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The Shifting Source of New Business Establishments and New Jobs
BibTeX
@MISC{Hathaway_theshifting,
author = {Ian Hathaway and Mark E. Schweitzer and Scott Shane},
title = {The Shifting Source of New Business Establishments and New Jobs},
year = {}
}
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Abstract
As markets and business patterns change, new business establishments are created to serve them. Those new establishments can be provided by entrepreneurs creating new fi rms or by the owners of existing businesses opening new locations. We show that over the past three decades, new establishments have increasingly been provided by existing businesses opening new locations. Those new locations have created jobs at a higher rate than brand-new fi rms, which helps to boost job creation. Looking at both forms of new establishments shows that job creation is down following the recession, but new locations were growing entering the recession and should be a critical component of job creation as the economy continues to recover. The rate at which Americans start new businesses has declined signifi cantly over the past three-and-a-half decades, raising concerns among economists and policymakers about the state of American entrepreneurship. The decline is troubling because new companies have historically played an important role in job creation—recent estimates put the number of new jobs created by new fi rms at 2.9 million annually on average (Haltiwanger et al. 2013). But between 1978 and 2011, the formation rate for new fi rms with more than one employee dropped by more than one-third on a per capita basis, and the number of jobs created by new fi rms fell from 3.4 percent of total business employment to 2.0 percent. Moreover, these changes have occurred across all broad industry sectors and nearly all geographic locations (Decker et al., 2014; Hathaway and Litan, 2014). But discussions about the engines of job growth may be too narrowly focused on new fi rms. After all, a brand-new company is not the only type of new business establishment that can be formed. When Walmart opens up a new store, Honda builds a new auto plant, or a local sports bar opens a second location across town, new establishments are formed and new jobs are created. And though these new business locations are included in the offi cial new-establishment statistics, researchers frequently sift them out in order to focus only on brand-new fi rms when they investigate the drivers of job growth.
Keyphrases
new job new fi rms new business establishment new location new establishment job creation shifting source job growth brand-new fi rms important role new business broad industry sector per caput basis past three-and-a-half decade new store formation rate american entrepreneurship geographic location second location total business employment offi cial new-establishment statistic new business location brand-new company new company critical component job creation recent estimate local sport bar business pattern change new auto plant
