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Working Paper
Agglomeration and innovation
Draft chapter for the forthcoming Handbook of Regional and Urban Economics, Vols. 5A and 5B This paper reviews academic research on the connections between agglomeration and innovation. The authors first describe the conceptual distinctions between invention and innovation. They then discuss how these factors are frequently measured in the data and note some resulting empirical regularities. Innovative activity tends to be more concentrated than industrial activity, and the authors discuss important findings from the literature about why this is so. The authors highlight the traits of ...
Working Paper
Entrepreneurial tail risk: implications for employment dynamics
New businesses are important for job creation and have contributed more than proportionally to the expansion in the 1990s and the decline of employment after the 2007 recession. This paper provides a framework for analyzing determinants of business creation in a world where new business owners are exposed to idiosyncratic risk due to initial imperfect diversification. This paper uses this framework to analyze how entrepreneurial risk has changed over time and how this has affected employment in the US. Conditions are provided under which entrepreneurial risk can be identified using micro data ...
Working Paper
Competition, syndication, and entry in the venture capital market
There are two ways for a venture capital (VC) firm to enter a new market: initiate a new deal or form a syndicate with an incumbent. Both types of entry are extensively observed in the data. In this paper, I examine (i) the causes of syndication between entrant and incumbent VC firms, (ii) the impact of entry on VC contract terms and survival rates of VC-backed start-up companies, and (iii) the effect of syndication between entrant and incumbent VC firms on the competition in the VC market and the outcomes of incumbent-backed ventures. By developing a theoretical model featuring endogenous ...
Blog
Startups Account for Smaller Share of U.S. Jobs
Since 1994, startup firms have seen their share of U.S. employment shrink.
Working Paper
How Did Young Firms Fare During the Great Recession? Evidence from the Kauffman Firm Survey
We examine the evolution of several key firm economic and financial variables in the years surrounding and during the Great Recession using the Kauffman Firm Survey, a large panel of young firms founded in 2004 and surveyed for eight consecutive years. We find that these young firms experienced slower growth in revenues, employment, and assets and faced tighter financing conditions during the recessionary years. While we find some evidence that firm growth picked up following the recession, it is not clear that it returned to the levels it would have been absent the recessionary shock. We ...
Working Paper
Changing Business Dynamism and Productivity : Shocks vs. Responsiveness
The pace of job reallocation has declined in all U.S. sectors since 2000. In standard models, aggregate job reallocation depends on (a) the dispersion of idiosyncratic productivity shocks faced by businesses and (b) the marginal responsiveness of businesses to those shocks. Using several novel empirical facts from business microdata, we infer that the pervasive post-2000 decline in reallocation reflects weaker responsiveness in a manner consistent with rising adjustment frictions and not lower dispersion of shocks. The within-industry dispersion of TFP and output per worker has risen, while ...
Working Paper
Entrepreneurship and State Taxation
Entrepreneurship plays a vital role in the economy, yet there exists little well-identified research into the effects of taxes on startup activity. Using recently developed county-level data on startups, we examine the effect of states' corporate, personal and sales tax rates on new firm activity and test for cross-border spillovers in response to these policies. We find that new firm employment is negatively?and disproportionately?affected by corporate tax rates. We find little evidence of an effect of personal and sales taxes on entrepreneurial outcomes. Our results are robust to changes in ...
Working Paper
Going Entrepreneurial? IPOs and New Firm Creation
Using matched employee-employer US Census data, we examine the effect of a successful initial public offering (IPO) on employee departures to startups. Accounting for the endogeneity of a firm?s choice to go public, we find strong evidence that going public induces employees to leave for start-ups. Moreover, we document that the increase in turnover following an IPO is driven by employees departing to start-ups; we find no change in the rate of employee departures for established firms. We present evidence that, following an IPO, many employees who received stock grants experience a positive ...
Working Paper
Business Dynamics in the National Establishment Time Series (NETS)/Leland Crane, Ryan Decker
Business microdata have proven useful in a number of fields, but the main sources of comprehensive microdata are subject to significant confidentiality restrictions. A growing number of papers instead use a private data source seeking to cover the universe of U.S. business establishments, the National Establishment Time Series (NETS). Previous research documents the representativeness of NETS in terms of the distribution of employment and establishment counts across industry, geography, and establishment size. But there exists considerable need among researchers for microdata suitable for ...