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KauffmanEconomic conditions, population growth and other external factors have little impact on firm formation

(KANSAS CITY, Mo.), Jan. 12, 2010 – Given the positive effects of new-business creation on the economy, policymakers and economists logically might seek to understand and establish the environment that best fosters entrepreneurship—especially at a time when the nation is facing a record recession. It is reasonable, for instance, to expect that external factors such as the current economic slump would create large, and potentially volatile, fluctuations in firm formation from year to year.

According to a new study released today by the Ewing Marion Kauffman Foundation, however, new-business creation in the United States is remarkably constant over time. Exploring Firm Formation: Why Is the Number of New Firms Constant? reveals that none of the factors that might bear on prospective entrepreneurs' decisions to form new companies—recessions, expansions, tax changes, population growth, scarce or abundant capital, technological advances or others—has much impact on the pace of U.S. startups.

Original Article: Number of New Companies Created Annually Remains Remarkably Constant Across Time, According to Kauffman Foundation Study

Author: Rossana Weitekamp