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The Annual Survey of Entrepreneurs: An Update
January 2017
Working Paper Number:
CES-17-46
We provide an update on the Annual Survey of Entrepreneurs (ASE), which is a relatively new Census Bureau business survey. About 290,000 employer firms in the private, non-agricultural U.S. economy are in the ASE sample. Its content is relatively constant over collections, allowing for comparability over time; however, each year there are approximately ten new questions in a changing topical module. Earlier topical modules covered innovation (2014) and management practices (2015). The topical module for reference year 2016 covers business advice and planning, finance, and regulations. The ASE is collected through a partnership of the Census Bureau with the Kauffman Foundation and the Minority Business Development Agency. Qualified researchers on approved projects may request access to the ASE micro data through the Federal Statistical Research Data Center (FSRDC) network.
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Firm Dynamics, Persistent Effects of Entry Conditions, and Business Cycles
January 2017
Working Paper Number:
CES-17-29
This paper examines how the state of the economy when businesses begin operations affects
their size and performance over the lifecycle. Using micro-level data that covers the entire universe of businesses operating in the U.S. since the late 1970s, I provide new evidence that businesses born in downturns start on a smaller scale and remain smaller over their entire lifecycle. In fact, I find no evidence that these differences attenuate even long after entry. Using new data on the productivity and composition of startup businesses, I show that this persistence is related to selection at entry and demand-side channels.
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Destructive Creation at Work: How Financial Distress Spurs Entrepreneurship
January 2017
Working Paper Number:
CES-17-19
Using US Census employer-employee matched data, I show that employer financial
distress accelerates the exit of employees to found start-ups. This effect is particularly evident when distressed firms are less able to enforce contracts restricting employee mobility into competing firms. Entrepreneurs exiting financially distressed employers earn higher wages prior to the exit and after founding start-ups, compared to entrepreneurs exiting non-distressed firms. Consistent with distressed firms losing higher-quality workers, their start-ups have higher average employment and payroll growth. The results suggest that the social costs of distress might be lower than the private costs to financially distressed firms.
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High Growth Young Firms: Contribution to Job, Output and Productivity Growth
January 2016
Working Paper Number:
CES-16-49
Recent research shows that the job creating prowess of small firms in the U.S. is better attributed to startups and young firms that are small. But most startups and young firms either fail or don't create jobs. A small proportion of young firms grow rapidly and they account for the long lasting contribution of startups to job growth. High growth firms are not well understood in terms of either theory or evidence. Although the evidence of their role in job creation is mounting, little is known about their life cycle dynamics, or their contribution to other key outcomes such as real output growth and productivity. In this paper, we enhance the Longitudinal Business Database with gross output (real revenue) measures. We find that the patterns for high output growth firms largely mimic those for high employment growth firms. High growth output firms are disproportionately young and make disproportionate contributions to output and productivity growth. The share of activity accounted for by high growth output and employment firms varies substantially across industries ' in the post 2000 period the share of activity accounted for by high growth firms is significantly higher in the High Tech and Energy related industries. A firm in a small business intensive industry is less likely to be a high output growth firm but small business intensive industries don't have significantly smaller shares of either employment or output activity accounted for by high growth firms.
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Entrepreneurial teams' acquisition of talent: a two-sided approach
January 2016
Working Paper Number:
CES-16-45
While it is crucial for startups to hire high human capital employees, little is known about what drives the hiring decisions. Considering the stakes for both startups and their hires (i.e., joiners), we examine the phenomenon using a two-sided matching model that explicitly reveals the preferences of each side. We apply the model to a sample of startups from five technological manufacturing industries while examining a range of variables grounded in prior work on startup human capital. The analysis is based on the Longitudinal Employer Household dynamics from the U.S. Census Bureau. Our findings indicate that, in the context of entrepreneurship, both startups and joiners rely heavily on signals of quality. Further, quality considerations that are important for the match play a minimal role in determining earnings. Our approach refines our understanding of how entrepreneurial human capital evolves.
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THE DYNAMICS OF LATINO-OWNED BUSINESS WITH COMPARISIONS TO OTHER ETHNICITIES
January 2016
Working Paper Number:
CES-16-33
This paper employs the Michigan Census Research Data Center to merge three limited-access Census Bureau data sets by individual firm and establishment level to investigate the factors associated with the Latino-owned Business (LOB) location and dynamics over time. The three main LOB outcomes under analysis are as follows: (1) the probability of a business being Latino-owned as opposed to a business being Asian-owned, Black-owned, or White-owned; (2) the probability of new business entry and exit; and (3) LOB employment growth. This paper then compares these factors associated with LOB with past findings on businesses that are Asian-owned, Black-owned, and White-owned. Some notable findings include: (1) only Black business owners are less associated with using personal savings as start-up capital than Latinos; (2) the only significant coefficient on start-up capital source is personal savings and it increases the odds of survival of a Latino business by 4%; (3) on average, having Puerto Rican ancestry decreases the odds of business survival; and (4) LOB are relatively likely to start a business with a small amount of capital, which, in turn, limits their future growth.
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Creditor Rights and Entrepreneurship:
Evidence from Fraudulent Transfer Law*
January 2016
Working Paper Number:
CES-16-31
We examine entrepreneurial activity following the adoption of fraudulent transfer laws in the U.S. These laws strengthen creditor rights by removing the burden of proof from creditors attempting to claw back funds that were transferred out of failing businesses. These laws are particularly important for entrepreneurs whose personal assets are often commingled with those of the venture. Using establishment-level data from the U.S. Census Bureau, we find significant declines in start-up entry, churning among new entrants, and closures of existing ventures after the passage of these laws. Our
findings suggest that strengthening creditor rights can, in some circumstances, impede entrepreneurial activity and slow down the process of creative destruction.
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Where Has All the Skewness Gone? The Decline in High-Growth (Young) Firms in the U.S.
November 2015
Working Paper Number:
CES-15-43
The pace of business dynamism and entrepreneurship in the U.S. has declined over recent decades. We show that the character of that decline changed around 2000. Since 2000 the decline in dynamism and entrepreneurship has been accompanied by a decline in high-growth young firms. Prior research has shown that the sustained contribution of business startups to job creation stems from a relatively small fraction of high-growth young firms. The presence of these high-growth young firms contributes to a highly (positively) skewed firm growth rate distribution. In 1999, a firm at the 90th percentile of the employment growth rate distribution grew about 31 percent faster than the median firm. Moreover, the 90-50 differential was 16 percent larger than the 50-10 differential reflecting the positive skewness of the employment growth rate distribution. We show that the shape of the firm employment growth distribution changes substantially in the post-2000 period. By 2007, the 90-50 differential was only 4 percent larger than the 50-10, and it continued to exhibit a trend decline through 2011. The reflects a sharp drop in the 90th percentile of the growth rate distribution accounted for by the declining share of young firms and the declining propensity for young firms to be high-growth firms.
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The Annual Survey of Entrepreneurs: An Introduction
November 2015
Working Paper Number:
CES-15-40R
The Census Bureau continually seeks to improve its measures of the U.S. economy as part of its mission. In some cases this means expanding or updating the content of its existing surveys, expanding the use of administrative data, and/or exploring the use of privately collected data. When these options cannot provide the needed data, the Census Bureau may consider fielding a new survey to fill the gap. This paper describes one such new survey, the Annual Survey of Entrepreneurs (ASE). Innovations in content, format, and process are designed to provide high-quality, timely, frequent information on the activities of one of the important drivers of economic growth: entrepreneurship. The ASE is collected through a partnership of the Census Bureau with the Kauffman Foundation and the Minority Business Development Agency. The first wave of the ASE collection started in fall of 2015 (for reference period 2014) and results will be released in summer 2016. Qualified researchers on approved projects will be able to access micro data from the ASE through the Federal Statistical Research Data Center (FSRDC) network.
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Wealth, Tastes, and Entrepreneurial Choice
October 2015
Working Paper Number:
CES-15-34
The nonpecuniary benefits of managing a small business are a first order consideration for many nascent entrepreneurs, yet the preference for business ownership is mostly ignored in models of entrepreneurship and occupational choice. In this paper, we study a population with varying entrepreneurial tastes and wealth in a simple general equilibrium model of occupational choice. This choice yields several important results: (1) entrepreneurship can be thought of as a normal good, generating wealth effects independent of any financing constraints; (2) nonpecuniary entrepreneurs select into small-scale firms; and (3) subsidies designed to stimulate more business entry can have regressive distributional effects. Despite abstracting from other important considerations such as risk, financing constraints, and innovation, we show that nonpecuniary compensation is particularly relevant in discussions of small businesses.
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