Useful Stats: The new US Census Bureau high-growth firm data set, 1978-2021

Information on the geographic distribution of innovation and entrepreneurship is not easy to tease out of many federal statistical data sets, leading regional policy often to be based on trends in all business starts or life span and size—ignoring the fact that some firms have greater impact on regional economic growth than others. The U.S. Census Bureau is well aware of the challenge and, earlier this week, released an experimental data set that allows for an examination of state-level long-term trends in the change in high-growth firms and establishments across the nation.

The data set, titled “The Business Dynamics Statistics of High Growth Firms,” with the acronym of BDS-HG, covers key economic data on high-growth firms with metrics such as the number of firms and establishments, job creation and destruction, employment, and growth rates. It extends the statistics published by the Business Dynamics Statistics (BDS) program with a focus on high-growth companies.

The BDS-HG was developed by the Center for Economic Studies, and its data compiled from the Longitudinal Business Database. The methodology can be found here.

What data is included in the BDS-HG?

The BDS-HG consists of two major data sets: firm growth rate and firm growth rate percentiles. Each is broken down into three categories: economy-wide data sets, one-way data sets, and two-way data sets. All data is available for download on the Census website here.

Data is available from 1978-2021 and covers variables such as a count of the number of firms and establishments, employment of full and part-time employees, job creation and destruction, relocation rate, and firm deaths and establishments. A full list of the variables is accessible in the BDS codebook glossary.

Industry-level data is available at the 2, 3, and 4-digit North American Industry Classification System (NAICS) code level.

Firm growth rates are broken down into either nine growth rate bins, ranging from -2 to 2, or five weighted growth rate percentile bins. The ranges of each bin can be seen in the data definitions page, here. To view the formulas used, refer to BDS-HG’s methodology page.

The Census authors define “high growth” as the number of firms within the firm growth rate bin of 0.8-2; this bin will be analyzed across each state. This Useful Stats explores state-level trends in high-growth firms, using the “state” data file in the Firm Growth Rate datasets.

Readers should note: when using BDS-HG data, it is important to recognize the distinction between a “firm” and an “establishment”. The selection impacts the numbers determined in each state. Specifically, an establishment is defined as a single physical location, while a firm contains one or more establishments. Thus, for regional-level data, firms may be double-counted across borders based on the locations of their establishments. For example, if a firm has an establishment in both California and Texas, it might be counted twice, one contributing to each state’s total. However, according to the Bureau of Labor Statistics, most businesses are single-establishment firms.

State-level trends in high-growth firms

The number of high-growth firms increased in 40 states and over the most recent five years of available data, from 2017-2021, while the remaining 10 states and Washington, D.C. (D.C.) decreased.

Firms increased by the largest relative amount in Delaware (31% or 111 firms), followed by Georgia (26% or 846), Idaho and Florida (each 25%; 216 and 2,028, respectively). Including these four states, 18 increased by at least 10%. An additional 10 states saw the number of high-growth firms increase by at least 5%.

The states with the largest relative decreases in firms were Hawaii (-14% or 64 firms), New York (-10% or 805), and North Dakota (-10% or 38).

Looking further back, at the past 10 years of data, from 2012-2021, the picture looks more grim; the number of firms increased in just 17 states, while decreased in 34 and D.C..

With a 26% increase in firms (+851), Georgia’s relative growth was the highest in the nation. Utah (+25% or 362 firms), Idaho (+23% or 201), and Delaware (+20% or 77) followed behind and were the only states to have increased by over 20%. An additional four states’ relative growths surpassed 10%.

West Virginia experienced the largest relative decrease in firm count at -31% (200 firms), followed by New York (-24% or 2,252), and Connecticut (-21% or 334).

Interestingly, when going back even further and looking at the 20-year trends of 2002-2021, an even larger proportion of states experienced decreases in the number of high-growth firms within their borders than the 10-year trend. Only 10 states increased, while the remaining 41 and D.C. declined.

The number of firms in Utah increased by 41% (+533) over the past 20 years of available data, much higher than the next state, Idaho, which increased 30% (+246). Delaware followed with a 17% increase (+66), leading Montana’s 13% increase (+82) and Arizona’s 9% increase (+209).

While many of the 20-year percentage increases are larger, the percentage decreases were also larger than in other year’s, averaging -19% across jurisdictions that decreased.

West Virginia’s decrease in the number of firms was the largest at -47% (-381), followed by Michigan (-33% or 1,509), Connecticut and Ohio (each -32%; -599 and -1,506 respectively). The majority of decreases were by over 20%.

See Figure 1 below for an interactive map of the above trends and Figure 3 at the bottom of the article for a visual representation of the annual change in high-growth firms and establishments for every year of available data.

Figure 1: 5, 10, and 20-year percentage change in the number of firms, by state

Figure 1 reveals several interesting geographical trends in the data consistent with general population trends. While less obvious from the 5-year numbers, the 10 and 20-year changes show decreases in high-growth firms concentrated around the Rust Belt region, and up into most of New England and out to the central states. Much of the growth is concentrated on both the west coast in states like California, Oregon, Nevada, Arizona, Utah, and Idaho, and the southeast coast in states like North and South Carolina, Georgia, and Florida.

Figure 2 below shows the number of high-growth firms for every year of available data between 1978 and 2021. The visual can be paused using the button in the bottom left, and each year can be scrolled through by clicking and dragging the mouse over the timeline located at the bottom of the visual.

Figure 2: Racing line chart featuring high-growth firms from 1978-2021

Figure 3, below, shows the same data as Figure 2, but with all 50 states and D.C. included. Click here to open the visual in a larger format for an easier viewing experience.

Figure 3: Racing line chart featuring high-growth firms from 1978-2021, for all states and D.C.

This article was prepared by SSTI using Federal funds under award ED22HDQ3070129 from the Economic Development Administration, U.S. Department of Commerce. The statements, findings, conclusions, and recommendations are those of the author(s) and do not necessarily reflect the views of the Economic Development Administration or the U.S. Department of Commerce.