According to the “Kauffman Index of Entrepreneurial Activity” report released by the Kauffman Foundation, the business startup rate is at its highest in 15 years. However, many of these entrepreneurs are choosing to take the sole proprietorship route instead of starting a business that would employ others.
While there has been a consistent rate of .34% of American adults created a business each month throughout 2010, the startup rate for businesses that take on employees has dropped by .03% for last year.
“Since it began, the recession has triggered annual declines in the rate of employer enterprise births,” said Carl Schramm, president and CEO of the Kauffman Foundation. “Far too many founders are choosing jobless entrepreneurship, preferring to remain self-employed or to avoid assuming the economic responsibility of hiring employees. This trend, if it continues, could have both short- and long-term impacts on economic growth and job creation.”
Entrepreneurship rates by race show that Latinos experienced the largest entrepreneurial activity increase between 2009 and 2010. The Latino business-creation rate rose from 0.46 percent in 2009 to 0.56 percent in 2010, the highest rate over the 15 years of Index data. The Asian entrepreneurial activity rate increased from 0.31 percent in 2009 to 0.37 percent in 2010, also the highest rate in the past decade and a half. Both African-Americans and non-Latino whites, on the other hand, experienced declines in entrepreneurial activity rates.
Entrepreneurship growth was highest among 35- to 44-year-olds, rising from 0.35 in 2008 to 0.40 in 2009. The oldest age group in the study (55-64 years) also experienced a large increase in business-creation rates from 2008 to 2009, contributing to a two-year upward trend to 0.40.
Among states, Nevada and Georgia had the highest entrepreneurial activity rates, with 510 per 100,000 adults creating businesses each month. Rounding out the top five highest rates were California (470 per 100,000 adults), Louisiana (460 per 100,000 adults) and Colorado, with 450 businesses started per 100,000 adults. The five states with the lowest rates of entrepreneurial activity were West Virginia (170 per 100,000 adults), Pennsylvania (180 per 100,000 adults), Wisconsin (180 per 100,000 adults), South Dakota (190 per 100,000 adults) and Indiana (190 per 100,000 adults).
“Regional patterns have a significant effect on entrepreneurial activity rates,” said Robert W. Fairlie, the study’s author and director of the master’s program in applied economics and finance at the University of California, Santa Cruz. “From 2009 to 2010, entrepreneurial activity rates increased in the West, further widening the gap between the West and other regions. Rates in the South remained steady, but declined in the Northeast and Midwest.”
