How Did Young Firms Fare during the Great Recession? Evidence from the Kauffman Firm Survey
We examine the evolution of several key firm-level economic and financial variables in the years surrounding and during the Great Recession using the Kauffman Firm Survey, a large panel of young firms founded in 2004 and surveyed for eight consecutive years. We find that these young firms experienced slower growth in revenues, employment, and assets and faced tighter financing conditions during the recessionary years. While we find some evidence that firm growth picked up following the recession, it is not clear that it returned to the levels it would have been absent the recessionary shock. We find little evidence that financing conditions for young firms loosened following the recession and show that financing constraints, in addition to diminished demand, may have contributed to these firms’ slower growth. We discuss the strengths and the limitations of the Kauffman Firm Survey in measuring the impact of the Great Recession on young firms and consider features of future data collection and measurement efforts that would be useful in studying entrepreneurial activity over the business cycle.
We thank Howard Aldrich, Shai Bernstein, John Haltiwanger, and Antoinette Schoar and participants in the NBER/CRIW conference on Measuring Entrepreneurial Businesses for comments and suggestions. We acknowledge the Kauffman Foundation and NORC data enclave for providing secure and remote access to the data used in this research. We thank Daniel Lee with the NORC data enclave for assistance in clearing the statistical output. The analysis and conclusions in this paper are those of the authors and do not indicate concurrence by other staff or members of the Board of Governors of the Federal Reserve System. Zarutskie (corresponding author) can be reached at email@example.com; Yang can be reached at firstname.lastname@example.org.