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July, 2000, Vol. 123, No. 7

The role of entrepreneurship in U.S. and European job growth

Robert W. Bednarzik

Entrepreneurship, or the creation of a new business or enterprise, is an integral and significant activity in a growing job market. Just as new establishments are created, some existing ones expand, contract, or dissolve operations altogether. Countries that have the capacity and wherewithal to accommodate high rates of business formation and dissolution will be best positioned to compete in world markets.

To examine and monitor this process, government agencies in the United States and Eurostat from the European Union have collected data on the births and deaths of establishments.¹ Until recently, U.S. establishment-based longitudinal data were available only on the manufacturing sector. However, new longitudinal data on the births and deaths of establishments in both the United States and Europe are available. For the United States, the new data series, referred to as the Longitudinal Establishment and Enterprise Microdata (LEEM), provides information on the services sector as well as the manufacturing sector. The Census Bureau collects the data for the U.S. Small Business Administration.² European Union data are collected by its "statistical arm," Eurostat, which developed a special data bank from existing statistical administrative data on small- and medium-size enterprises (SMEs) in 1994 and 1995. In addition, the Global Enterprise Monitor project collected comparable data, using a very small sample of 10 industrialized countries to measure the level of entrepreneurship and to study the relationship between business creation and economic growth internationally. The results of the survey show a wide lead in the number of new businesses created in the United States.³ Although the Establishment and Enterprise Microdata and the Eurostat data on small- and medium-sized enterprises are not comparable, they each shed light on the nature and magnitude of a very important component of job creation––entrepreneurship. This article uses the Establishment and Enterprise Microdata and the international databases to determine the role of entrepreneurship in job growth for the United States and Europe.

This excerpt is from an article published in the July 2000 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.

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Footnotes
1 The European Union consists of the following countries: Belgium, Denmark, Germany, Greece, Spain, France, Ireland, Italy, Luxembourg, Netherlands, Austria, Portugal, Finland, Sweden, and the United Kingdom.

2 Dun and Bradstreet Corporation also tabulates the opening and closing of U.S. establishments and tracks their employment level over time. However, research suggests that these data overstate the actual number of openings and closures.

3 See Paul Reynolds, Michael Hay, and S. Michael Camp, Global Entrepreneurship Monitor, 1999, Executive Report (Ewing Marion Kauffman Foundation, Center for Entrepreneurial Leadership, 1999).

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Foreign Labor Statistics
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