1. Copyright 2010, The World Bank Group. All Rights Reserved. Business demography, part 2 Dynamics of the population of businesses 1 Business statistics and registers

2. Copyright 2010, The World Bank Group. All Rights Reserved. Death Enterprise Death is an independent event affecting only one enterprise It involves the dissolution of a combination of factors of production It involves the deletion of an enterprise reference on the (live) business register 2

3. Copyright 2010, The World Bank Group. All Rights Reserved. Death types Like enterprise births, enterprise deaths include the population of all active enterprises irrespective of employment thresholds In addition to enterprise deaths, exits by decline may occur in data collections using an employee threshold Enterprise deaths cover all enterprises, regardless of whether they are employers or not No general threshold is applied to the size of the enterprise Employer enterprise deaths are deaths of enterprises with at least one employee Economic enterprise deaths are deaths of enterprises with at least two employees 3

4. Copyright 2010, The World Bank Group. All Rights Reserved. From closure to death Enterprise deaths is defined as follows: “A count of the number of deaths of enterprises registered to the population concerned in the business register corrected for errors. A death amounts to the dissolution of a combination of production factors with the restriction that no other enterprises are involved in the event. Deaths do not include exits from the population due to mergers, takeovers, breakups and restructuring of a set of enterprises. It does not include exits from a sub-population resulting only from a change of activity.” 4

5. Copyright 2010, The World Bank Group. All Rights Reserved. Impact of deaths As well as indicators on the number of deaths, there is a demand for data on the impact of these deaths The impact can be measured both in terms of the effect on the labor market, i.e. the amount of employment lost, or the effect on the economy in financial terms, i.e. the amount of turnover lost Employment lost when an enterprise death occurs is of interest to policy makers Employment lost may be difficult to measure 5

6. Copyright 2010, The World Bank Group. All Rights Reserved. Indicators for death Number of deaths as a percentage of the population of active enterprises Correlations of deaths with GDP and unemployment: Persons employed in enterprises that die in year xx as a proportion of the total number of persons employed in the population of active enterprises in year xx (both in head counts) Mean employment loss per death, measured in terms of persons employed (head count) 6

7. Copyright 2010, The World Bank Group. All Rights Reserved. Survival The survival of an enterprise is defined in the following way: An enterprise born in year xx or having survived to year xx from a previous year is considered to have survived in year xx+1 if it is active in terms of turnover and/or employment in any part of year xx+1 (= survival without changes) An enterprise is also considered to have survived if the linked legal unit(s) have ceased to be active, but their activity has been taken over by a new legal unit set up specifically to take over the factors of production of that enterprise (= survival by take-over) Activity is defined as any turnover and/or employment in the period from 1.1 to 31.12 in a given year This definition of survival excludes cases where enterprises merge, or are taken over by an existing enterprise in year xx 7

8. Copyright 2010, The World Bank Group. All Rights Reserved. Indicators for survival Survival rate of newly born enterprises − Survival rate in years xx+t, (t=1 to n) of enterprise births in xx. − Survival rate in years xx+t, (t=1 to n) of employer enterprise births in xx. − Survival rate in years xx+t, (t=1 to n) of economic enterprise births in xx. − Average survival rate in years after birth (i=1 to n) of enterprise births, employer enterprise births and economic enterprise births in the period xx, xx+t. 8

9. Copyright 2010, The World Bank Group. All Rights Reserved. Other demographic events Apart from births and deaths there are other types of demographic events affecting the units in the statistical business register. Some of these lead to the creation of new businesses (births), some to the closure of businesses (deaths), but some do not. The events are: Change of ownership Merger Take-over Break-up Split-off Creation of a joint venture Cessation of a joint venture Restructuring within an enterprise Restructuring within an enterprise group Change of group Complex restructuring 9

10. Copyright 2010, The World Bank Group. All Rights Reserved. Change of ownership Change of Ownership (one-to-one take-over) involves the re-structuring of the legal basis of an enterprise 10

11. Copyright 2010, The World Bank Group. All Rights Reserved. Merger A Merger is a consolidation of the production factors of two or more enterprises into one new enterprise There is no continuity or survival, but the closures of the previous enterprises are not considered to be deaths Similarly the new enterprise is not considered to be a birth 11

12. Copyright 2010, The World Bank Group. All Rights Reserved. Take-over Enterprises taken over are not considered to be deaths One of the original enterprises does survive The remaining original enterprises are closed 12

13. Copyright 2010, The World Bank Group. All Rights Reserved. Break-up A Break-up is splitting of the production factors of an enterprise into two or more new enterprises There is no continuity or survival The closure of the previous enterprise is not considered to be a death The new enterprises are not considered to be births 13

14. Copyright 2010, The World Bank Group. All Rights Reserved. Split-off A Split-off is similar to a break-up, but in this case the original enterprise does survive There is no death, but one or more new enterprises are created 14

15. Copyright 2010, The World Bank Group. All Rights Reserved. Creation or cessation of joint venture A joint venture is created when two or more independent enterprises agree to commit some of their resources to work together None of the original enterprises exercise outright control over the entity created Joint ventures may be considered to be births The cessation of a joint venture mirrors the above 15

16. Copyright 2010, The World Bank Group. All Rights Reserved. Restructure within Enterprise A Re-structure within Enterprise involves one enterprise, which survives throughout Examples include opening or closing local units This event is of no real interest for business demography 16

17. Copyright 2010, The World Bank Group. All Rights Reserved. Restructure within enterprise group Re-structure within Enterprise Group is creation and/or cessation of one or more enterprises under common ownership It does not result in any births or deaths 17

18. Copyright 2010, The World Bank Group. All Rights Reserved. Complex Re-structure A Complex Re-structure concerns two or more enterprise groups A typical example is where two or more enterprise groups trade subsidiary enterprises It does result in any births or deaths 18

19. Copyright 2010, The World Bank Group. All Rights Reserved. Reactivation A Reactivation involves an enterprise becoming dormant for a period of less than two years, then recommencing activity It does not constitute a birth or death 19

20. Copyright 2010, The World Bank Group. All Rights Reserved. Growth The term growth is used in business demography to study how cohorts of enterprises develop Growth is measured in terms of a change in size (in this case employment) over time It is expected that growth for births will generally be positive To fully evaluate growth of new enterprises it is necessary to follow them over a longer period of time Some annual figures on the population of active enterprises are necessary in order to compare the statistics on growth in newly born enterprises with changes in the population as a whole 20

21. Copyright 2010, The World Bank Group. All Rights Reserved. Indicators for growth Rate of growth of the number of persons employed in newly born enterprises Rate of growth of surviving enterprises Average number of jobs per enterprise in newly born enterprises during the first five years of operation 21