Kansas Secretary of State Kris Kobach reports new business filings set another record in 2016. There were 18,147 new domestic business filings last year and the total number of entities in existence also set another record at 187,305. The number of entities in existence does not include proprietorships.
Research conducted by Dr. Arthur Hall, Center of Applied Economics at the University of Kansas, shows that new business filings are extremely important to job growth in Kansas. In fact, if not for jobs created by new start-ups, Kansas would only have had two years of private sector job gains between 1977 and 2014!
According to Dr. Hall, “Net job change has four components: establishment births, establishment deaths, establishment expansions, establishment contractions. The table tracks net job creation starting with business establishments born in 1977. An establishment represented by a firm age of zero is a new firm (a new small business). A new establishment with age “Left Censored” is a new branch location of a very old firm–for example, a new Sears store or a new Ford Motor Company site. In the database, firms are set to be as old as the oldest establishment in the firm’s portfolio. For example, a brand new investment company that bought a string of 20 year old department stores would be set as age 20 not age zero.
The take-away is pretty stark: Net new jobs come from brand new firms and very old firms. Not many new firms make it to very old firms. On balance, old firms shed more jobs than they create–mostly through establishment death.”