Small Business Growth: Searching for Stylized Facts
34 Pages Posted: 23 Oct 2007
Date Written: October 23, 2007
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
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