as well as of market goods and services, it is important to be able to identify them in a way that is useful for various research and policy purposes. For some applications—such as in measuring national-level output or employment, industry-specific outputs (like radiators for new cars), or the wide range of goods and services provided by a major retailer (like a single megastore providing food, hardware, electronics, and pharmaceuticals within the same structure)—it may be necessary only to identify activities at the firm level, even if that firm operates establishments in several locations. In many other cases, when analysis is focused on understanding the sources of goods, services, or job creation and loss for a given geographic location, it is important to have data on business activities at the establishment level. Physical locations can be identified at the local or regional level, with attention to growth and change for a given neighborhood, county, metropolitan region, or state, or for the sector in which the unit is classified. Such questions require a focus on business entities that make up a geographically defined economy.

In this chapter, we consider these definitional issues in detail. The first part of the chapter focuses broadly on what a business unit is and what entry or exit of a business represents; the remainder of the chapter asks how such concepts are, or could be, measured in the current U.S. statistical system. In that system, there are a number of different units of analysis from which data are collected (see Box 2-1). These include the establishment, the company (firm), the line of business, and the owner. Some of these concepts are related to legal and administrative entities, while others are related to the productive or geographic structure of the firm.3 Given these existing data resources and the possibility of incorporating relatively small modifications, we suggest alternative ideas for collecting data on businesses for the purpose of measuring producer dynamics.


Any procedure for identifying and counting businesses or for providing reliable statistics on business activities is more useful if it begins with a precise conceptualization of a business entity. However, as alluded to above, a number of alternative definitional or conceptual approaches are possible, and they vary in terms of relevance to the production of timely, accurate data on new and young businesses.


Throughout this discussion the focus is on nontax-exempt organizations, although many of the concepts defined could be used to measure business dynamics in the nonprofit sector as well.

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