Small Business Volatility Decreasing

I recently posted on an interesting study called "Entrepreneurship and Job Growth".  In addition to information on the role small and personal businesses play in the creation of jobs, the study also covers business volatility.  The paper references an earlier work on business volatility, and the National Bureau of Economic Research wrote about the earlier study in their journal.  Key quote:

"The authors' main finding is that the employment-weighted mean volatility of firm growth rates for all U.S. businesses has declined by more than 40 percent since 1982. LBD data confirm that volatility rose among publicly traded firms. However, this trend is overwhelmed by declining volatility among privately held firms, some large, but many as small as mom-and-pop shops. Although the level of business volatility is relatively high at privately held firms, it has trended downward. In contrast, the level of business volatility is relatively low at publicly traded firms, but it has trended upward. This pattern of "volatility convergence" holds in every major industry."

While volatility is not a clean proxy for business or employment risk, it is an indicator of risk.  It is interesting that our research shows that employees see working for big companies as increasingly risky, and small business ownership and employment as less risky than it used to be.   Because of this, small business employment or ownership is seen as a viable alternative to large company employment by more people.   It is starting to look like the data at least in part supports this view.