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This paper reports on entry patterns and survival probabilities for the cohort of firms that entered the Canadian business sector in 2002. The paper uses data from Statistics Canada's Longitudinal Employment Analysis Program (LEAP) to produce a special dataset, including a longitudinal identifier and business numbers, to track the 2002 cohort across multiple LEAP vintages.
The paper disaggregates the business sector along industry and size dimensions to provide an illustration of how the 2002 cohort fared. Consistent with previous findings, the results show that the services sector had more entrants and that, in many cases, service industries had higher entry rates. The lowest entry rate occurred in manufacturing. Across size classes, small firms were the most prevalent, with higher entry rates and a larger number of entrants than their larger counterparts.
Throughout the analysis, the results consistently show that groupings with higher entry rates have lower survival probabilities and that industries with higher entry rates are the industries most likely to have lower survival probabilities. Similarly, small-sized firms have high entry rates, but also have lower survival probabilities. For example, the entry rate for the smallest size class was 20% in 2002, but firms in this class had a one-year survival probability of 74%. In other words, one in five small firms in 2002 was new, but one-quarter of such firms were gone after one year. Seven years after entry, only 27% of small entrants remained. In comparison, entrants with 5 to 10 employees had an entry rate of 3%, a one-year survival probability of 93%, and a seven-year survival probability of 52%.
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