The Economic Contribution of a Cohort of New Firms Over Time

What is the economic contribution of a cohort of new entrants? Previous research has investigated this topic but only in passing, and found conflicting results. We analyze a cohort of 6578 firms that entered in 2004, and track them for 10 years with an emphasis on size, which is measured using (deflated) sales data from the entrepreneurs’ bank account records. The overall economic contribution of the cohort decreases in the years after entry. Post-entry growth is not sufficient to offset the economic loss from high exit rates. Broadly similar results are found when disaggregating by firm size and industry.