After Inception: Durability of Startup Jobs

Now that we've settled the argument whether startup firms create the most jobs in the economy (Yes, 100%), a common counter-argument needs some attention.  Do startup jobs last?  Critics say no.  But what does the data say?

Along comes doctoral candidate and Kauffman research analyst Michael Horrell and colleague Robert Litan with this new report, After Inception. Highlighted points here:

• Cohorts of firms started each year retain, on average, 80 percent of their initial total employment to age five.
• Older cohorts of firms exhibit increasingly higher employment retention rates over five years, but these rates are not substantially higher than those of new startup cohorts.
• Cohorts that start during a recession hire fewer people in the first few years following their birth, but they catch back up to the same levels of employment at age five.
• Prolonged recessions, on the other hand, appear to lower employment among cohorts. Cohorts at age five that had survived through portions of three recession years had roughly 10 percent less employment (as compared to their startup years) than cohorts of firms that encountered no recessions in their first five years.

Comments

[Talosaga]

I'm not sure if you take 'requests', but I thought it'd be interesting to see what percentage of total Research and Development is done by start upfirms, and what conclusions we could draw from this.

[Alex Tabarrok]

I was really expecting a movie tie in here.

[Jared]

Looking out further than five years, do the surviving firms exceed what they started with (e.g. in 2000 3 million jobs)? At what point does a cohort surpass 3,000,001+ jobs?

Since (taking e.g. year 2000) startups created 3 million jobs in the first year, and then 5 years later retained 2.4 million of them, is it accurate to say that after 5 years, net job creation of startups from the 2000 cohort was 1.8 million?

[Tim]

Alex, blame the marketing guys. Of course, I shamelessly copied the title. My take: the movie was not nearly as complex as everyone is making it out to be. The more I think of it, the more dull I found the plot. Action and acting were good, as was the pace. But ... enough already. Lost in the subconscious if you're too heavily sedated? There were some ham-handed plot drivers that were not hard science fiction. I liked it, but was expecting more of a puzzle.

Tal, good question, but it probably cannot be answered in a satisfactory way. What startups even distinguish R&D budgets from general salary? If anyone has researched this, I'd be just as curious as you to see the results.

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