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Kauffman Foundation releases second report on new Indicators of Entrepreneurship

April 02, 2020

Leveraging new data from the Census Bureau, the Kauffman Foundation recently released the second part of its new Indicators of Entrepreneurship series. This report focuses on the foundation’s New Employer Business indicators — a subset of the Early-State Entrepreneurship indicators provided in Kauffman’s first report of the series in September 2019 — meant to illuminate trends in the emergence of new businesses with employees and the time it takes for these companies to make their first payroll. The series replaces the Kauffman Index of Entrepreneurship series.

Kauffman’s four New Employer Business indicators are:

  • Rate of new employer business actualization: The percentage of all new businesses that make a first payroll within eight quarters of business application.
  • Rate of new employer businesses: The number of new employer businesses per 100 people.
  • New employer business velocity: The average time between business application and making a first payroll within eight quarters, conditional on having payroll within eight quarters.
  • Employer business newness: New employer businesses as a share of all employer firms regardless of age.

Having discontinued the popular Kauffman Index of Entrepreneurship, the foundation explains that its new series provides a more current, timely, broad and balanced perspective on the complex field of entrepreneurship, giving policymakers and researchers a more robust picture of regional entrepreneurship characteristics. While this new series continues to provide data at the national and state levels, it discontinues the practice of ranking states by a single measure.

While this new report succeeds in providing a broader picture of regional entrepreneurial activity, as mentioned in previous SSTI coverage, these new indicators do not provide specific insights into the Main Street small business and innovative high-growth segments, nor does it provide information on the industry make-up of entrepreneurial activity.

Kauffman uses publicly available data from the Census Bureau’s Business Formation Statistics (BFS), Business Dynamics Statistics (BDS), and Population Estimates Program (PEP) data sets. The BFS is a new data product currently released in beta form that was originally developed as an experimental research project in the bureau’s Center for Economic Studies. Now repackaged as a formal release, akin to the BDS and PEP, the BFS most notably is forward looking and relies on a model to predict quarterly business formations beyond what the lagging administrative data can show.

entrepreneurship, employment, report