Steadfast Survivors

Startups for decades have accounted for most net job creation in the nation—a situation caused by the fairly steady patterns by which they’re set up and by which they survive, a Kauffman Foundation survey found.

But those patterns can change, and some factors signal that certain economic sectors could be on the verge of a jump in new company creation, according to the study titled, “Neutralism and Entrepreneurship: The Structural Dynamics of Startups, Young Firms and Job Creation.

The cost of forming an information technology company, for example, has dropped, and there are lower investment requirements for startup acceleration programs.

Formation and survival rates for new companies end up being fairly consistent through time, boosting the number of U.S. companies each year. Those five years old or younger make up the largest chunk each year, adding the most net new jobs, the report finds. The conclusion is based on an analysis of Business Dynamics Statistics information split up by company age to track startup employment changes.

Companies thin out as they age, but those that survive create more jobs than are lost as businesses close, the release said. Not many companies last beyond 40 years, even though most Fortune 500 companies are older than that. Those large companies make up a small fraction of the nation’s more than 6 million companies, and part of their longevity depends on combining with or buying other companies—such as young ones.

New companies also can contribute to the deaths of older firms. However, making it easier for new companies to form might mean a lower survival rate.