employment-based data on existence would measure entry earlier than would the product market participation approach discussed above. Others have emphasized the fact that revenue generation by small firms often precedes the hiring of the first employee and, in fact, many firms never hire an employee through their entire lifetimes (Davis et al., 2006).
While the product market approach leads to a focus on firms from the birth event forward, it has become clear that there is a lack of information and attention to the mechanisms and processes that precede it. Indeed, it is now clear that a substantial amount of time (“sweat equity”) as well as resources (mainly informal funding) is absorbed by start-up efforts that never become operating businesses by any criteria. In addition to substantial intellectual interest, a more complete understanding of the start-up process itself has substantial implications for regional economic policies as well as personal career planning.
In the current statistical system, the unit of analysis that maps most flexibly into measurement needs is based on establishment reporting. Under ideal conditions, information on the range of products or services produced at each business location is also provided so that economic activity can be classified into the relevant market(s). The data collected in the quinquennial economic censuses by the Census Bureau have this product- and business-type detail for surveyed establishments.9 In addition, the data collection procedures of both BLS and the Census Bureau allow establishments to be disaggregated into distinct reporting units if they are important producers of multiple products.
A weak point embedded in both agency procedures has to do with the collection of data from small establishments owned by multiunit firms. The annual Company Organization Survey (described in Appendix A) omits small multiunit firms; thus the Census Bureau captures only the entry and exit of such smaller multiunit establishments owned by small multiunit firms in the quinquennial economic censuses. The MWR do not require an employer to disaggregate the data by establishment until 10 or more employees work away from the parent location. In each case, when dealing with small multiestablishment firms, it may be difficult to measure producer dynamics at the establishment level, especially at high frequencies.
Even in the economic census, a significant number of smaller establishments are not sent survey forms and their data come from administrative record sources. These administrative record sources do not provide disaggregations of output by detailed product or service provided. Output of such establishments is assigned entirely to the industry classification of the establishment.