The Promise and Peril of Entrepreneurship

A clearer view of entrepreneurship, based on new comprehensive data, that upends what we know about job creation and survival among US startups.

Startups create jobs and power economic growth. That’s an article of faith in the United States—but, as The Promise and Peril of Entrepreneurship reveals, our faith may be built on shaky ground. Economists Robert Fairlie, Zachary Kroff, Javier Miranda, and Nikolas Zolas—working with Census Bureau microdata—have developed a new data set, the Comprehensive Startup Panel, that tracks job creation and the survival of every startup in the country. In doing so, they recalibrate our understanding of how startups behave in the US economy. Specifically, their work seeks to answer three critical questions: How many jobs does each entrepreneur create? Do those jobs disappear quickly? And how long do entrepreneurial enterprises survive?

Job creation and survival rates are, the authors conclude, much lower than those reported by official federal sources. Such discrepancies emerge from the more comprehensive picture drawn from this new data set—a picture that, for instance, highlights the important but understudied differences between employer firms (startups that hire people) and nonemployer firms (startups that do not initially hire people but may do so in later years as they grow). This reframing captures the vast number of businesses that start with no employees, a number largely missing from the statistics underpinning the mythos of the riskiness of entrepreneurship. The book also explores who owns startups—focusing on differences by race and ethnicity.

With its new, wider view of the realities of job creation and survival among startups, The Promise and Peril of Entrepreneurship has significant implications for economic policymaking and research, and for the billions of dollars that the government and the private sector invest in promoting entrepreneurship.Preface vii
1 Introduction: Entrepreneurship 1
2 Businesses and Startups in the United States 15
3 Job Creation by Startups 39
4 Startup Survival 61
5 The Dynamics of Job Creation and Survival among Startups 77
6 Refining Our Definition of an Entrepreneur 99
7 Who Owns Startups? 133
8 Policy Implications and Future Research 167
Notes 191
References 203
Index 215“How much do startups matter for the dynamism of the economy? Using the best new data, The Promise and Peril of Entrepreneurship offers comprehensive answers that will be required reading for policy makers and researchers.”
—David Card, Professor, UC Berkeley; co-recipient of 2021 Nobel memorial prize in economics
 
 
“This book takes an exciting new look at the definition of entrepreneurship in our country and sheds light on the value of the smallest businesses to our economy.”
—Karen G. Mills, Senior Fellow, Harvard Business School; former Administrator, U.S. Small Business AdministrationRobert Fairlie is Professor of Public Policy and Economics at University of California, Los Angeles, and Research Associate at National Bureau of Economic Research.

Zachary Kroff is an economist with the Center for Economic Studies at the US Census Bureau.

Javier Miranda is Deputy Head of the Department of Structural Change and Productivity at the Halle Institute for Economic Research in Germany. He is also Associate Professor in Microeconomics, Productivity Research, at Friedrich Schiller University Jena.

Nikolas Zolas is Senior Economist with the Center for Economic Studies at the US Census Bureau.