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December 2008, Vol. 131, No. 12
The births and deaths of business establishments in the United States
Akbar Sadeghi
The role of entrepreneurs in the American economy is legendary. One of the unique characteristics of the U.S. economic system is the freedom to start a business relatively easily and quickly. Indeed, one of the engines of growth is the employment and wages generated by new businesses. It is also an economic reality that businesses close frequently. The interplay of business births and deaths is not fully understood with the existing range of economic measures available from U.S. statistical agencies.
The story of entrepreneurship also entails a neverending search for new and imaginative ways to combine the factors of production into new methods, processes, technologies, products, or services. These efforts lead to the growth of new businesses, the decline of less productive ones, and the reallocation of resources from less profitable businesses and establishments to more profitable ones. This process is often referred to as “creative destruction,” a concept popularized by the economist Joseph Schumpeter.1
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Footnotes
1 J.A. Schumpeter, Capitalism, Socialism, and Democracy (New York, Harper, 1975 [originally published in 1942]), pp. 82–85.
Business Employment Dynamics
Quarterly Census of Employment & Wages
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