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  • 8/3/2019 US Bureau Of Labor Statistics (BLS) Report: High Failure Rate For Silicon Valley Startups In 2000

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    16 Monthly Labor Review September 2011

    Silicon Valley Businesses Born in 2000

    Tian LuoandAmar Mann D

    urg th t 1990 2000, urry o vtmt Itrt thoogy omp gv r to

    th ot-om u. T urh t pk o Mrh 10, 2000, whth NASDAQ (ormry th Nto A-oto o Surt Dr AutomtQuotto) tt v o 5,132, out4 tm hghr th t h 3 yr r-

    r. A th gp tw th vuto th prorm o my omp -m pprt, Itrt tok tum. Tnasdaq rh t ow pot o Otor 9,2002, wh t to 1,114, roughy o-thth v t t pk. Grou zro urgth pro o oom ut w SoVy, r tr rou S

    Jo, Cor. T r w hom to myo th Itrt- omp tht mto typy th ot-om rzy o th r.

    Rgr th go tr o tho-

    og ovto,1

    So Vy rvprogou mout o vtur pt -

    vtmt th t 1990 2000, gvgr to thou o w u thr. Vtur pt vtmt rhthr hght v 2000, wh $32.3 -o w pump to So Vy.2 (Shrt 1.)T rt xm th ohort o So

    Vy hgh-th u or m th

    Tian Luo is an economistin the San Franciscoregional ofce, Bureauof Labor Statistics; AmarMann is a supervisoryeconomist in the sameoce. Email: [email protected] or [email protected]

    Survival and growth o Silicon Valleyhigh-tech businesses born in 2000

    High-tech businesses born in 2000 in the Silicon Valleyhad below-average survival and employment growth rates

    rom 2000 to 2009, except or the year 2000, during whichsurviving rms o the cohort experienced signicant growththat carried over or 8 years; year-specic and industry-mixefects, however, weaken the latter conclusion

    2000 vtmt rzy, urg whh thot-om u rh t px. T rttrk th 2000 hgh-th ohort throughth o 2009, pro ompg otoy th ruup o th ot-om oom,ut o th mv hgh-th owturtht oow th ot-om ut, w th ro tht g Dmr 2007.Frt, th 2000 ohort hrtrt r

    pro, ug th umr o u jo rt, tgorz y hgh-thutry trtup z. T, th prorm- o th 2000 hgh-th ohort, mur trm o urvv rt mpoymtgrowth, ompr wth th prorm o typ hgh-th ohort. o ow or rompro o th two ohort, tor -ug th u or ur o hgh-thtrtup, uh yr-p utry-mx t, r xm. I othr wor,th rt r how th rtv u

    or ur o th ohort w u ytor uh th rgr u y th y o promt utr thohort. Fy, th 2000 hgh-th ohortmpoymt growth rt r xm yt utry to how whh utr

    wr mot or t uu ovr th xt.

    So Vy h rputto or rthoog ovto h

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    Monthly Labor Review September 2011 17

    Chart 1. Investment in venture capital or Silicon Valley frms, 19952009

    Billionso dollars

    Billionso dollars

    35

    30

    25

    20

    15

    10

    5

    01995 1997 1999 2001 2003 2005 2007 2009

    35

    30

    25

    20

    15

    10

    5

    0

    SOURCE: Money Tree ReportTM, PricewaterhouseCoopers and the National Venture Capital Association.

    to moy th opt o rtv truto, or-g to whh omp rty rvt thmv trtup trprur hg th

    u. T omptto ott hurg h y vovg p o hgh-th omp th So Vy, whh rm mog th rgt mot ut hgh-th tr th wor. Ty prt hr w prov mur o th tur-ovr xpr y hgh-th trtup th Vy o tor tht u th urvv growth o womp, wh o g th t o th 2000hgh-th ohort.

    Data

    T t prt th rt r o mro-t xtrt rom th Buru o Lor Sttt (BLS, thBuru) Qurtry Cu o Empoymt Wg(QCEW) progrm, whh h ormto o roughy 9.1mo U.S. u thmt th pu pr-

    vt tor. T t r omp o urtry or Stt umpoymt ur tx purpo rt umtt to th Buru. T QCEWprogrm Fr-Stt ooprtv vtur tw th Buru th Stt Workor Ag. T progrm ot

    ormto o pproxmty 98 prt o jo thUt Stt.T op o th tuy prt ompr x out3

    tht mk up wht kow th So Vy 11utr4 hgh th org to th 2007North Amr Iutry Cto Sytm (NAICS)5o o. T rt ou o t mt t th u- or rm v. Eh u my oprt goto or hv mutp thmt rt r-. Frm r t y thr Empoyr IttoNumr, whh ggrgt th vu u t-hmt o h mpoyr. Troughout wht oow, u or urvvor , t y gv tm, tt o o t thmt tv h potvmpoymt th t t tht tm. By to,

    or u to or prt o th 2000 rthohort, t ot xt th t or hv potvmpoymt pror to th yr 2000. T to oth rth rt th thmt urvv mth-ooogy vop or Bu Empoymt Dym(BED) t.6

    Athough th rt u prmry th 2000 rthohort, QCEWmrot o u rth, th, mpoymt tw 1991 2009 r u to otrut , or typ, ohort. T typ ohort rt o

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    Silicon Valley Businesses Born in 2000

    18 Monthly Labor Review September 2011

    urvv mpoymt growth r ompr wth rtor th 2000 ohort. Bu tht wr ur or thtmrg wth othr rm m up out 1.1 prt o u ovr th 19912009 orvto wow,ut r xu rom th y orr to vo kw-

    g th rut or mpoymt growth urvv rt.7

    2000 birth cohort

    I th yr 2000, out 2,600 hgh-th u wror th So Vy, g ovr 27,000 jo to tho oomy. T vrg rth z o th hgh-thu w 10 mpoy; howvr, mpoymt th wy orm u rg rom 1 to morth 1,000.

    Nry h o So Vy hgh-th trtup 2000 wr omputr ytm g rt rv-

    , mor th o-urtr o u wr Itrt, tommuto, t prog. Bu- th two utr o m up 62 prt oth ohort mpoymt th rt yr. (S t 1.)

    Nry 91 prt o w hgh-th u th 2000 wr rv-provg u, wh oy 5 pr-t wr goo proug th rmg o wru oprtg mutp utr. I trm o wmpoymt, howvr, goo-proug u m up20 prt o th tot, wh rv-provg um up 76 prt o th tot, wth th rmr ou mutp utr. Othr tu o hv how tht

    goo-proug rm t to hv hghr v o tmpoymt th rv-provg o.8

    T oowg tuto how tht, though u- whh trt wth our or wr mpoy m up 64prt o w hgh-th rm 2000, th mrrm out or oy 11 prt o w hgh-th m-poymt rom th 2000 ohort rth yr:

    Percent distribution

    Birth size Businesses Employment

    4 or wr (m)............ 63.8 11.45 to 49 (mum)............ 32.3 39.0

    50 or mor (rg)........... 3.9 49.6

    By otrt, rgr rm or wth 50 or mor mpoyout or jut 4 prt o u, ut m uph o w mpoymt 2000.T rt o th rt trk th ohort o out 2,600

    So Vy omp or 2000 rom tht yrthrough th urtr o 2009. A w how,hg th ohort wr grty t y yr-p utry-mx t.

    Employment and survival

    Amog th u th 2000 ohort o hgh-thtrtup, mpoymt grw rom out 27,000 2000 to pk o ry 34,500 2001. (S hrt 2.) Dptth growth or trtup, xtg hgh-th rm hpproxmty 16,000 jo tht yr.9

    I 2002, th ohort h t tpt mpoymt, og ovr 11,500 jo, mor th th th g 2001. T yr 2002 o w th tpt So Vy tr hgh-th tor.10 T2000 ohort mpoymt o otu huut yr, y th o 2009 th ohortmpoy wr th 9,400 mpoy, oy 34 prt oth t mpoymt v 2000.T mjorty o hgh-th u or 2000

    ot urvv pt 2003. (S hrt 2.) By 2009, wr th 1

    5 hgh-th trtup or 2000 wr t u.T 2000 ohort hght u urvv rt, 93 prt,ourr t rt yr. T g ott wththo rom prvou tu, whh o how tht u- gry hv hghr urvv rt thr rt

    yr. T ro tht w u ot hv ought rrv to urvv or t t 1 yr.11 Gv thrg poo o vtur pt g tht w vto yr-2000 trtup, t urt tht thy wr to urvv th rt yr , ot th prgprgrph, v jo. T owt u urvv rtor th 2000 ohort wr xpr 2002 2003

    (thr thr ourth yr, rptvy). Btw 2004 2008 (thr th through th yr), u ur-

    Table 1. Distribution o businesses and employment among SiliconValley high-tech startups, by major industry, 2000

    [In percent]

    Industry Business Employment

    All business and employment startups 100.0 100.0

    Computer systems design and relatedservices 46.6 36.0

    Internet, telecommunications, and dataprocessing 25.7 25.9

    Architecture and engineering services 11.1 5.9

    Software publishers 4.5 5.4

    Scientic research and development services 3.1 2.9

    Semiconductor and electronic componentmanufacturing 2.8 11.7

    Electronic instrument manufacturing 1.2 2.6

    Computer and peripheral equipmentmanufacturing .5 4.3

    Communications equipment manufacturing .5 .9

    Pharmaceutical and medicine manufacturing .2 .1

    Aerospace product and par ts manufacturing .0 .0

    Businesses operating in multiple industries 3.9 4.4

    SOURCE: U.S. Bureau of Labor Statistics; Quarterly Census of Employ-ment and Wages.

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    Monthly Labor Review September 2011 19

    Chart 2. Employment and cumulative survival o 2000 birth cohort o Silicon Valley high-tech frms, 20002009

    40,000

    35,000

    30,000

    25,000

    20,000

    15,000

    10,000

    5,000

    0

    EmploymentSurvival rate

    (percent)

    2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

    SOURCE: U.S. Bureau of Labor Statistics, Quarterly Census of Employment and Wages.

    100

    90

    80

    70

    60

    50

    40

    30

    20

    10

    0

    Total employment

    Yearly survival

    Cumulative survival

    vv rt wr gry rg. T U-hp urvtr y th u urvv rt o So Vy 2000

    hgh-th ohort ott wth mr pttr ou othr tu.12Amog th hgh-th omp rom th 2000 ohort

    tht urvv, mpoymt h, o vrg, ou y2009. Lk th rt, prvou tu o u urv-

    vorhp growth hv how tht urvvg ompt to grow thr mpoymt.13 (S hrt 3.) I thrt yr, urvvg rm grw thr vrg mpoymtrom 10.4 to 14.4 mpoy pr rm. Foowg th -t urg, 2002 vrg mpoymt urvvg rmropp to ry th m v thr trtup yr o2000. Atr 2003, howvr, urvvg rm h, o vr-

    g, ott mpoymt growth, y 2009 thy h vrg o 20.4 mpoy pr rm.

    Both urvv mpoymt growth rt vrgrty wth th rth z o th rm, g oorv prvou tu.14 (S hrt 4.) Survvgrm wth m rth z h muh rgr mpoymtgrowth, ut owr urvv rt, th rm o rgr rthz. Dpt urvv rt o oy 17 prt, mu tht urvv vrg ry thror thr mpoymt ovr th pro xm.

    A rut o th growth mog urvvor, m rm, whh m up 11.4 prt o th 2000 ohort t

    mpoymt v, out or 23.4 prt o tot m-poymt y 2009. (S hrt 5.) I otrt, u org rth z xpr hghr urvv rt (29 pr-t), ut tho whh urvv t to otrt thrmpoymt v, rutg o mpoymt hr.

    T otruto to 2000 ohort mpoymt rom rgrm r rom 49.6 prt 2000 to 38.5 prt 2009. For u o mum rth z, th hr o2000 ohort mpoymt o r, rom 39.0 prtto 38.1 prt. Howvr, vrg mpoymt urvvgmum-z u grw y 50.1 prt.

    Comparative analysis

    Overview o methodology. T 2000 ohort xpror v o ttrto, v y th rop urvvor mpoymt. So Vy, howvr, r-ow or th rto o w omp oowg thtruto o o o.15 o gug whthr th urvv growth orv or th 2000 ohort orm oruuu, ompro m tw th rtvprorm o 2000 hgh-th trtup wth tht o wht

    w mght th typ or vrg ohort.

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    Silicon Valley Businesses Born in 2000

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    SOURCE: U.S. Bureau of Labor Statistics, Quarterly Census of Employment and Wages.

    25

    20

    15

    10

    5

    0

    25

    20

    15

    10

    5

    02000 2001 2002 2003 2004 2005 2006 2007 2008 2009

    Number ofemployees

    Number ofemployees

    Chart 3. Average employment in 2000 birth cohort o Silicon Valley high-tech frms, 20002009

    Chart 4. Index o employment in 2000 birth cohort o Silicon Valley high-tech frms, by birth size, 20002009

    500

    400

    300

    200

    100

    0

    500

    400

    300

    200

    100

    0

    Index

    (2000 = 100)

    Index

    (2000 = 100)

    2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

    (17.5)

    (17.2)

    (29.0)

    Large

    Small

    Medium

    NOTE: Cumulative survival rates, in percent, from 2000 to2009 are shown in parenthesis.

    SOURCE: U.S. Bureau of Labor Statistics, Quarterly Census ofEmployment and Wages.

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    Monthly Labor Review September 2011 21

    Chart 5. Proportion o employment and frms in 2000 cohort o Silicon Valley high-tech frms, by birth size,2000 and 2009

    PercentPercent

    100

    90

    80

    70

    60

    50

    40

    30

    20

    10

    0

    100

    90

    80

    70

    60

    50

    40

    30

    20

    10

    0Firms

    2000Employment

    2009Firms Employment

    SOURCE: U.S. Bureau of Labor Statistics, Quarterly Census of Employment and Wages.

    4

    32

    64

    50

    39

    32

    62

    39

    38

    23

    11

    6

    o otrut th typ ohort, th oowg tortht ou t th urvv growth o hgh-th

    rm r or: (1) th tur y o u,(2) yr-p x t, (3) utry (mx) -t. T y o u ptur th vrg ur-

    vv mpoymt growth rt uto o g. Iothr wor, th y ptur wht, o vrg, rth urvv mpoymt growth rt o hgh-thrm t rt tm thr v. Nxt, yr-pt ptur th mrooom mpt o prtur

    yr o th rt o urvv growth. For xmp, rm tht or or tht xt urg tm o o-om proprty w gry hv ttr propt tho tht or or tht uto urg owow.

    Fy, th utry tor ptur how urvv growth rt vry wth r th ohort utrymx. Comp rt utr hv gtr thr xpt urvv mpoymtgrowth rt. For xmp, o wou xpt ohort thth hgh otrto o omp th rhttur grg utry to hv gry hghr urvvrt, u rhttur grg rm t to mor t th tho othr hgh-th utr.A thr o th orgog tor mut or or

    r vuto o th prorm o th 2000 ohort.(S th ppx or mthooog t.)

    Atr orrtg or th thr tor tvyvg th pyg , th ru, or th r -tw th tu urvv or growth rt o th rth ohort th um o th thr tor, prov too th upror or ror prorm o rth ohort.Aothr wy to trprt th prt rt tht t howhow typ ohort wou hv prorm, trm ourvv growth, t h or 2000 wth thm utry mx tht ppr th 2000 ohort.

    Results

    Employment. O vrg, urvvg So Vy

    hgh-th rm tht w or tw 1991 2009 h xpt mpoymt growth o 130 prt ovr thrt 10 yr o t . (S hrt 6.) T 2000 ohort oSo Vy hgh-th omp tht urvv to 2009h lowervrg mpoymt growth o 94.5 prtovr th rt 10 yr o thr y. O th oth ompro o, th uu yr-2000 trtup

    wr upr trm o growth or ot ourh muh mght hv xpt.T ouo o ot ppr trog, though, wh

    largemediumsmall

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    Silicon Valley Businesses Born in 2000

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    240

    220

    200

    180

    160

    140

    120

    100

    80

    NOTE: Calendar years refer to 2000 cohort; ordinal years refer torms born between 1991 and 2009.

    240

    220

    200

    180

    160

    140

    120

    100

    80

    Chart 6. Index o employment growth o surviving frms born between 1991 and 2009 and surviving frmsrom the 2000 cohort

    Index (2000or year 1 = 100)

    Born between 1991 and 2009 (life-cycle eects)Life-cycle eects + year eectsLife-cycle + year eects + industry mix2000 cohort

    2000 or 2001 or 2002 or 2003 or 2004 or 2005 or 2006 or 2007 or 2008 or 2009 orYear 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

    SOURCE: U.S. Bureau of Labor Statistics, Quarterly Census of Em-ployment and Wages.

    Index (2000or year 1 = 100)

    yr utry-mx t ovr th 20002009 pro r

    or. Ajutg or ooug t rv thturvvg rm th 2000 ohort grw t rt mr totht xpt rom th thort, or typ, ohort. (Shrt 6.) Tu, thort urvvg rm or 2000

    wth th m utry mx th 2000 rth ohort wouhv t mpoymt grow y 93.6 prt, mr toth 2000 ohort 94.5-prt growth rt.T 2000 ohort h trogr-th-xpt growth

    t rt yr: urvvg rm grw thr mpoymt y 37prt, ompr wth xpt rt o growth o 22prt or rm rom th typ ohort (g, tkg

    yr utry-mx t to out). O o th

    tor tht otrut to th 2000 ohort ry m-poymt g my hv th mmmoth mouto vtur pt vtmt So Vy urg rou th yr 2000. Dot-om-r trtup r ot -ot wth hvg hgh ur rt: how uky thyur through pt rrv or, vr, omgprot.16 T uuu pk th ohort mpoymt 2001 my hv u to trtup urg throughthr vtor pt rrv.17

    A typ ohort ujt to th m yr u-

    try-mx t th 2000 ohort tuy wou hv

    gg th 2000 ohort trm o mpoymt growththrough mot o th . A mpoymt hok toth 2000 ohort ourr 2009, wh urvvg rmotrt, rthr th oowg th xpt pttr ogrowth, rpo to th ro tht took ho moghgh-th omp. T hok th x o m-poymt growth or th 2000 ohort th thortohort to ovrg.T y how tht, tr 10 yr, th 2000 ohort

    prorm out w wou xpt, oowgjutmt or oth yr-p utry-mxtor. T potv mpt o mpoymt growth u

    to th ohort utry mx wr mor th ot ygtv yr-p t, whh mp growthpropt or hgh-th omp or 2000.

    Survival. Appyg th mthooogy r thppx o to th vopmt o urvv rt orth thort, or typ, So Vy ohort. Aout 28prt o typ ohort o hgh-th rm urvv pt9 yr; howvr, oy 17.1 prt o th 2000 ohorturvv tht og. (S hrt 7.)

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    Monthly Labor Review September 2011 23

    Atr jutmt or yr-p t, howvr, thurvv rt o th typ ohort ovrg towr thto th 2000 ohort, roppg to 18.7 prt. T gt tht typ ohort wr or 2000

    wr ujt to th mrooom t o yr 2000

    to 2008, 18.7 prt o tht ohort wou hv urvvto 2009. Ag utry mx r to th jutrt y v owr urvv rt o 16.4 prt orth typ ohort. T 16.4-prt gur th rt thtjut or kow xogou tor tht t urvv.Aothr trprtto o th rt tht t r ththort urvv o typ ohort or 2000, u-

    jt to th 2000-to-2008 t, hvg th mutry mx th 2000 ohort. I ompro, th 2000ohort urvv rt tr yr 9 w 0.7 prt hghrth th thort urvv rt.

    Ity, urvv rt or oth th 2000 ohort th typ ohort wr ot mrky rt rom ur-

    vv rt ou or othr utr yr: othrtuy ou tht urvv rt or rv-provg goo-proug utr rg rom 19 prt to 26prt ovr th rt 9 yr o thr tm.18

    Uk th mpoymt growth y, whh howoppot t u to th yr utry-mx tor,

    100

    90

    80

    70

    60

    50

    40

    30

    20

    10

    0

    100

    90

    80

    70

    60

    50

    40

    30

    20

    10

    0

    Chart 7. Cumulative survival rate o frms born between 1991 and 2008 and frms rom the 2000 cohort

    Percentsurviving

    Birth 2000 or 2001 or 2002 or 2003 or 2004 or 2005 or 2006 or 2007 or 2008 orYear 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9

    NOTE: Calendar years refer to 2000 cohort; ordinal years refer torms born between 1991 and 2008.

    Percent

    surviving

    SOURCE: U.S. Bureau of Labor Statistics, Quarterly Census ofEmployment and Wages.

    Born between 1991 and 2008 (life-cycle eects)Life-cycle eect + year eectsLife-cycle eect + year eects + industry mix2000 cohort

    y o urvvorhp rv tht oth yr -utry-mx tor t hw or th 2000 ohort.St, gv th rg mout o vtur pt gotg rou So Vy urg th ry prt o th, t omwht urprg tht hgh-th trtup

    th 2000 ohort ot r ory ttr ththo th typ ohort. (T tuy ot yzhow w th typ ohort wou hv prorm, gvth wpr vty o vtur pt 2000.)Wh umutv urvv rt ow or y o

    th og-trm urvvorhp o ohort, th urvv rt oprvou yr urvvor ow or vuto o ur-

    vv rt trvg yr. (S hrt 8.) For th 2000ohort, urvv rt wr owr th tho o th typohort vry yr xpt or yr 9. Both th typohort th 2000 ohort xht U-hp pttr(th typ ohort U ttr) yry urvv, r-ut tht ott wth g ot prvourrh o trtup ro rt utr. Not otht, wh th 2000 ohort yry urvv rt gr-y ow tho o th typ ohort, th ttr rtovrg towr tho o th 2000 ohort wh orrtor yr utry-mx t. T t r motvt urg th 2001-to-2003 tmrm, wh m-

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    Silicon Valley Businesses Born in 2000

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    2000 or 2001 or 2002 or 2003 or 2004 or 2005 or 2006 or 2007 or 2008 orYear 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9

    Chart 8. Survival rate o previous years survivors or frms born between 1991 and 2008 and frms romthe 2000 cohort

    100

    95

    90

    85

    80

    75

    70

    Born between 1991 and 2008 (life-cycle eects)Life-cycle eect + year eectsLife-cycle eect + year eects + industry mix2000 cohort

    100

    95

    90

    85

    80

    75

    70

    NOTE: Calendar years refer to 2000 cohort; ordinal years refer torms born between 1991 and 2008.

    SOURCE: U.S. Bureau of Labor Statistics, Quarterly Census of Em-ployment and Wages.

    rooom t grty pr th typ ohortyry urvv rt to v mr to tht o th 2000ohort. Yr-p mrooom t py thrgt ro mpg ot oy urvv rt, ut o (how rr) mpoymt growth, or th 2000 ohorto So Vy hgh-th trtup.

    Industry employment perormance

    T prvou to xm mpoymt urvv th 2000 ohort typ ohort. T toyz th 2000 ohort o or r tot m-poymt growth ro utr. Empoymt growtho hgh-th u vr grty y utry. (St 2.) Btw 2000 2009, mpoymt growth

    vrou hgh-th utr or th ohort rg rom r o 61 prt to o o mpoymt utry.

    Computer systems design. Mor th 46 prt o hgh-th u or 2000 wr th omputrytm g utry. (S t 1.) Athough th -utry h th rgt tot mpoymt oth 2000 2009, ry 7,000 jo wr h y th utry 2000ohort urg tht pro.

    Internet, telecommunications, and data processing. T I-trt, tommuto, t-prog u-tr group w th o-rgt hgh-th utry th 2000 ohort rpt o oth th umr o wu th umr o w mpoy. O th7,000 mpoymt rth th utry 2000, wrth 1,200 wr t 2009 rom urvvg rm. Tutry, mor th y othr, w hom to my o th-ommr trtup tht m to ymoz th xo th ot-om oom.19

    Architecture and engineering services. T rhttur grg rv utry h th thr-rgt um-r o rth 2000, ut h out vrg mpoymtttrto. S 2000, th utry h o o th

    trogt tt growg r th to hgh-th ptur, ut h grow t ow-vrg rt thSo Vy.20

    Goods-producing industries. Hgh-th goo-prougutr r hrtrz y owr umr o rth,ut rgr rm z. Tu, though goo-proug(muturg) utr m up oy 5 prt o rth, thy out or 20 prt o w mpoymt.(S t 1.) Empoymt growth vr ro goo-

    Percentsurviving

    Percentsurviving

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    Monthly Labor Review September 2011 25

    Table 2. Employment growth o Silicon Valley high-techbusinesses, by industry, 20002009

    Industry

    Total employment

    Percentchange2000 2009

    All businesses 27,163 9,159 66.3

    Computer systemsdesign and relatedservices 9,770 2,793 71.4

    Internet, telecom-munications, and dataprocessing 7,045 1,161 83.5

    Semiconductor andelectronic componentmanufacturing 3,168 914 71.2

    Architecture and engi-neering services 1,601 554 65.4

    Software publishers 1,454 420 71.1

    Computer and periph-

    eral equipment manu-acturing 1,172 975 16.8

    Scientic research anddevelopment ser vices 784 195 75.1

    Electronic instrumentmanufacturing 717 155 78.4

    Communications equip-ment manufacturing 231 0 100.0

    Pharmaceutical andmedicine manufactur-ing (1) (1) (1)

    Aerospace product andparts manufacturing (1) (1) (1)

    Businesses operating

    in multiple industries 1,195 1,927 61.21 Data do not meet BLS or State agency disclosure standards.

    SOURCE: U.S. Bureau of Labor Statistics, Quarterly Census of Employ-ment and Wages.

    proug utr, wth u ommutoupmt, moutor, tro trumtmuturg xhtg ow-vrg mpoymtgrowth tho omputr prphr upmtmuturg howg vor mpoymt growth.

    Multiple industries. Bu oprtg mutp

    hgh-th utr wr th oy u hghth tht h, o vrg, mpoymt growth tw2000 2009. T u t to ghtyrgr th u oprtg oy g u-try, tor tht ou hp xp thr hghr mpoy-mt growth.21 O rth mog hgh-th utr 2000, mpoy o u mutp utrm up 4.4 prt o mpoymt. (S t 1.) By2009, mpoymt th u out or 21.0prt o th ohort tot mpoymt.

    A FIRS GLANCE, HE SURVIVAL AND EMPLOYMENgrowth ptur or th 2000 rth ohort ppr k,

    wth oy 18 prt o hgh-th u urvvg, mpoymt g y 66 prt, y 2009. Noth-, tr jutmt or yr-p utry-mx

    t, th ohort to hv h tguhr rom hgh-th rm xtg rom 2000 to2009 rgr rt o urvv growth. O uuhrtrt, howvr, w th 2000 ohort ormyhgh mpoymt growth th rt yr o u, rut tht my rt to th rg mout o trtupu v to om hgh-th omp urg th1998-to-2000 tmrm.

    Notes

    ACKNOWLEDGMEN: T uthor thk Dv , Dv H, Rhr Cyto rom th BLS Of o Empoymt Um-poymt Sttt, Rhr Crr, Stv Cohr, Jy Mou, Mh Dom rom th BLS Of o F Oprto, orthr thoughtu ommt, rvw, gu.

    1 Ro C. DVo, Kv Kow, Arm Brou, Bj-m Yo, North Amr Hgh-h Eoomy: T Gogrphy oKowg-B Iutr, Exutv Summry (St Mo,ca, Mk Ittut, o t), p. 4, http://www.milkeninstitute.org/pdf/NamericaHiTechExecSmmry_Final.pdf (vt Spt. 15,2011).

    2 PrwtrhouCoopr th Nto Vtur Cpt A-oto, MoneyTree Report, https://www.pwcmoneytree.com/mtpublic/ns/nav.jsp?page=historical (vt Spt. 15, 2011).

    3 T x So Vy out r Am, Cotr Cot, SFro, S Mto, St Cr, St Cruz.

    4 T 11 utr r omputr prphr upmt mu-turg; omputr ytm g rt rv; mou-tor tro ompot muturg; Itrt, tommu-to, t prog; otwr puhr; t rrh vopmt rv; tro trumt muturg; rh-ttur grg rv; ommuto upmt mu-turg; phrmut m muturg; ro-p prout prt muturg. T pproh tk o D Hkr, Hgh-th mpoymt: NAICS- upt, Monthly Labor Review, Juy 2005, pp. 5772, http://www.bls.gov/opub/mlr/2005/07/art6full.pdf(vt Spt. 15, 2011).

    5 T North Amr Iutry Cto Sytm (naics)group thmt to utr o th o th tvt

    whh thy r prmry gg.6 S Akr Sgh, T rth th o u t-

    hmt th Ut Stt, Monthly Labor Review, Dmr2008, pp. 318, http://www.bls.gov/opub/mlr/2008/12/art1full.pdf(vt Spt. 15, 2011); Jm R. Sptzr, T Cotruto oEthmt Brth Dth to Empoymt Growth, Journalo Business & Economic Statistics, Jury 2000, pp. 11326. Nto Stt-v t o thmt urvv r v throughth bls bed progrm or mjor utr, http://www.bls.gov/bdm/bdmage.htm (vt Spt. 15, 2011) http://www.bls.gov/opub/ils/summary_10_09/younger_older_business_establishments.htm

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    Silicon Valley Businesses Born in 2000

    26 Monthly Labor Review September 2011

    (vt Spt. 15, 2011).7 A mr u trtmt o t ppr Amy E. Kup,

    Survv ogvty th Bu Empoymt Dym t,Monthly Labor Review, My 2005, pp. 5056, http://www.bls.gov/opub/mlr/2005/05/ressum.pdf(vt Spt. 15, 2011).

    8Ibid., p. 54.

    9 Amr M Luo, Crh root: So Vyhgh-th mpoymt wg, 200008,Monthly Labor Review,

    Jury 2010, pp. 5973, http://www.bls.gov/opub/mlr/2010/01/art3full.pdf(vt Spt. 15, 2011).

    10 T tor ot 84,500 jo 2002. (S M Luo, ibid.)11 S Jo Brur Ruo Shur, Orgzto Mort-

    ty: T Lt o Nw Ao,Administrative Sci-ence Quarterly, Sptmr 1990, pp. 53047; Mrk Fhm D A. Lvth, Hoymoo th Lty o Ao:A Nw Prptv o Durto Dp So Org-zto Rtohp,Academy o Management Review, Apr 1991,pp. 44268.

    12 S Brur Shur, Orgzto Mortty; Jo

    Popk, Business Survival Rates by Age Cohort o Business (U.S. Dprt-mt o Commr, Sm Bu Amtrto, 2001).

    13 Amy E. Kup Mr C. Pzz, Bu EmpoymtDym t: urvv ogvty, II, Monthly Labor Review,Sptmr 2007, pp. 310, http://www.bls.gov/opub/mlr/2007/09/art1full.pdf(vt Spt. 15, 2011).

    14 S Dv S. Ev, T Rtohp Btw Frm Growth,Sz, Ag: Etmt or 100 Muturg Iutr, Journalo Industrial Economics, Ju 1987, pp. 56781, t o Atr-tv Tor o Frm Growth, Journal o Political Economy, Augut

    1987, pp. 65774; Rjhr Agrw Dv B. Aurth, DoEtry Sz Mttr? T Impt o th L Cy hoogy oFrm Survv,Journal o Industrial Economics, Mrh 2001, pp. 2143; Dv B. Aurth t Mhmoo, T Rt o HzrCorotg Nw Frm Pt U.S. Muturg,Review oIndustrial Organization, vo. 9, o. 1, pp. 4156, Nw Frm Sur-

    vv: Nw Rut Ug Hzr Futo, Review o Economics andStatistics, Frury 1995, pp. 97103.15 Juu Zhg, High-tech Start-ups and Industry Dynamics in Silicon

    Valley (S Fro, Pu Poy Ittut o Cor, 2003); py p. 4.

    16 Mh Wo, Burn Rate: How I Survived the Gold Rush Years onthe Internet(Nw York: Smo Shutr, 1998), rot p.

    17 Mh S. Mo, Hgh-h Iutry It th Souto toth Ro,Money (abc Nw, Aug. 14, 2009), http://abcnews.go.com/Business/Technology/story?id=8322044&page=1 (vtSpt. 15, 2011).

    18 Joh Bw Guy Gty,Innovation Strategies and Perormancein Small Firms (Ottw, Sttt C, 2003); py p. 43.

    19 Mthw Ho Stv Lkrt, 10 Yr Atr: A LookBk t th Dotom Boom But, Weekly Wellness Magazine, F.17, 2010, http://www.wired.com/magazine/2010/02/10yearsafter/all/1 (vt Spt. 15, 2011).

    20 M Luo, Crh root ( py p. 66).

    21 Som tu hv ou potv orrto tw rm z,o th o h, urvv rt mpoymt growth, o thothr. (S, or xmp, Agrw Aurth, Do Etry SzMttr? Ev, T Rtohp Btw Frm Growth, Sz, Ag.)

    APPENDIX: Methodology

    T mtho u th txt o th rt ppy to oor oth o th ky or o th rt: business survival employment growth mog hgh-th rm or -tw 2000 2009 th So Vy.

    Survival

    Business lie cycle. T y o u x-pr two wy: th umutv urvv uto th yry urvv rt (th urvv rt o th prvou

    yr urvvor). T umutv urvv uto -

    tmt wth th Kp-Mr prout mt tmtor,1 oprmtr mxmum khoo tmtor gv y

    whr

    th tmt o th proty o urvvgpt tm t, n

    i th umr o rm tht r t rk t

    tm t, i th umr o th t tm t. T o-

    prmtr orm o th tmtor ow yry urvvrt to vry ro oowup tm.

    T umr t rk

    ,

    whr si th umr o rm tht urvv urg thprvou pro i th umr o o (hr, rght-or ; rm tht wr t v th ourthurtr o 2009, th t urtr o th orvto w-ow, r rght or). Fy, th yry urvv rt rv rom th umutv urvv uto wthth ormu

    .Chrt A1 how tht th h o So Vyhgh-th u trtup 1991 urvv pt g5. Chrt A2 t tht u t to hv r-tvy hghr urvv rt thr t yr (95 prt) th wort urvv rt thr thr yr (84 pr-t). Atr 3 yr, th u urvv rt o prvou

    yr urvvor r throughout rm .

    ,

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    Silicon Valley Businesses Born in 2000

    28 Monthly Labor Review September 2011

    Year-specic efects. Eoom oto urg hyr t th urvv o u. I to to thtur y o u, u my hrhror r urvv oto rt yr. T yr-p- t, jutmt tor, ut th pr-

    t r tw h yr hzr rt2 thvrg rt or yr. T jutmt tor ppto th hzr rt rv rom th tur y o u orr to jut or mrooom t. Trutg mur t how typ ohort wouurvv t wr or th yr 2000.

    Chrt A3 how tht hzr rt o hgh-th rm th So Vy t to owr th 1990 th th 2000.

    Industry-mix efects. T urvv rt o vrou hgh-th utr r htrogou. For xmp, u th Itrt, tommuto, t-progutry t to hv th owt urvv rt, wh tho tro trumt muturg rht-tur grg rv hv th hght. (S t

    A1.) Bu h rth ohort h rt hgh-thutry mx, om ohort my ur- or ovrprorm trm o urvv. o jut or th utry-mx t, jutmt tor omput tht tk to outhow h utry urvv rtv to othr utr

    how th utry mx or th 2000 rth ohort rrom tht o vrg rth ohort.T rtv hzr rt, or hzr rto, o h u-

    try (rtv to utry) rv wth th uo th Cox proporto hzr mo,3 mprmtrmo wth hzr uto

    ,whr vtor o prmtr or h utry. Tmo ow hzr rt to vry utoo oowup tm, ut um tht th hzr rt ort utr r proporto ovr oowup tm. T wght vrg (th vrg, wght y th

    umr o u h utry) o th hzr r-to ut to trm hzr umr.

    SOURCE: U.S. Bureau of Labor Statistics, Quarterly Census of Employment and Wages.

    20

    18

    16

    14

    12

    10

    8

    6

    4

    2

    0

    20

    18

    16

    14

    12

    10

    8

    6

    4

    2

    0

    Percent Percent

    1991 1993 1995 1997 1999 2001 2003 2005 2007

    Chart A3. Hazard rate o all Silicon Valley high-tech businesses, 19912008

    Average

    Hazard rate

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    Monthly Labor Review September 2011 27

    Chart A1. Cumulative survival rate o Silicon Valley high-tech frms, by age o frm, 19912009

    100

    90

    80

    70

    60

    50

    40

    30

    20

    10

    0

    0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

    100

    90

    80

    70

    60

    50

    40

    30

    20

    10

    0

    SOURCE: U.S. Bureau of Labor Statistics, Quarterly Census of Employment and Wages.

    Age, years

    Chart A2. Annual survival rate o Silicon Valley high-tech frms, by age o frm, 19912009

    96

    94

    92

    90

    88

    86

    84

    82

    80

    78

    96

    94

    92

    90

    88

    86

    84

    82

    80

    780 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

    Age, years

    SOURCE: U.S. Bureau of Labor Statistics, Quarterly Census of Employment and Wages.

    Percentsurviving

    Percentsurviving

    Percent

    surviving

    Percent

    surviving

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    Monthly Labor Review September 2011 29

    For th 2000 rth ohort, umr ut wthth wght vrg o th rth ohort utry mx.

    T jutmt tor or th utry mx trmy th prt r tw th umr utor rth ohort th umr. For th 2000rth ohort, th jutmt tor 1.068, tgtht w xpt th hzr rt or u th ohortto 6.8 prt hghr th tht o vrg ohort ty gv tm. T prmry otruto to th vt

    hzr rt rom th hghr v o Itrt, tom-muto, t-prog u mog yr-2000 trtup.

    Employment growth

    Baseline employment growth. T , or vrg, m-poymt growth o So Vy hgh-th uor tw 1991 2009 ovr th y o u-

    Table A1. Regression results

    IndustryParameterestimate

    Hazard ratio1 p-value

    Aerospace product and parts manufacturing 1.12 3.06 < .0001

    Architecture and engineering services .70 2.01 < .0001

    Communications equipment manufacturing .98 2.66 < .0001Computer and peripheral equipment manufacturing 1.05 2.87 < .0001

    Computer systems design and related services .99 2.69 < .0001

    Electronic instrument manufacturing .72 2.05 < .0001

    Internet, telecommunications, and data processing 1.31 3.69 < .0001

    Pharmaceutical and medicine manufacturing .76 2.13 < .0001

    Scientic research and development services .83 2.30 < .0001

    Semiconductor and electronic component manufacturing .90 2.45 < .0001

    Software publishers 1.04 2.83 < .0001

    1 Ratio of hazard rate of industry to that of multiple industries. SOURCE: U.S. Bureau of Labor Statistics, Quarterly Census of

    SOURCE: U.S. Bureau of Labor Statistics, Quarterly Census of Employment and Wages.

    30

    25

    20

    15

    10

    5

    0

    30

    25

    20

    15

    10

    5

    01 2 3 4 5 6 7 8 9 10

    Chart A4. Average employment o Silicon Valley high-tech frms, by age o frm, 19912009

    Numberof employees Numberof employees

    Age, years

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    Industry-mix efects. Iutr uh omputr ytmg otwr puhr t to hv grtrmpoymt growth throughout rm , whrrop prout prt muturg t tohv u mpoymt . T wght vrg

    o h utry vrg mpoymt growth u totrm th vrg mpoymt growth or th hgh-th group. A jutmt tor or th 2000 ohort ut th prt r tw th xptmpoymt growth o ohort wth th utry mx o

    th 2000 ohort tht o typ hgh-th ohort.For th 2000 ohort, th tor 3.4 prt pr yr,tg tht typ ohort wth th m utrymx tht o th 2000 ohort wou xpt to hv3.4 prt hghr mpoymt growth pr yr th

    ohort wth vrg hgh-th utry mx. A2how th uz u mpoymt growth th proporto o mpoymt, y utry, or vrghgh-th So Vy ohort th 2000 rth ohortovr th 200009 pro.

    Notes to appendix1 Ewr L. Kp Pu Mr, Noprmtr Etmto

    rom Iompt Orvto,Journal o the American Statistical As-sociation, vo. 53, o. 282, 1958, pp. 45781.

    2 T hzr rt th rt t whh rm xt th mrktp (tht

    , mthmty, 1 mu th urvv rt).3 Dv R. Cox, Rgro Mo L-,Journal o the

    Royal Statistical Society, Series B (Methodological), vo. 34, o. 2, 1972,pp. 187220.


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