All grown up? Michael Anyadike Danes. Presentation at ERC Understanding Small Business Growth Conference 2015

1. E: m.anyadike-danes@aston.ac.uk
W: enterpriseresearch.ac.uk
Enterprise Research Centre
Annual Research Conference
Aston, February 2015

2. All grown up? The fate after 15 years
of the quarter of a million UK firms born in 1998
Michael Anyadike-Danes & Mark Hart
Aston Business School and Enterprise Research Centre

3. the agenda
• the field
• data sources and construction
• getting to know cohort98
• survival
• birth to age 15 by size-band
• year-to-year mobility by size-band
• growth trajectories and their slope
• what have we learned?

4. the field: firm growth
from recent surveys of the firm growth literature:
"Even though there has been sustained interest in growth
for almost 50 years, relatively little is known about this
phenomenon and much misunderstanding and confusion
surrounds it." Leitch et al Entrepreneurship Theory &
Practice, 2010
and,
"We wrap up by .. arguing in favour of [a] ... research
strategy, which emphasizes the need for solid empirical
work to first produce the ’stylized facts’ that theory can
then attempt to explain. At this stage, we consider that
research into the growth of firms could benefit greatly
from gathering of statistical regularities and ’stylized
facts’." Coad, The Growth of Firms, 2009

5. data sources & construction
1. sources
Inter-Departmental Business Register
(IDBR) is a ’live’ register updated for jobs
from HMRC (VAT and PAYE) and Business Register
Employment Survey
the BSD comprises extracts from ’snapshots’ of the IDBR
taken each March (1997 to 2013)
2. construction
focus on firm and job dynamics with firms linked year-to-year
by ID
appearance of first job ≡ birth of firm
dis-appearance of last job ≡ death of firm
private sector (defined by industrial activity)
focus here: cohort of private sector firms born in 1998

6. getting to know cohort98

7. cohort98, firms and jobs summary, birth to age 15
birth survivors age 15 summary statistics
at birth
firms ’000 239.6 26.2 26.2 survival ratio (%) 10.9
jobs ’000 1123.7 163.4 394.9 net job creation ’000 231.5
jobs/firm 4.69 6.25 15.09 growth ratio 2.41
Notes:
1. ’survival ratio’ is the ratio of firm numbers at age 15 to firm numbers
at birth
2. ’net job creation’ is the cohort jobs at age 15 less survivor jobs at birth
3. ’growth ratio’ is the ratio of jobs/firm at age 15 to jobs/firm in
survivors at birth

8. cohort98: jobs and firms, birth to age 15 (log scale)
(a) cohort98 jobs, all and age 15 survivors, and all firms ('000) (log scale)
year
jobsandfirms(th)(logscale)
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
20
55
150
400
1100
jobs
jobs surv
firms
(b) cohort98 jobs/firm, all and age 15 survivors (log scale)
jobs/firm(logscale)
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
1
2.5
7.5
20
55
jobs/firm
jobs/firm surv

9. cohort98:firm size distribution, birth and age 15,
shares by size-band,(%)
all at birth surv at birth surv at age 15
sharesbysize−band%
020406080100
from the bottom: 1–4; 5–9; 10-19; 20+

10. survival

11. cohort98:hazard ratios by age and size-band
(a) hazard ratios by age, size at birth
years since birth
hazard,ratio
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35 1−4 5−9 10−19 20+
(b) hazard ratios by current size
years since birth
hazard,ratio
1 2 3 4 5 6 7 8 9 10 12 14
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35 1−4 5−9 10−19 20+
at age
hazardratios

12. birth to age 15 by size-band

13. cohort98 age 15 survivors, Origin/Destination matrix
size-band at birth (rows) vs size-band age 15 (columns)
1–4 5–9 10–19 20+ all
(a)firms
1-4 15011 3973 1997 1248 22229
5-9 721 642 489 407 2259
10-19 196 180 226 334 936
20+ 84 55 91 508 738
all 16012 4850 2803 2497 26162
(b) shares of all (%)
1-4 57.4 15.2 7.6 4.8 85.0
5-9 2.8 2.5 1.9 1.6 8.6
10-19 0.7 0.7 0.9 1.3 3.6
20+ 0.3 0.2 0.3 1.9 2.8
all 61.2 18.5 10.7 9.5 100.0

14. cohort98 age 15 survivors, Origin/Destination matrix
net job creation (’000) & growth ratio (age15 ÷ birth)
by size-band at birth (rows) vs size-band age 15 (columns)
1–4 5–9 10–19 20+ all
(a) net job creation (’000)
1-4 6.5 18.6 22.7 91.6 139.3
5-9 -2.8 0.3 3.0 23.4 24.3
10-19 -2.1 -1.0 0.2 30.5 27.7
20+ -5.8 -1.8 -6.8 54.4 40.1
all -4.2 16.1 19.6 199.9 231.5
(b) growth ratio (jobs/firm)
1–4 5–9 10–19 20+ all
1-4 1.29 3.54 6.93 38.43 4.85
5-9 0.38 1.07 2.06 9.71 2.69
10-19 0.17 0.57 1.08 7.75 3.27
20+ 0.02 0.18 0.17 1.64 1.40
all 0.88 2.02 2.09 3.12 2.41

15. year-to-year mobility

16. cohort98 survivors to age 15: year-to-year-size-band mobility
t(data[1,3:17])
(a) no change
0.6
0.7
0.8
0.9
1
aa bb cc dd
t(data[5,3:17])
(b) change up
0
0.1
0.2
0.3
0.4 ab bc cd
t(data[11,3:17])
(c) change down
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0
0.1
0.2
0.3
0.4 ba ca cb da dc
at age
proportions

17. growth trajectories

18. cohort98 survivors to age 15: trajectories
by size-band at birth (average jobs/firm log scale) loess fit
age
jobs(logscale)
3
7
20
55
a: 1−4
0 5 10 15
b: 5−9
0 5 10 15
c: 10−19
3
7
20
55
d: 20+
a: 1−4 b: 5−9 c: 10−19 d: 20+

19. cohort98 survivors to age 15: slopes of trajectories
by size-band at birth (growth in jobs/firm %)
age
jobgrowth(%)
0204060
a: 1−4
5 10 15
−40−2002040
b: 5−9
−40−2002040
5 10 15
c: 10−19
−80−60−40−200
d: 20+
a: 1−4 b: 5−9 c: 10−19 d: 20+

20. what have we learned?

21. what have we learned?(1)
• cohort98 was born with about 250 thousand firms and
1 million jobs, by age 15, 90% of firms were dead and jobs
down to 400 thousand
• survival
the chance of death fell from around 25% at age 2 to less than
10% at age 15
firms larger at birth have a better chance of surviving
by age 15 firms that grew out of the smallest size-band had
half the chance of dying compared to that of firms which did
not grow out of the smallest size-band

22. what have we learned?(2)
• birth to age 15 by size-band
85% of age 15 survivors were born 1 – 4, by age 15 67% still 1
– 4
just 1248 grow from 1 –4 to 20+ (6% of 1 –4), but these are
half of all 20+ at age 15
20+ at age 15 account for 85% of net job creation, and those
born 1–4 about half the 20+ contribution
average jobs/firm expanded from 6 at birth to 15 by age 15, a
factor of 2.5
growth in jobs/firm is inversely related to size-band at birth,
with those born 1 – 4 expanding at twice the average rate

23. what have we learned?(3)
• year-to-year mobility by size-band
each year 80% to 90% of firms remain in the same size-band
most movement up or down is just one size-band
after age 5 about 10% move up and 10% move down each year
• growth trajectories and their slope
trajectories connecting a size-band at birth to a size-band at
age 15 are generally monotonic but their slopes vary
considerably
slopes of trajectory show most change up to age 5 – steepest
expansion/contraction
size-bands shrinking to 1–4 seem to display ’quadratic’ slope:
is this how firms die?
slopes of size-bands going to mid-size (5–9 and 10–19)
stabilise after age 5
some evidence of ’disturbance’ around age 11–13 especially
firms heading to 20+ : 2009 – 2011 (’great recession’?)

24. The statistical data used here is from the Office of National
Statistics (ONS) and is Crown copyright and reproduced with the
permission of the controller of HMSO and Queen’s Printer for
Scotland.The use of the ONS statistical data in this work does not
imply the endorsement of the ONS in relation to the interpretation
or analysis of the statistical data.