
E.J. Reedy
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:
- I'm introducing a new tag - state - in my tag cloud to start tracking state-level data sources which I come across.
- 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.
4/29/2011 5:13:58 AM By
E.J. Reedy
The National Establishment Time-Series (NETS) Database, a longitudinal database of linked Dun & Bradstreet records, is one of the standout data sources to emerge in the last half decade for the study of entrepreneurship (and businesses, more generally). As an early proponent of the potential of this data, I wanted to offer some commentary now that comes from grantees that have used the NETS data for different purposes such as matching to other data sets, surveys, or just aggregate examinations of firm dynamics. Every data set has its advantages and disadvantages, NETS is no anomaly in this regard, but one of the unique things about my role is that I get to see some of these trends and connect experiences. These comments emerged as the result of an email inquiry I had made to those listed here for a potential new project. I found the comments so valuable I decided they should be published as blog post so that others could see them. All the commentators were allowed to review and modify their comments before posting. I would encourage others who have experiences that can help to hone the use of NETS and hopefully drive improvements to its core to add them as comments to this post.
“The strengths of the NETS are its historical address information, descriptive data (industry, incorporation codes, and CEO and ownership demographics) and survival measures. These traits seem sufficient to conduct event history analysis using quasi-experimental methods.
If your focus is on other types of performance such as growth, then I'm not convinced this is the best dataset. I found in my research that employment and sales figures in the NETS are often estimates and not actual observations of the levels of these measures. It presents a problem when you are dealing with small firms because you lose variation since so many of these small firms appear to reach stability over short periods of time. I'm still using the data for this purpose but I take the results to be more speculative than definitive.
Also, the lack of information on other attributes of organizations (i.e. invested capital, costs, revenue streams, and the education and experience of CEOs) makes it hard to account for unobservable differences that may be the underlying cause of performance when evaluating a policy outcome. There are statistical methods to address these issues but these also open the door to skepticism and criticism.
I'm working on ways to improve on the value of the NETS by merging it with other datasets to add richer data to what I already use. Depending on the types of firms being studied, one may improve on the types of controls that can be accounted for and on the type of performance being evaluated.”
“I agree with Alejandro that NETS is not the best data to see changes in firm level outcomes. In our work we found that the information on sales and credit scores are actually the best of their outcomes variables, and are updated reasonably well. But especially employment variable are very sticky in NETS and do not seem well covered in NETS.
One of the best data set that you could use is probably LBD data at Census, but this data is difficult to access since you need to apply for access.”
“I am less skeptical of the employment measures than Alejandro and Antoinette, although it depends how you are using the data. At the individual establishment level there is clearly a lot of stickiness. But when you are averaging across many establishments (like in our EZ paper) this doesn't really matter. I think that if you are matching based on geographic location the NETS are very useful although the geocoded information that comes provided with the data might need to be re-geocoded.”
See select other posts dealing with NETS: Comparing Business Registers; youreconomy.org Updated
3/23/2011 10:49:47 AM By
E.J. Reedy
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).
3/7/2011 7:52:55 AM By
E.J. Reedy
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.
3/7/2011 7:20:08 AM By
E.J. Reedy
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.
2/14/2011 5:58:00 AM By
E.J. Reedy
The events of the last month in Egypt and the Middle East have had me thinking some about the forces that can drive change. One of strange parts of about the space that I occupy, not being in a stat agency and not being an academic, is I that get an outsider’s perspective of what is happening within and across these institutions. This is particularly helpful in watching how change happens within these organizations. I wanted to reflect a bit on some observations about the global statistical system, specifically the informal international network of governmental statistical offices and officials that produce the data which we rely upon to understand our economies, our people, and all aspects of our world.
I don’t know what I’d call these musings but I think when looked at together there are some truths here that can be helpful in particular to academics who might over the course of their careers only have an opportunity to work with statistical agencies once or twice. I have talked to a lot of academics (and others) who might want to see improvements in certain data, release of certain data, coordinated collection of surveys, or the like. Most academics are befuddled by national statistical offices and their bureaucratic ways. There is little academic training given to understanding project management, partner coordination, etc. – all things which are critical to getting data collected, produced, etc. Consider this a short primer but also a larger consideration about how the system informally operates.
While we would like to pretend that all countries are playing with an identical deck of power and influence in national statistics, the reality is that three players wield unusual power and influence on the direction of the global statistical system. Innovative measurements and production of new and meaningful series by a relatively small country, say Chile or Belarus, are very unlikely to be replicated or noticed internationally without the attention or interest of one of the three trump statistical players. Recognizing where and how power centers are shifting in the statistical community is important for those of us trying to drive improvements in data and for researchers attempting to see cross-country studies replicated.
The Fading Trump
The first trump that I recognized in my job was the United States. Simply put, in the production of innovation and entrepreneurship data, if equivalent data is not produced on the United States (and if people don’t believe the results), any international comparison is doomed. As a Foundation whose main focus is production of data on these topics in the U.S., we were often approached about funding or supporting U.S. replications of data series and research. While this was a particularly powerful position for the U.S. in the 2000s, post-crisis it seems this trump has diminished. Now, while most efforts would like to have the U.S.’s involvement, countries have tended to have more interest in more timely and meaningful national-level data, with much less importance given to comparing their results to the U.S. benchmark. The U.S. has never fully taken advantage of its potential power as a statistical leader, too often relinquishing involvement in international efforts to gather improved data. Driving the global conversation was a space the Canadians really saw outsized-power with until recently with the gutting of many of their statistics programs.
The Suit Bigger than All the Others
The quiet behemoth of internationally comparable statistics is Eurostat, the European Union’s statistical office. While they have wielded some power since their establishment, my own experience is that just as the European Union’s powers have broadened in policy and other rights, Eurostat’s power to drive the international statistical conversation has increased. In our own experience, the signing-on of Eurostat to the Entrepreneurship Indicators project at the OECD, which we funded, was a significant milestone in driving internationally-replicative data. With the ability to drive statistics coming from 27 member countries, Eurostat is both blessed and cursed. The blessings in terms of potential replicants are easy to see but the curses are a bit more hidden. One significant curse is the limited ability of Eurostat to drive implementations which ALL member countries don’t agree to. Hence, the sovereignty of data production remains at the state-level and can sometimes lead to the dumbing down of mandatory statistics. A lack of microdata access and a mandate that is too inwardly focused have limited their global power.
The Rising Trump
While no expert would currently identify China as a global statistical leader, from what I see in the academic world I have no doubt its power in global statistics is also rising. While researchers doing cross-country studies of entrepreneurship and innovation are a limited bunch, it feels as if almost all the proposals I see for collections in this area involve China and X. And with the OECD’s increased focus on non-member economies, it is certainly trying to get China and other BRIC national statistical offices to join the global conversation. So far, this seems about the only potential international source of power that China has not systematically tried to take advantage of in its development efforts. From my understanding and time living/traveling there it would seem there is still some distrust of official statistics and too much information about the activities within the country. India is a country that has a huge history of measurement and record keeping but still lacks many of the basic infrastructures for modernization.
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Developing better data is part of Kauffman's long-term strategy for advancing better research and policy on entrepreneurship and innovation. Data Maven is place you can connect with new data developments, provide us feedback on possible new projects, and contribute to the community seeking to improve entrepreneurship and innovation measurement.
E.J. Reedy is a manager in Research and Policy at the Kauffman Foundation. Learn more ...
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