firm_formation_importance_of_startups - Kauffman Foundation Research Series Firm Formation and Economic Growth The Importance of Startups in Job

firm_formation_importance_of_startups - Kauffman Foundation...

This preview shows page 1 - 5 out of 12 pages.

Tim Kane Ewing Marion Kauffman Foundation Kauffman Foundation Research Series: Firm Formation and Economic Growth The Importance of Startups in Job Creation and Job Destruction July 2010
Image of page 1

Subscribe to view the full document.

©2010 by the Ewing Marion Kauffman Foundation. All rights reserved. Tim Kane, PhD, is a Senior Fellow in Research and Policy at the Ewing Marion Kauffman Foundation. The author would like to thank John Haltiwanger, Javier Miranda, Dane Stangler, Bob Litan, Paul Kedrosky, and Carl Schramm for comments.
Image of page 2
T h e I m p o r t a n c e o f S t a r t u p s i n J o b C re a t i o n a n d J o b D e s t r u c t i o n 1 Kauffman Foundation Research Series: Firm Formation and Economic Growth The Importance of Startups in Job Creation and Job Destruction July 2010 Tim Kane Ewing Marion Kauffman Foundation
Image of page 3

Subscribe to view the full document.

K a f f u m a n Fo u n d a t i o n Re s e a rc h S e r i e s : F i r m Fo r m a t i o n a n d E c o n o m i c G row t h 2 T he oft-quoted American sports slogan, “Winning isn’t everything. It’s the only thing!” could well be attributed to the economic importance of firm formation in creating jobs. A relatively new dataset from the U.S. government called Business Dynamics Statistics (BDS) confirms that startups aren’t everything when it comes to job growth. They’re the only thing. By now it is well understood that firms large and small are continuously and simultaneously destroying and creating jobs. Even a mild level of this creative- destructive churn points to a dynamic economy much different than static economic models can describe. However, beyond the job churn at existing firms, there is a dynamic in firm birth that seems to be very important for understanding job creation— specifically, the unique effect of new firms, or startups. Put simply, this paper shows that without startups, there would be no net job growth in the U.S. economy. This fact is true on average, but also is true for all but seven years for which the United States has data going back to 1977. The BDS is the first publicly available dataset that incorporates the age of firms in a dynamic format (Haltiwanger, Jarmin, and Miranda, 2008). Figure 1 presents summary data from the BDS, 1 showing that firms in their first year of existence add an average of 3 million jobs per year. By construction, the BDS defines an existing firm —age one up to age twenty-six and beyond—such that it can both create and lose jobs. In contrast, a startup , or age zero firm, only creates jobs because it experiences no gross job destruction. We might anticipate that the net job gain also would be positive at existing firms, but that is decisively not the case during most years on record. Notably, the figure shows that, during recessionary years, job creation at startups remains stable, while net job losses at existing firms are highly sensitive to the business cycle.
Image of page 4
Image of page 5
  • Spring '14
  • Firm, Ewing Marion Kauffman foundation, job creation

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Ask Expert Tutors You can ask 0 bonus questions You can ask 0 questions (0 expire soon) You can ask 0 questions (will expire )
Answers in as fast as 15 minutes