The recent report by the Kaufmann Index
of US Entrepreneurial Activity sheds
light on interesting startup trends from 1996 to 2013. Led by Robert Fairlie,
Professor of Economics at the University of California, Santa Cruz, the report
is packed with US data which indicates that the number of entrepreneurs per
100,000 people in the Silicon Valley area is 570, followed by Los Angeles
(490), Miami (430), Houston (340) and New York – New Jersey (320).
The Kauffman Index measures the
monthly business-creation rate at the individual owner level, reporting the
percentage of non-business-owning adults who start businesses. Data also
reveals entrepreneurial activity by gender, race, immigrant status, economic
sector, age and education.
In 2013, 0.28 percent of the
adult population in the US, or 280 out of 100,000 adults, created a new
business each month, which represents approximately 476,000 new businesses per
month. The US unemployment rate was 8.5 percent at the end of 2011 and dropped
to 6.7 percent at the end of 2013.
Age, gender,
education
Male entrepreneurial activity
rate was 0.34 percent in 2013, and the female entrepreneurship rate was 0.22
percent. Entrepreneurial rate in the age group 20-34 was 0.18 percent in 2013,
for people 35-44 years of age it was 0.31 percent, and for ages 55-64 it was
0.31 percent. An aging population has led to a rising share of new
entrepreneurs in the age group 55-64 years; they represent 23.4 percent of new
entrepreneurs in 2013.
The least educated have the
highest rate of business creation, which might be due to more limited labour
market opportunities as compared to more highly educated groups.
Geography
Entrepreneurial activity rates
reflect strong geographical patterns in the US. Rates of new business creation
are the highest in the West and lowest in the Midwest. The states with the
highest entrepreneurial activity rates were Montana (610 per 100,000 adults),
Alaska (470 per 100,000 adults), South Dakota (410 per 100,000 adults),
California (400 per 100,000 adults) and Colorado (380 per 100,000 adults).
Among the fifteen largest
metropolitan areas in the US, San Francisco (0.57 percent) had the highest
entrepreneurial activity rate in 2013 and Philadelphia (0.18 percent) had the
lowest rate.
Ethnic groups
and immigrants
The business creation rate
remains nearly twice as high in immigrant populations as the native-born rate.
Over the past decade, Latinos, Asians and other immigrants experienced rising
shares of all new entrepreneurs, due to increasing populations as well as
rising entrepreneurship rates.
The immigrant share of new
entrepreneurs in 2013 was 25.9 percent, up from 19.1 percent in 2003. The
entrepreneurial activity rate was 0.19 percent in 2013 for African-Americans,
0.38 percent for Latinos, 0.28 percent for Asians, and 0.27 percent for whites.
The Latino share of all new entrepreneurs rose from 16.0 percent in 2003 to
20.4 percent in 2013. The Asian share of new entrepreneurs is 6.1 percent.
The native-born rate has remained
relatively flat over the last two decades. Immigrants were substantially more
likely to start businesses each month than were the native-born citizens in
2013. For immigrants, 430 out of 100,000 people started businesses each month,
compared with 250 out of 100,000 people for the native-born population.
Other trends
Entrepreneurial activity rates
differed substantially by major industry groups. Though the Internet and mobile
sectors understandably attract a lot of attention, in 2013 the entrepreneurial
activity rates were actually highest in the construction industry at 1.27 percent,
followed by services (0.37 percent) and manufacturing (0.10 percent).
In 2013, 78.2 percent of new
entrepreneurs were drawn from those who were not coming directly out of
unemployment. Over the past eighteen years, the share of new business creation
from ‘opportunity’ entrepreneurship increased when economic conditions were
improving and decreased when economic conditions were becoming worse. The
largest share of ‘opportunity’ entrepreneurship occurred at the height of the
‘Roaring 90s,’ and the lowest share was in 2009 at the end of the recession.
The recession may have pushed
many individuals into business ownership because of high unemployment rates.
These individuals were probably more likely to start sole proprietorships and
other non-employer firms instead of more costly employer firms, according to
the report.
The report is packed with other
data which allows readers and analysts to draw a range of conclusions and make
appropriate policy interventions. The report also opens to the door to other countries
to share their own analysis on entrepreneur trends with respect to age,
geography, gender and sector.
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This is a repost of an article that appeared on http://yourstory.com/ on July 31, 2014
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