Statement from the Ewing Marion Kauffman Foundation, July 2007In the Kauffman Foundation’s work to advance entrepreneurship in the United States, the Survey of Business Owners (SBO) is a critical and unique tool for understanding and encouraging the diversity and dynamism of U.S. business. While most business surveys have small samples that focus only on large corporations, the SBO covers 2.3 million businesses of all sizes and ages, including the small and the new. As a part of the Economic Census conducted every five years, the SBO provides a great wealth of information about business age, industry, employment, owner demographics (ethnicity, gender, and veteran status), and firm financing. As the Federal Reserve has questioned its continuance of the Survey of Small Business Finance, the SBO is the sole remaining nationally representative, large-scale survey of businesses in the United States that can gather this information.
Entrepreneurship is essential to the nation’s economic health and competitiveness, and the SBO is essential to promoting entrepreneurship. Federal agencies such as the Department of Commerce and the Small Business Administration, state and local economic development organizations, chambers of commerce, and researchers rely on the SBO to track trends in business ownership and develop effective approaches for boosting successful entrepreneurship.
In addition, the federal government, local governments, private industry, and researchers depend on the SBO to identify disparities in business ownership in the United States. Business ownership remains a largely white-, male-dominated phenomenon; while important advances have been made by female- and minority-owned firms, differential start-up and success remain the pattern. From the SBO, we know that the United States is not living up to its entrepreneurial potential; without the SBO, we could not measure the gap nor determine how best to close it.
After three years of study and debate, the National Academies of Sciences—the nation’s scientific advisors––concluded in May of 2007 that in order to advance understanding of U.S. business creation, the Economic Census and the SBO must be expanded (see box). The National Academies, like the Kauffman Foundation, recognize the important place that the SBO plays in the data infrastructure that underpins our dynamic economy.
With a fiscal year 2008 budget of $6.3 million (or $2.75 per sample firm), the SBO is one of the most cost-effective surveys conducted by the Census Bureau. The return to the nation—in business development, jobs, and competitiveness—on this small investment is immeasurably greater.
Recomendation of the National Academies
5.1.3 – Surveying Business Owners
In addition to tracking changes that business entities undergo, it would also be beneficial to be able to monitor transitions that accompany the earliest phases in the lives of the owners who start them. Given the focus of many surveys on large producers, timely information on start-up financing, human resources, and investments in research and development and physical capital is often inadequate for young and small firms. This is particularly true for the nonemployer segment of the business population. One survey vehicle that does provide coverage of both the employer and nonemployer universes is the SBO. A key feature of this survey is that it identifies business age. The SBO generates statistics on the composition of U.S. businesses and on owner characteristics. Economic policymakers in federal, state, and local governments use SBO data as a source of information on business success and failure rates. The survey is particularly useful for comparing the performance of minority and nonminority and women- and men-owned businesses (see Appendix A).
The primary shortcoming of the SBO, in terms of its value for producing statistics on business dynamics, is that it is carried out infrequently—once every five years. Because many new businesses emerge then fail quickly, this kind of information needs to be collected on a more frequent basis.
Recommendation 5: The Census Bureau’s SBO should be conducted on an annual basis. The survey should include both a longitudinal component and a flexible, modular design that allows survey content to change over time. In addition, the Census Bureau should explore the possibility of creating a public-use (anonymized) SBO or a restricted-access version of the data file.
The survey could be modified to include panel elements as well, perhaps in a manner similar to what is done in the Annual Survey of Manufacturers. This would facilitate measurement of the transitions that young and small firms make over their lifetimes. Finally, it would allow for flexibility in the type of questions asked over time by incorporating survey modules that differ with respect to content. For example, to minimize burden, one could create modules on business finance, investment, and workforce training, among others, and cycle through them so that each is conducted periodically. The net result of such a program would be more detailed statistics about young small firms, provided on a more consistent basis, with overall better survey coverage than is currently available.
Implementing Recommendation 5 entails no conceptual hurdles; however, a more frequent survey would create new demands on resources and raise concerns about burden. It is possible that respondent burden associated with a more frequently conducted survey could be offset by rotating the samples and supplementing the survey data with additional administrative data. Finally, the value of the SBO would be greatly enhanced if researchers could obtain greater access to the microdata in secure settings or through creation of a public-use file.
—Committee on National Statistics, Understanding Business Dynamics: An Integrated Data System for America’s Future, 2007, pg. 99