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Business Dynamics Statistics Briefing: High Growth and Failure of Young Firms

Business startups that survive grow faster than more-established companies, according to Business Dynamics Statistics data funded by the Ewing Marion Kauffman Foundation. However, because entrepreneurial ventures also have higher mortality rates than older companies, they also have higher rates of job loss reflecting an “up or out” pattern.

High Growth and Failure of Young Firms highlights a single dimension of the U.S. Census Bureau’s Business Dynamics Statistics (BDS). The BDS provides researchers with comprehensive data, broken out by firm age, that are necessary to understanding startup firms’ role in job creation.

The High Growth and Failure data show that very young firms (one year old) have a net employment growth rate of about 15 percent, if they survive, but about 20 percent of jobs at startups are lost due to business establishment closings in the first year. Older firms (age 29 and older), on the other hand, create jobs at a rate of about 4 percent, conditional on survival, and have a similar rate of job loss due to business establishment closings. Among surviving firms, average employment growth rates decline with the age of the firm.