U.S.
entrepreneurial activity fell significantly from 10.6% in 2005 to 6.9%
in 2009, according to the “Global Entrepreneurship Monitor (GEM) 2009
National Entrepreneurial Assessment for the United States of America,”
conducted by Babson College and Baruch College. While
fewer businesses are starting up, the good news is that survival rates
among new ventures—more than 42 months in operation—are rising. GEM
speculates that better capitalization has contributed to their
sustainability.
The
steep decline in US entrepreneurial activity translated also to
established businesses, as those declined by 26% (7.7% to 5.7%). The
rate of entrepreneurs closing shop was unchanged in 2009.
All over the U.S. necessity-driven entrepreneurship increased while rates of high-growth potential ventures weakened.
All four types of entrepreneurs suffered during the deepest phase of the crisis in 2008-9:
- Early-stage fell from 8.7% to 6.9%;
- Established declined from 7.7% to 5.7%;
- Opportunity-driven declined from 7.2% to 4.8%.
- Only necessity-driven entrepreneurs increased. (As the economy sheds jobs, more individuals start businesses to sustain themselves.)
GEM found glimmers of hope, however, in the slow-down of business closings among non-Caucasian entrepreneurs.
Key U.S. Findings:
· Midwest bears greatest hardship—Its
early-stage entrepreneurship dropped from 7.4% to 4.8%, and
owner-managed businesses--less than 42 months old--fell from 3.2% to
1.4%. Non-Caucasian entrepreneurs suffered disproportionately. Their
early-stage activity fell considerably from 17.9% in 2008 to 5.3% in
2009.
· Fewer closing--Nationwide in 2008, 2.9% of non-Caucasian entrepreneurs shuttered their businesses compared to 1.4% in 2009.
· Pessimism is heightened--In
2009, U.S. early-stage and established entrepreneurs uniformly rated
the entrepreneurial climate negative with few business opportunities,
even as GEM’s ‘national experts’ perceived the existence of ‘good
opportunities to create new firms’ markedly on the rise.
· Some industries fare better—Entrepreneurship
activity among extractive and transforming industries changed little
between 2008 and 2009, while business services experienced the greatest
declines. Activity in the consumer sector actually increased in both
early-stage (from 35.9% to 41.1%) and established businesses (32.8% to
34.3%), perhaps because of low capital and technical training
requirements needed for these businesses.
· Drop in innovation--2009
saw declines in new products and services, and declines in innovation
were deeper for established businesses (25.7% of entrepreneurs reported
developing innovative products in 2009, the corresponding number for
established businesses is 9.9%). Early-stagers are more innovative and
GEM speculates they will be better positioned coming out of the crisis.
· US still innovation leader—Of
innovation-driven economies, the U.S. is among the countries with the
highest rates for emerging (nascent) entrepreneurial activity and holds a
higher average rate among nascent and new firm (3-43months in business)
economies.
· Hard to startup, easy to establish—GEM
found that starting a business in the U.S. was more difficult in
general than growing an existing business. The U.S. discontinuation
rate is slightly higher than the average for innovation-driven countries
in 2009 —probably due to fewer opportunities in finding alternative
sources of income during the recession.
·
Internet entrepreneurs—Early-stage entrepreneurs reported starting out as an Internet business 18% of the time in 2009 compared to 2.3% a year earlier.
Internet entrepreneurs—Early-stage entrepreneurs reported starting out as an Internet business 18% of the time in 2009 compared to 2.3% a year earlier.
· Rising interest in social entrepreneurship-GEM
found an increasing interest in social entrepreneurship as an approach
to business start-up and growth, and in 2009, social entrepreneurship
continues to capture the imagination of the world.
· Funding falls—Informal investment in entrepreneurs from the so-called 3Fs-Family, Friends, and Foolhardy strangers-continued
to fall in 2009. The US prevalence rate was the third lowest since
1999 when GEM began its annual surveys. 2008 and 2009 were also the
weakest market years for Initial Public Offerings (IPOs) since 1980
almost 30 years ago.
· Clean Technology attracts Venture Capital-With
the amount invested increasing ten-fold from $0.4 billion in 2004 to
$4.1 billion in 2008. Investment fell though in 2009 along with VC
investment in general.
· Gender gap narrows—In
2008, the gender gap decreased between male and female prevalence rates
among entrepreneurs. In 2009, both male and female prevalence rates
declined with the gap remaining essentially unchanged.
· Up-Tick in dynamism—In
2009, the U.S. dynamism rate (ratio of early-stage entrepreneurs to
established businesses) experienced a slight up-tick from 2008.
The link to the full report:
About GEM U.S. Team
In
January 2008, Babson College invited Baruch College to join the GEM
United States Team. The partnership brings together the expertise from
the Arthur M. Blank Center for Entrepreneurship at Babson with that from
the Lawrence N. Field Center for Entrepreneurship at Baruch College,
specifically around minority and immigrant entrepreneurship.
Barbara Spies Blair
Associate Director, Public Relations, Babson College
Babson Park, MA 02457
tel: 781-239-4621
Educating leaders who create economic and social value everywhere
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