The Small Business Sector in Urban America: Growth and Vitality in 25 Cities

JPMorgan Chase Institute, April 2019

40 Pages Posted: 2 Aug 2019

See all articles by Diana Farrell

Diana Farrell

JP Morgan Chase & Co. - JP Morgan Chase Institute

Chris Wheat

JP Morgan Chase & Co. - JP Morgan Chase Institute

Date Written: April 9, 2019

Abstract

Small businesses are one of the pillars of urban economies, making substantial contributions to economic growth and dynamism. However, the fragility of the small business sector is an ongoing challenge that limits how much it contributes to economic growth in cities. Understanding the drivers of growth and failure in the small business sector — and the variation of these drivers across cities — is critical to the development of policies that promote small business survival and growth. The JPMorgan Chase Institute leveraged high-frequency, de-identified financial data from a sample of 290,000 small operating businesses to identify differences and similarities in small business financial outcomes across 25 US cities. This report provides a lens into the composition and contributions of different types of firms to aggregate revenue growth and exit rates of the small business sector. Our findings are fourfold. First, new firms account for most of the revenue growth in the small business sector, but their contributions to growth vary widely by city. Among new small businesses, five percent of firms account for nearly all aggregate revenue growth across cities, and these usually grow organically. Additionally, while revenue growth rates vary substantially by industry across cities, small firms in construction, other professional services, health care services and high-tech services drive aggregate growth in most cities. Across cities, retail and other professional services drive small business exits. These findings suggest that both local and national policymakers interested in the financial health of the small business sector might benefit from paying closer attention to themes that are similar across cities, and important differences between cities.

Keywords: small business, cities, entrepreneurship

JEL Classification: E32, M13, L26

Suggested Citation

Farrell, Diana and Wheat, Chris, The Small Business Sector in Urban America: Growth and Vitality in 25 Cities (April 9, 2019). JPMorgan Chase Institute, April 2019. Available at SSRN: https://ssrn.com/abstract=3431222 or http://dx.doi.org/10.2139/ssrn.3431222

Diana Farrell

JP Morgan Chase & Co. - JP Morgan Chase Institute ( email )

New York, NY
United States

Chris Wheat (Contact Author)

JP Morgan Chase & Co. - JP Morgan Chase Institute ( email )

New York, NY
United States

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