Small Business Growth: Searching for Stylized Facts

34 Pages Posted: 23 Oct 2007

See all articles by Brian Headd

Brian Headd

U.S. Small Business Administration, Office of Advocacy

Bruce A. Kirchhoff

New Jersey Institute of Technology

Date Written: October 23, 2007

Abstract

Using special tabulations from the U.S. Census Bureau, we use aggregate data to follow a cohort of firms over 10 years from their formation and the universe of existing firms to track their growth/decline in employment. We created a table to show the employment change categories for a cohort of new single establishment firms drawn from the 1992 universe of single establishment firms from 1992 to 2002. We also created tables to show the employment change categories for the universe of single establishment firms in the cohort defining declining and growing firms as separate sub-cohorts. Some industry detail is also described. We offer propositions related to firm growth and use data contained in the tables to seek verification.

The tables provide evidence that growing firms are generally a constant share of the cohort with a minor business cycle effect; firms with employment growth outnumber firms with employment decline; and fast growing firms in a given year tend to revert to the mean in later years. We divided the dataset into 83 industrial sectors and found that industry performance does not seem to have much impact on the number of fast growing or declining firms and industries with many fast growing firms also tend to have many fast declining firms.

The empirical findings of this paper establish some basic stylized facts about the life cycle of firms and they suggest the need for creating recurring firm age data.

Keywords: small business, business growth, business dynamics, entrepreneurship

JEL Classification: M13, L00, L11, L21, L22

Suggested Citation

Headd, Brian and Kirchhoff, Bruce A., Small Business Growth: Searching for Stylized Facts (October 23, 2007). Available at SSRN: https://ssrn.com/abstract=1024026 or http://dx.doi.org/10.2139/ssrn.1024026

Brian Headd (Contact Author)

U.S. Small Business Administration, Office of Advocacy ( email )

409 Third Street, SW
Washington, DC 20416
United States

Bruce A. Kirchhoff

New Jersey Institute of Technology ( email )

323 Martin Luther King Blvd.
Newark, NJ 07102
United States
973-596-5658 (Phone)
973-596-3074 (Fax)

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