followed over a longer period of time—up to three or four years—activity could be tracked until their businesses entered the system through a Schedule C tax return filing or, if it had employees, via the Unemployment Insurance system records. Such modules could be rotated over time to cover a range of both firm and business owner variables. Data from these modules would provide estimates of the prevalence of independent start-ups and business sponsored start-ups among the adult population and should be stored in a database that facilitates longitudinal analyses.

Surveying Business Owners

In addition to tracking changes that business entities undergo, it would also be beneficial to be able to monitor transitions that accompany the earliest phases in the lives of the owners who start them. Given the focus of many surveys on large producers, timely information on start-up financing, human resources, and investments in research and developoment and physical capital is often inadequate for young and small firms. This is particularly true for the nonemployer segment of the business population. One survey vehicle that does provide coverage of both the employer and nonemployer universes is the SBO. A key feature of this survey is that it identifies business age. The SBO generates statistics on the composition of U.S. businesses and on owner characteristics. Economic policy makers in federal, state, and local governments use SBO data as a source of information on business success and failure rates. The survey is particularly useful for comparing the performance of minority and nonminority and women-and men-owned businesses (see Appendix A).

The primary shortcoming of the SBO, in terms of its value for producing statistics on business dynamics, is that it is carried out infrequently— once every five years. Because many new businesses emerge then fail quickly, this kind of information needs to be collected on a more frequent basis.

Recommendation 5: The Census Bureau’s SBO should be conducted on an annual basis. The survey should include both a longitudinal component and a flexible, modular design that allows survey content to change over time. In addition, the Census Bureau should explore the possibility of creating a public-use (anonymized) SBO or a restricted access version of the data file.

The survey could be modified to include panel elements as well, perhaps in a manner similar to what is done in the Annual Survey of Manufacturers. This would facilitate measurement of the transitions that young and small firms make over their lifetimes. Finally, it would allow for flexibility in the type of questions asked over time by incorporating survey modules that differ with respect to content. For example, to minimize burden, one could

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