of commerce, as a specific type of entity. Any action that would be pursued by the courts related to tax payments, enforcing environmental regulations, antitrust legislation, compliance with Equal Employment Opportunity Commission guidelines, and the like would require dealing with the legal entities. Hence, development and administration of legal requirements and regulations require a focus on these kinds of definitions; it is not uncommon, however, for a single business, coordinating resources and strategy, to create several legal entities to gain tax advantages, compartmentalize risk exposure, or facilitate development of financial support.

Alternatively, business entities may be defined in a more purely economic sense. In this context, any buyer or seller of goods and services (not acting solely as a consumer) conducting activities that influence prices or quantities exchanged in a market would qualify as a meaningful unit of analysis. Such business entities could consist of the full- or part-time effort of a single person or of an organization of thousands acting in concert. There has been substantial effort devoted to identifying the number of businesses (or producers) in specific markets and to measuring the dynamics of producer-buyer exchanges.

Assessment of producer dynamics depends on defining a relevant market, and such definitions can be difficult to refine. This difficulty surfaces, for example, in antitrust cases, where market demarcation is often vigorously contested. However, if one collects detailed information on both the geographic location of production and the products and services produced at each location, then the analyst has flexibility in defining markets and hence in constructing measures of producer dynamics. This also relates to the point that a one-size-fits-all definition of business births and deaths will not provide adequate information over the full range of applications. The opening of a Home Depot in a city may represent a new business birth (of an established firm) in that location while, at the national level, this would properly be viewed as internal corporate growth. The statistical system should provide flexibility in allowing accurate measures of business dynamics at the market level, whether that market is local or national in scope. It would clearly be a major benefit if data could be organized around both legal and productive entities.

2.1.1
Legal and Production-Oriented Concepts

To be useful, the definition of a business should provide clarity for determining when a “productive organization” exists, as well as for indicating precise events associated with changes in status (e.g., firm birth or death transitions). The existence of a legal entity is relatively straightforward: one exists when it has been listed in an appropriate registry. However, there is not a one-to-one correspondence between the existence of a legal entity and



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