Is Occupational Injury Risk Higher at New Firms?*

• Published date: 01 January 2014
• DOI: http://doi.org/10.1111/irel.12045
• Author: Frank Neuhauser,John Mendeloff,Seth A. Seabury
• Date: 01 January 2014

Is Occupational Injury Risk Higher at New

Firms?*

SETH A. SEABURY, JOHN MENDELOFF, and FRANK

NEUHAUSER

This paper studies whether newly created firms have higher injury rates than

established firms. We use data on a large sample of single-establishment firms in

Pennsylvania from 2001–2005 to examine the relationship between firm age and

the risk of lost workday injuries. Using the full set of firms, there appears to be

little overall correlation between firm age and risk. If anything, newer firms

appear less likely to have lost workday injuries. When we condition on having at

least one injury reported in 2000, however, we find that in later years the injury

risk of firms declines with age. This pattern is consistent with systematic underre-

porting of injuries by new firms.

Introduction

EACH YEAR IN THE UNITED STATES THERE IS CONSIDERABLE TURNOVER IN THE

STOCK OF employers. From 1994-2010, there were more than 600,000 new

firms created every year on average.

1

The rapid growth of new firms is gener-

ally celebrated as a sign of entrepreneurship and economic growth. It is possi-

ble, however, that new firms lack experience with regulatory and safety

requirements designed to protect workers. If this lack of experience with regu-

latory requirements and best practices causes employers to fail to take appro-

priate precautionary measures, then it could have adverse consequences for

*The authors’saffiliations are, respectively, University of Southern California and RAND Corporation, Los

Angeles, CA. Email: seabury@usc.edu; University of Pittsburgh and RAND Center for Health and Safety in

the Workplace (CHSW), Pittsburgh, PA. Email: jmendel@rand.org; University of California, Berkeley, CA.

Email: frankn@berkeley.edu.

This work was supported by the California Commission on Health and Safety and Workers’Compensation

(CHSWC). The authors wish to thank Jing Xia for excellent research assistance. The opinions in this paper

are those of the authors, and do not represent those of CHSWC or the institutions that the authors are affili-

ated with.

1

These data come from the Bureau of Labor Statistics series on business employment dynamics (see

http://www.bls.gov/bdm/entrepreneurship/bdm_chart1.htm).

INDUSTRIAL RELATIONS, Vol. 53, No. 1 (January 2014). ©2013 Regents of the University of California

Published by Wiley Periodicals, Inc., 350 Main Street, Malden, MA 02148, USA, and 9600 Garsington

Road, Oxford, OX4 2DQ, UK.

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workers in the form of increased injury risk. Furthermore, new firms could

face higher direct and indirect occupational injury costs, while all employers

could be affected by higher workers’compensation insurance premiums.

This paper examines whether newly created firms are associated with work-

ers at a higher risk of occupational injury. There is evidence to suggest that

experience is a factor in occupational safety and health, but the focus usually

has been on the experience level of workers. For example, research by Leigh

et al. (1997), Breslin and Smith (2006), and Breslin, Smith, and Dunn (2007)

suggests that workers’compensation claims are less likely for workers with

longer job tenure and more experience. There is only limited evidence, how-

ever, on whether or not workers at new firms are more likely to be injured on

the job. Work by Ruser (1995) examines within-firm trends in injury rates, but

does not directly link these trends to the age of the firm.

A recent paper by Tompa and Fang (2008) does suggest that newer firms

exhibit higher injury rates in a sample of firms in Ontario from 1998–2002.

Specifically, their findings suggest that firms had reported lost workday injury

rates 13 percent higher in their first two years of existence. To our knowledge

this is the only firm-level evidence indicating higher injury rates for newer

firms.

Other studies have looked at the role of firm experience on outcomes un-

related to occupational safety. For example, the literature on organizational

learning has focused almost exclusively on productivity as an outcome. Several

studies have looked at the performance of new firms and the factors that drive

their success. Typically, studies that focus on firm performance generally pre-

dict that firms become more efficient over time, at least for the first few years

(Gupta and Rathi 1996; Klepper 1996). While these studies have not directly

addressed the issue of occupational safety, the logic that, as new problems are

encountered, managers and employees will devise ways to address them, is

likely to be as relevant to safety problems as to other types of problems.

Other studies offer some suggestive evidence that injury risk could be related

to firm age. Mendeloff et al. (2006) confirmed earlier evidence that smaller

establishments had higher fatality rates than larger establishments, controlling for

industry. They established that it was the size of the establishment or work site,

not the size of the firm, which played, by far, the greater role. Thus, large firms

are safer than smaller ones, but primarily because they have, on average, larger

establishments. But, although we know that smaller firms (generally, smaller

establishments) are newer on average than larger firms, none of this prior work

directly addresses the causal effect of firm age on safety.

Here we use a large, longitudinal database of workers’compensation (WC)

claims for single-establishment firms in Pennsylvania from 2001–2005 to esti-

mate the association between the age of firms and their observed rates of lost

Injury Risk at New Firms /29