Report Finds U.S. Entrepreneurship on the Rise

Entrepreneurial activity in the U.S. has been increasing in recent years, according to a new study.

The report, issued by Baruch College and Babson College, found that with 12.3 percent of the U.S. adult population engaged in entrepreneurial activity, the U.S. experienced a more than 60 percent increase in total entrepreneurial activity from 2010 to 2011, matching the level recorded in 2005.

The increase follows significant drops reported in both 2009 and 2010. The U.S. had the highest level of total entrepreneurial activity among developed economies globally, according to the study.

“Our 2011 report on entrepreneurship in America shows that Americans are turning to business ownership in ever increasing numbers,” said Baruch College professor Edward Rogoff in a statement. “The number of Americans who are still actively in the workforce and are pursuing their own businesses has grown by 40 percent over the last two years. Today, more than one American in eight can be called entrepreneurs. There is simply no doubt that the future of the American economy resides with entrepreneurship.”

The report also found that more than 29 million U.S. adults (18-64 years old) were starting or running new businesses in 2011. Moreover, nearly 40 percent of these entrepreneurs expected to create more than five new jobs in the next five years.

The report also found that 39 percent of entrepreneurial ventures expect to add more than five employees over five years, indicating the potential for significant job creation and restored confidence in the U.S. economic recovery.

For the first time since the 2008 financial crisis, nascent entrepreneurship is on the rise.  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).

Last year saw a rebound in the number of established business owners, with a 17 percent increase over 2010. The U.S. rate of established business owners of 9 percent was above average compared to other developed economies studied in the report.

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. 

Blacks are twice as likely as whites to become entrepreneurs (19.3 percent to 9.7 percent, respectively), according to the study. 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.

The study found 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.

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.

Entrepreneurs have wealthier households than non-entrepreneurs. Data in the report indicates that more affluent households more often lead to entrepreneurship.

Only 13 percent of the U.S. entrepreneurs studied report more than 25 percent of their revenues coming from international sales. That was the lowest level among innovation-driven economies. 

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