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U.S. Startup Activity Remains Steady

Mark Marich on March 08, 2011 Source: Policy Dialogue on Entrepreneurship

During the Great Recession, more Americans have become entrepreneurs than at any time in the past 15 years. However, while the economy and its high unemployment rates may have pressed more individuals into business ownership, most of them are going it alone, rather than starting companies that employ others.

According to the "Kauffman Index of Entrepreneurial Activity," a leading indicator of new business creation in the United States, 0.34 percent of American adults created a business per month in 2010—or 565,000 new businesses. That rate remained consistent with 2009 and represents the highest level of entrepreneurship over the past decade and a half. In contrast, however, the quarterly employer firm rate has dropped from 0.13 percent in 2007 to 0.10 percent in 2010.

Capturing new business owners in their first month of significant business activity, the Kauffman Index of Entrepreneurial Activity provides the earliest documentation of new-business development across the country. In addition to this overall rate of entrepreneurial activity, the Kauffman Index presents separate estimates for specific demographic groups, states and select metropolitan statistical areas (MSAs). It provides the only national measure of business creation by specific demographic groups.

Other key findings include:

  • The immigrant rate of entrepreneurial activity increased substantially – from 0.51 percent in 2009 to 0.62 percent in 2010 – and declined slightly for the native-born. This increase expanded the large positive gap that already existed between immigrant and native-born entrepreneurial activity rates.
  • A growing immigrant population and rising entrepreneurship rate contributed to a rise in the share of new entrepreneurs that are immigrant, from 13.4 percent in 1996 to 29.5 percent in 2010.
  • Entrepreneurial activity increased slightly for men and decreased slightly for women. For men, the entrepreneurial activity rate increased from 0.43 percent in 2009 to 0.44 percent in 2010. The female entrepreneurship rate decreased from 0.25 percent to 0.24 percent.
  • The African-American entrepreneurial activity rate decreased from 0.27 percent in 2009 to 0.24 percent in 2010. The white entrepreneurial activity rate decreased from 0.33 percent to 0.31 percent.
  • The entrepreneurship index was highest among the least-educated group, moving from 0.49 percent in 2009 to 0.59 percent in 2010, suggesting an increased number of people entering entrepreneurship out of necessity. The largest decrease in entrepreneurial activity occurred for high school graduates.
  • Among the United States fifteen largest metropolitan statistical areas, Los Angeles had the highest entrepreneurial rate (0.62 percent) in 2010. Philadelphia had the lowest rate (0.15 percent)

Category:  Growth & Poverty 

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