Where has all the skewness gone ? The decline in high - growth ( young ) firms in the U . S . March 2015

The pace of business dynamism and entrepreneurship in the U.S. has declined over recent decades. We show that the character of that decline changed around 2000. Since 2000 the decline in dynamism and entrepreneurship has been accompanied by a decline in high-growth young firms. Prior research has shown that the sustained contribution of business startups to job creation stems from a relatively small fraction of high-growth young firms. The presence of these high-growth young firms contributes to a highly (positively) skewed firm growth rate distribution. In 1999, the difference in the growth rate of the firm growing at the 90 percentile and the 50 percentile of the growth rate distribution was about 31 percentage points. This gap was 16 percent larger than the growth rate difference of firms at the 50 and 10 percentiles. However, we show that the 90-50 differential fell substantially in the post-2000 period. By 2007, the 90-50 differential was only 4 percent larger than the 50-10, and it continued to exhibit a trend decline through 2011. Both the declining share of young firms and the declining propensity for young firms to be high-growth firms are contributing factors. In addition, key sectors have exhibited a sharp decline in positive skewness in the post-2000 period— specifically the high tech sector. This sector exhibited an increase in dispersion and skewness in firm growth rates during the 1990s before the sharp decline.