U.S. ENTREPRENEURSHIP RATES INCREASE ACCORDING TO RESEARCH BY BABSON COLLEGE AND BARUCH COLLEGE
Entrepreneurship in the United States is experiencing high growth, according to the 2011 Global Entrepreneurship Monitor (GEM) U.S. Report issued today 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 total entrepreneurial activity level among developed economies globally.
According to the Report, more than 29 million U.S. adults (18-64 years old) were running or starting 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.”
To access the full 2011 Global Entrepreneurship Monitor U.S. Report, visit the Babson Global Entrepreneurship Monitor Report Web page. Among the Report’s other key findings:
Job creation expected
- An encouraging 39 percent of entrepreneurial ventures are expecting to add more than five employees over five years, indicating the potential for significant job creation and restored confidence in the United States’ economic recovery.
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
- 2011 saw a rebounding in the number of established business owners with a 17 percent increase over 2010. The U.S. rate of established business owners (9 percent) was above-average compared to other developed economies studied by GEM.
Gender gap is closing
- There continue to be fewer women entrepreneurs 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 entrepreneurs to every 10 men entrepreneurs.
- Blacks are twice as likely as whites to become entrepreneurs (19.3 percent to 9.7 percent, respectively.)
- 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
- There is a strong relationship between entrepreneurship activity and levels of education. College graduates were over twice as likely to choose entrepreneurship (15 percent) than those with no high school education (7 percent), and almost 50 percent more likely than high school graduates.
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
- Entrepreneurs have wealthier households than non-entrepreneurs. GEM data indicates that more affluent households more often lead to entrepreneurship.
Majority of U.S. entrepreneurs’ revenues are based on domestic sales
- Only 13 percent of U.S. entrepreneurs report more than 25 percent of their revenues coming from international sales; the lowest level among innovation-driven economies.
“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.”
The Global Entrepreneurship Monitor (GEM) is a not-for-profit academic research consortium that has as its goal making high quality information on global entrepreneurship activity readily available to as wide an audience as possible. GEM is the largest single study of entrepreneurial activity in the world. Initiated in 1999 with 10 countries, GEM 2011 conducted research in 54 economies all over the world. Visit the Babson Global Entrepreneurship Monitor Web page or the Global Entrepreneurship Monitor Website.
About Babson College
Babson College is the educator, convener, and thought leader for Entrepreneurship of All Kinds®. The College is a dynamic living and learning laboratory, where students, faculty, and staff work together to address the real-world problems of business and society ─ while at the same time evolving our methods and advancing our programs. We shape the leaders our world needs most: those with strong functional knowledge and the skills and vision to navigate change, accommodate ambiguity, surmount complexity, and motivate teams in a common purpose to create economic and social value. As we have for nearly a half-century, Babson continues to advance Entrepreneurial Thought and Action® as the most positive force on the planet for generating sustainable economic and social value. For information, visit the Babson Website.