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As economy improves, entrepreneurs face less competition

Christina Hernandez Sherwood, eMed Editor, MedCity News

As the economy improves following the recession, entrepreneurs are surprisingly facing less competition from new startups. That’s because the overall business creation rate declines with the unemployment rate, according to new research from the Kauffman Foundation.

In 2012, the monthly rate of American adults starting businesses declined slightly to 0.30 percent from 0.32 percent the year before. That translates to about 514,000 new business owners each month last year compared to 543,000 in 2011.

“It’s likely not a coincidence that the number of new businesses created dropped when the economy improved last year. While a stronger economy is good for business growth, it also means the unemployed find jobs instead of starting firms,” said Dane Stangler, director of research at the Kauffman Foundation. “During the Great Recession when the labor market was at its weakest, business creation rates rose to record highs. The 2012 rates are a return to longer-term levels.”

The full report, which includes breakdowns of entrepreneurial activity by gender, age, region, and ethnicity, is available here.

Weekly Wisdom from Kauffman is a regular feature on eMed highlighting insightful research from the Kauffman Foundation. Do you have a favorite Kauffman research insight that could help life science entrepreneurs? Send it to mailto:emededitor@kauffman.org.

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