Ryan Decker, John Haltiwanger, Ron Jarmin, and Javier Miranda write,
the typical young firm (as captured by the median) exhibits little or no growth even conditional on survival…however, among all the young firms, a few do exhibit very high rates of growth which yields a high mean growth rate.
Later,
the annual startup rate declined from an average of 12.0 percent in the late 1980s to an average of 10.6 percent just before the Great Recession, when it plummeted below 8 percent.
Still later,
firms aged five years or less made up about 47 percent of all firms in the late 1980s, but this number declined to 39 percent of all firms before the start of the Great Recession, and has declined further since then.
They point to one factor that I had thought of, which is that large retailers are reducing entrepreneurial activity in the “mom and pop” sector.
They also point to the possibility that startups now must spend more resources assembling a trained work force
That is from Arnold Kling. I’m not sure how to reconcile that with this story from a little while back.
Another more significant measure of fall from leadership position is provided by my old colleague and mentor, Dick Foster, who looked at the average lifespan of companies on the S&P 500. In 1937, at the height of the Great Depression and certainly a time of great turmoil, a company on the S&P 500 had an average lifespan of 75 years. By 2011, that lifespan had dropped to 18 years – a decline in lifespan of almost 75%
So we’re getting fewer new firms while at the same time more new firms at the large end of the spectrum.
So is it harder to start a company but also harder to maintain your edge? I like the explanation about small retail driving the start up rate decline.
Not Unreasonable 