4.2
GAPS IN DATA ON BUSINESS DYNAMICS AND ON SMALL, YOUNG, AND NASCENT FIRMS

As indicated throughout this report, the primary emphasis of the statistical system traditionally has been to produce accurate cross-sectional, highly aggregated statistics. One consequence of this strategy is that our ability to accurately measure the activity of small and younger producers, and their role in dynamic economic processes, is compromised. For this segment of the business population, a greater reliance on administrative records has developed over time.10 Administrative data typically contain only a limited number of data fields such as payroll and employment.

Even with limitations imposed by administrative data, U.S. business statistics typically can be disaggregated along a number of dimensions—for example, by firm or establishment size. However, the federal statistical system produces very little information tabulated by firm or establishment age. A better understanding of business dynamics, industry evolution, the role of entry in markets, and the productivity impact of new firms requires data on business age. As illustrated by past efforts—for example, the 1939 and 1948 Censuses of Retail—and by recent studies using business microdata (Davis, Haltiwanger, and Schuh, 1996), it is certainly feasible to construct such statistics. A focus on publishing statistics by business age would also dovetail well with recent innovations in measuring producer dynamics, such as the BED, Quarterly Workforce Indicators, and LBD/SUSB programs. Since these programs rely on the accurate measurement of entry and exit of producers and the accurate tracking of existing producers over time, their statistical frames could be readily adapted to allow for the measurement of business age and the production of statistics disaggregated by business age. This involves no new collection of data but would require business registers to maintain information that, though relatively easy to construct at the establishment level, does require somewhat greater effort at the firm level, where adjustments for mergers and acquisitions must be incorporated into the company age data.

Besides placing greater emphasis on the production of statistics (both levels and dynamics) of small and young firms from existing data resources, more regularly collected information on the activity of these businesses needs to be collected to help fill several conspicuous gaps. For example, few data sources detail how young firms invest in research and development,

10

A good example of this is the Census of Manufactures. Many statistics produced on small firms in the Census of Manufactures are imputed values based on administrative record data. Few small manufacturing firms in an economic census year actually receive forms. This clearly reduces costs and reduces respondent burden, but the result is that less is known about small and, thus, the majority of young firms.



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