U.S. Entrepreneurship Rates Reverse Trend, Reach New Heights
Entrepreneurial activity in the U.S. is up 60+ percent and at highest level since 2005, according to the newest Global Entrepreneurship Monitor (GEM) U.S. Report. The study also finds that education plays a key role in the formation of entrepreneurs.
Entrepreneurship in the United States is soaring to new heights, according to the 2011 Global Entrepreneurship Monitor (GEM) U.S. Report issued this fall by Babson College and Baruch College. With 12.3 percent of the U.S. adult population engaged in entrepreneurial activity, the U.S. experienced a 60+ percent increase in total entrepreneurial activity (TEA) from 2010 to 2011, matching the TEA level recorded in 2005. The dramatic increase follows significant drops reported in both 2009 and 2010. Further, the U.S. reported the highest TEA level among developed economies globally.
According to the Report, more than 29 million U.S. adults (18-64 years old) were starting or running new businesses in 2011. Moreover, nearly 40% of these entrepreneurs expected to create more than five new jobs in the next five years.
“We saw an unprecedented jump in entrepreneurial activity in 2011,” commented the GEM Report’s lead author,
Donna J. Kelley, Associate Professor of Entrepreneurship at Babson College. “Most of these entrepreneurs were in the process of just getting started, which means a lot of people took the leap into entrepreneurship during 2011. In addition, compared with 2010, more people reported that they were intending to start businesses in the next three years, showing a more positive future outlook for entrepreneurship in the United States after two years of declining indicators.”
“Importantly, necessity-based entrepreneurship accounted for a lower proportion of entrepreneurial activity in 2011,” continued Kelley. “In the depths of the recession, we saw a tremendous increase in people starting businesses out of necessity. In 2011, the entrepreneurship rate was pulled up primarily by those starting businesses to pursue promising opportunities--a strong sign of entrepreneurial activity occurring as a result of optimism, not desperation.”
Among the Report’s other key findings:
Job creation expected
Nascent entrepreneurship on the rise
For the first time since the crash in 2008, nascent entrepreneurship is on the rise. In fact, the percentage of nascent entrepreneurship nearly doubled from 2010 to 2011 (8.4 percent in 2011 up from 4.8 percent in 2010). Entrepreneurial intentions also increased by over 30 percent in 2011 after holding steady from 2008 to 2010 (10.9 percent in 2011 compared to 8.3 percent in 2010.)
Increase in established business owners
Gender gap is closing
There continue to be fewer women than men entrepreneurs, though the U.S. female/male ratio among entrepreneurs is higher than the global average. In 2011, there were approximately eight women to every 10 men entrepreneurs.
Race Implications
Age factors
Younger adults (18-24 years old) are more likely to start a business, but 10 percent of adults 55-64 years of age, and 4.5 percent over the age of 65, also intend to start businesses. Male youth have a higher perception about opportunities, while female youth are more discouraged by fear of failure.
Education shapes entrepreneurs
Low fear factor
Among developed economies, U.S. entrepreneurs exhibited the lowest rates of fear of failure in the developed world, along with Switzerland and Slovenia. Less than one-third of U.S. adults (18-64) were dissuaded by fear of failure. At the same time, perceived capabilities in the U.S. were among the highest within innovation-driven economies. Over 55 percent of adults believed they had the skills and ability to start a business.
Wealth and the impact of financial means
Majority of U.S. entrepreneurs’ revenues are based on domestic sales
“The United States, for all its image as a global economy, has only an average level of internationally-oriented entrepreneurs for its development level,” comments Abdul Ali, Associate Professor of Entrepreneurship at Babson, and a coauthor on the Report. “As many developing regions of the world are quickly becoming innovators, these entrepreneurs will need to maintain their global competitiveness and they are most likely to do so by engaging with international markets.”