carrying out the activities) associated with the early stages of business formation is to collect data from household or individual units.
While there are limitations to household-based data, such as the typical absence of information on business performance, they can add unique analytic capacity for understanding business dynamics. Ideally, information collected from households would be linkable to business data sets through unique identification numbers. Integrating data from households and from employers is critical—perhaps increasingly so—for tracking the growth of new firms and emerging sectors, and for developing a more complete picture of employment flows in the economy.
Existing household surveys could be used as the screening vehicle for identifying nascent and young businesses.
Recommendation 4: The Census Bureau should periodically add a module to the American Community Survey (or possibly the Current Population Survey) to identify nascent entrepreneurs. A method should be developed for linking this survey information with subsequent business identifiers in a longitudinal household-business data infrastructure so that transitions from nascent to active status (and vice versa) and from nonemployer to employer status (and vice versa) can be measured and studied.
Adding a module or a screener question to household surveys can, in principle, capture activity associated with nascent businesses. Such a plan must acknowledge that the majority of households will not be populated with individuals involved in business start-ups. Because the sampling frame is not particularly efficient for locating such activity, only very large surveys would generate sufficient numbers of eligible cases. That said, only minor modifications to the structure of items asked in the Current Population Survey (CPS) or the American Community Survey (ACS) would be required. These modifications could be implemented immediately with relatively little additional monetary cost, though we recognize that there is an opportunity cost (given the widespread interest in adding content to household surveys, there are a number of topical modules worthy of consideration).
The Census Bureau should also consider implementing a program of periodic follow-on surveys of the screened nascent entrepreneurs and young businesses using specialized topic modules. Combining responses to a well-designed set of questions with some longitudinal follow-ups and administrative record linkage would provide a pathway for studying the dynamics of these businesses over their entire life cycles.1 If these individuals could be