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Measuring Entrepreneurial BusinessesCurrent Knowledge and Challenges$
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John Haltiwanger, Erik Hurst, Javier Miranda, and Antoinette Schoar

Print publication date: 2017

Print ISBN-13: 9780226454078

Published to Chicago Scholarship Online: May 2018

DOI: 10.7208/chicago/9780226454108.001.0001

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PRINTED FROM CHICAGO SCHOLARSHIP ONLINE (www.chicago.universitypressscholarship.com). (c) Copyright University of Chicago Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in CHSO for personal use.date: 27 September 2021

Small Businesses and Small Business Finance during the Financial Crisis and the Great Recession

Small Businesses and Small Business Finance during the Financial Crisis and the Great Recession

New Evidence from the Survey of Consumer Finances

(p.291) 7 Small Businesses and Small Business Finance during the Financial Crisis and the Great Recession
Measuring Entrepreneurial Businesses

Arthur B. Kennickell

Myron L. Kwast

Jonathan Pogach

University of Chicago Press

We use the Federal Reserve’s 2007, 2009 re-interview of 2007 respondents, and 2010 Surveys of Consumer Finances (SCFs) to study how small businesses owned and actively managed by households fared during those turbulent years. Even though the surveys contain extensive data on a broad cross-section of firms and their owners, to the best of our knowledge this is the first paper to use these SCFs to study small businesses. We find that the financial crisis and the Great Recession severely affected the vast majority of small businesses, including tight credit constraints. We document complex interdependencies between the finances of small businesses and their owner-manager households, including a more complicated role of housing assets than reported previously. We find that workers who lost their job during the recession responded in part by starting their own small business, and that factors related to the survival of a small business are problematic to identify. Our results support the importance of relationship finance to small businesses and the primary role of commercial banks in such relationships. We find that both cross-section and panel data are needed to understand the complex factors associated with the creation, survival and failure of small businesses.

Keywords:   small business, entrepreneurship, great recession, credit constraints

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