NEWSRELEASE

For Release: January 7, 2005
Contact: John McDowell, (202) 205-6941
john.mcdowell@sba.gov
SBA Number: 05-01 ADVO
Press Kit

Study Shows Distribution Of Firm Growth Rates Differ From Previous Assumptions

More Firms Grow Slower, Faster Than Previously Thought

WASHINGTON, D.C. - The distribution of business growth rates is different from that previously assumed by economists. This is the central finding of a new paper released today by the Office of Advocacy of the SBA before the American Social Sciences Association in Philadelphia.

Conducted to better understand the dynamic nature of growth and decline of firms of all sizes, the report breaks new ground in understanding the United States economy. Based on the report’s findings, economists may want to reevaluate their econometric tools when modeling the growth of businesses.

“This research will provide economists and policy makers with new data and new tools to help them understand how our economy works,” said Dr. Chad Moutray, Chief Economist for the Office of Advocacy. “By using new data sets, economists are now able to provide solid grounding for policy proposals.”

Written by Daniel Teitelbaum and Robert Axtell representing NuTech Solutions, with funding from the Office of Advocacy, Firm Size Dynamics of Industries: Stochastic Growth Processes, Large Fluctuations, and the Population of Firms as a Complex System, provides three main findings:

· Firm growth rates are not normally distributed, but have strong “tails” among slower and faster growing firms,
· Firm growth rate distributions do not differ much by type of industry, and
· Firm growth rates do not depend on the size of the establishments studied.

The Office of Advocacy, the “small business watchdog” of the government, examines the role and status of small business in the economy and independently represents the views of small business to federal agencies, Congress, and the President. It is the source for small business statistics presented in user-friendly formats and it funds research into small business issues.

For more information and a complete copy of the report, visit the Office of Advocacy website at www.sba.gov/advo

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Created by Congress in 1976, the Office of Advocacy of the U.S. Small Business Administration (SBA) is an independent voice for small business within the federal government. Appointed by the President and confirmed by the U.S. Senate, the Chief Counsel for Advocacy directs the office. The Chief Counsel advances the views, concerns, and interests of small business before Congress, the White House, federal agencies, federal courts, and state policy makers. Economic research, policy analyses, and small business outreach help identify issues of concern. Regional Advocates and an office in Washington, DC, support the Chief Counsel’s efforts. For more information on the Office of Advocacy, visit www.sba.gov/advo, or call (202) 205-6533.