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Institute for Workplace Studies----------------- Professor Samuel B. Bacharach

School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies

Cornell University

16 East 34th Street, 4th floor---------------------- Stuart Basefsky

New York, NY 10016 -------------------------------Director, IWS News Bureau

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Small Business Administration (SBA)

Office of Advocacy

 

CROSSING THE EMPLOYER THRESHOLD: DETERMINANTS OF FIRMS HIRING THEIR FIRST EMPLOYEE [5 December 2013]

by Robert W. Fairlie

http://www.sba.gov/advocacy/7540/772191

or

http://www.sba.gov/sites/default/files/rs418tot.pdf

[full-text, 39 pages]

 

Research Summary

http://www.sba.gov/sites/default/files/rs418.pdf

 

 

Press Release 5 December 2013

Advocacy Report Explores Why a Firm Hires Its First Employee

http://www.sba.gov/advocacy/809/775551

 

[excerpt]

Job creation is paramount to America’s full economic recovery. How can job creation be encouraged? Since small businesses have historically created a disproportionately large share of new jobs, this research analyzes the factors that lead new businesses without employees to hire their first employee. This is a significant aspect of small business job creation. Given that about three in four small businesses do not have employees, these non-employer businesses present an important source of potential new jobs.

 

Table of Contents

Executive Summary.........................................................................................................................4

1. Introduction......................................................................................................................................6

2. Data..................................................................................................................................................8

The Kauffman Firm Survey.............................................................................................................8

GATE Experiment .........................................................................................................................10

3. Owner Characteristics and Hiring the First Employee?.................................................................11

Legal Form of Organization...........................................................................................................17

4. Business Milestones Associated with Taking the Leap from Owner to Employer........................19

Businesses with Positive Revenues ...............................................................................................23

Services and Other Industries ........................................................................................................25

5. Does Entrepreneurship Training Help Owners Hire Their First Employee?.................................27

Estimating Effects of Entrepreneurship Training on Hiring the First Employee...........................31

6. Conclusions....................................................................................................................................35

References......................................................................................................................................37

Appendix Tables ............................................................................................................................39

 

Figures and Tables

Figure 1: Rates of Hiring First Employee and Going Out of Business for Non-Employer Startups KFS 2004-2011......................................................................................................12

Table 1: Annual Hiring Rates of First Employee among Non-Employer Startups, KFS 2004-2011......................................................................................................................................13

Table 2: Cumulative Hiring Rates of First Employee among Non-Employer Startups, KFS 2004-2011 ............................................................................................................................14

Table 3: Owner Characteristics and Hiring Rates of First Employee among Non-Employer Startups, KFS 2004-2011.....................................................................................................15

Table 4: Regressions for Probability of Hiring First Employee, KFS 2004-2011......................................16

Table 5: Regressions for Probability of Hiring First Employee including Legal Form of Organization, KFS 2004-2011 .............................................................................................18

Table 6: Annual Rates of Hiring First Employee, KFS 2004-2011............................................................20

Table 7: Regressions for Annual Probability of Hiring First Employee, KFS 2004-2011 .........................22

Table 8: Regressions for Annual Probability of Hiring First Employee including only Businesses with Revenues, KFS 2004-2011........................................................................24

Table 9: Regressions for Annual Probability of Hiring First Employee in Service Industries, KFS 2004-2011 ....................................................................................................................26

Table 10: Regressions for Annual Probability of Hiring First Employee in Construction, Trade, Manufacturing, and Other Industries, KFS 2004-2011........................................................27

Table 11: Treatment/Control Comparison of Baseline Characteristics for GATE Experiment .................29

Table 12: Treatment and Control Groups’ Receipt of Entrepreneurship Training .....................................30

Table 13: Self-Reported Amount that Entrepreneurship Training Helped Recipients in Various Ways.....................................................................................................................................31

Table 14: Impact of Entrepreneurship Training on Hiring Employees for Non-Employer Business Owners at Baseline ...............................................................................................33

Table 15: Impact of Entrepreneurship Training on Business Ownership and Sales for Non-Employer Business Owners at Baseline...............................................................................34

 

Appendix Table 1: Industry Distribution of Non-Employer Startups in the Kauffman Firm Survey (2004) and the New Non-Employer Firms in Survey of Business Owners (2007) ..............39

Appendix Table 2: Industries and Hiring Rates of First Employee among Non-Employer Startups.................................................................................................................................39

 

 

 

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