The U.S. economy is highly dynamic: businesses open and close, workers switch jobs and start new enterprises, and innovative technologies redefine the workplace and enhance productivity. With globalization, markets have also become more interconnected. Measuring business activity in this rapidly evolving environment increasingly requires tracking complex interactions among firms, establishments, employers, and employees. Understanding Business Dynamics presents strategies for improving the accuracy, timeliness, coverage, and integration of data that are used in constructing aggregate economic statistics, as well as in microlevel analyses of topics ranging from job creation and destruction and firm entry and exit to innovation and productivity. This book offers recommendations that could be enacted by federal statistical agencies to modernize the measurement of business dynamics, particularly the production of information on small and young firms that can have a disproportionately large impact in rapidly expanding economic sectors.It also outlines the need for effective coordination of existing survey and administrative data sources, which is essential to improving the depth and coverage of business data.