Successor/Predecessor Firms
March 2002
Working Paper Number:
tp-2002-04
Abstract
The goal of this research was to investigate the value added from using worker flows to identify the spurious births and deaths of businesses. We identify four types of "at risk" businesses from ES202 using the successor/predecessor flag and mimic the same categories using UI wage record data. We use two critical decision rules in the analysis: a successor firm has to have at least 80% of employment coming from the donor firm and (in two of the four categories) at least 5 employees have to come from the donor firm. We examine the sensitivity of the categories based on the percentage definition, and find that the results stay very similar, with the exception of the identification of the pure successor. We examine the sensitivity based on the count threshold, and find that there are enormous differences, particularly with identifying spinoff businesses.
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