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Business Dynamics Statistics of High Tech Industries
January 2016
Working Paper Number:
CES-16-55
Modern market economies are characterized by the reallocation of resources from less productive, less valuable activities to more productive, more valuable ones. Businesses in the High Technology sector play a particularly important role in this reallocation by introducing new products and services that impact the entire economy. Tracking the performance of this sector is therefore of primary importance, especially in light of recent evidence that suggests a slowdown in business dynamism in High Tech industries. The Census Bureau produces the Business Dynamics Statistics (BDS), a suite of data products that track job creation, job destruction, startups, and exits by firm and establishment characteristics including sector, firm age, and firm size. In this paper we describe the methodologies used to produce a new extension to the BDS focused on businesses in High Technology industries.
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Measuring Cross-Country Differences in Misallocation
January 2016
Working Paper Number:
CES-16-50R
We describe differences between the commonly used version of the U.S. Census of Manufactures available at the RDCs and what establishments themselves report. The originally reported data has substantially more dispersion in measured establishment productivity. Measured allocative efficiency is substantially higher in the cleaned data than the raw data: 4x higher in 2002, 20x in 2007, and 80x in 2012. Many of the important editing strategies at the Census, including industry analysts' manual edits and edits using tax records, are infeasible in non-U.S. datasets. We describe a new Bayesian approach for editing and imputation that can be used across contexts.
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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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Research Funding and Regional Economies
January 2016
Working Paper Number:
CES-16-32
Public support of research typically relies on the notion that universities are engines of economic development, and that university research is a primary driver of high wage localized economic activity. Yet the evidence supporting that notion is based on aggregate descriptive data, rather than detailed links at the level of individual transactions. Here we use new micro-data from three countries - France, Spain and the United States - to examine one mechanism whereby such economic activity is generated, namely purchases from regional businesses. We show that grant funds are more likely to be expended at businesses physically closer to universities than at those farther away. In addition, if a vendor has been a supplier to a grant once, that vendor is subsequently more likely to be a vendor on the same or related grants. Firms behave in a way that is consistent with the notion that propinquity is good for business; if a firm supplies a research grant at a university in a given year it is more likely to open an establishment near that university in subsequent years than other firms.
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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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Grown-Up Business Cycles
October 2015
Working Paper Number:
CES-15-33
We document two striking facts about U.S. firm dynamics and interpret their significance for employment dynamics. The first is the dramatic decline in firm entry and the second is the gradual shift of employment toward older firms since 1980. We show that despite these trends, the lifecycle dynamics of firms and their business cycle properties have remained virtually unchanged. Consequently, aging is the delayed effect of accumulating startup deficits. Together, the decline in the employment contribution of startups and the shift of employment toward more mature firms contributed to the emergence of jobless recoveries in the U.S. economy.
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The Human Factor in Acquisitions: Cross-Industry Labor Mobility and Corporate Diversification
September 2015
Working Paper Number:
CES-15-31
Internal labor markets facilitate cross-industry worker reallocation and collaboration, and the resulting benefits are largest when the markets include industries that utilize similar worker skills. We construct a matrix of industry pair-wise human capital transferability using information obtained from more than 11 million job changes. We show that diversifying acquisitions occur more frequently among industry pairs with higher human capital transferability. Such acquisitions result in larger labor productivity gains and are less often undone in subsequent divestitures. Moreover, acquirers retain more high skill workers and they exploit the real option to move workers from the target firm to jobs in other industries inside the merged firm. Overall, our results identify human capital as a source of value from corporate diversification and provide an explanation for seemingly unrelated acquisitions.
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The Promise and Potential of Linked Employer-Employee Data for Entrepreneurship Research
September 2015
Working Paper Number:
CES-15-29
In this paper, we highlight the potential for linked employer-employee data to be used in entrepreneurship research, describing new data on business start-ups, their founders and early employees, and providing examples of how they can be used in entrepreneurship research. Linked employer-employee data provides a unique perspective on new business creation by combining information on the business, workforce, and individual. By combining data on both workers and firms, linked data can investigate many questions that owner-level or firm-level data cannot easily answer alone - such as composition of the workforce at start-ups and their role in explaining business dynamics, the flow of workers across new and established firms, and the employment paths of the business owners themselves.
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Statistics on the International Trade Administration's Global Markets Program
September 2015
Working Paper Number:
CES-15-17
Recent mandates for evidence-based policy choices from both the Executive and Legislative branches of the federal government underscore the importance of understanding the relationship between program participation and business outcomes. In this paper, we examine the correlations between participation in an export-promotion program and business outcomes. We use this experience to provide more general lessons learned about combining program data on treatments with Census Bureau micro data that can be used as a control. Note this paper does not evaluate a program, but instead provides critical information about a program.
The mission of the Commercial Service/Global Markets program is to help companies either start or increase their exports of goods and services. It pursues this mission through advocacy, events, and counseling. This study looks at a very small part of the overall program. While we cannot rule-out several sources of bias in our results, we do observe several consistent patterns across our models. In particular, program participation is positively correlated with export growth and change and, for small businesses, also with positive employment growth. However, overall, and for large firms in particular, there is a negative correlation with employment growth and counseling. The paper concludes with a 'Lessons Learned' section that highlights areas where measurement can be improved.
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Cyclical Reallocation of Workers Across Employers by Firm Size and Firm Wage
June 2015
Working Paper Number:
CES-15-13
Do the job-to-job moves of workers contribute to the cyclicality of employment growth at different types of firms? In this paper, we use linked employer-employee data to provide direct evidence on the role of job-to-job flows in job reallocation in the U.S. economy. To guide our analysis, we look to the theoretical literature on on-the-job search, which predicts that job-to-job flows should reallocate workers from small to large firms. While this prediction is not supported by the data, we do find that job-to-job moves generally reallocate workers from lower paying to higher paying firms, and this reallocation of workers is highly procyclical. During the Great Recession, this firm wage job ladder collapsed, with net worker reallocation to higher wage firms falling to zero. We also find that differential responses of net hires from non-employment play an important role in the patterns of the cyclicality of employment dynamics across firms classified by size and wage. For example, we find that small and low wage firms experience greater reductions in net hires from non-employment during periods of economic contractions.
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