Thursday, April 10, 2014

Entrepreneurial activity falls again in 2013 according to Kauffman

(KANSAS CITY, Mo.), April 9, 2014 – As the nation's employment rate continued to improve, America's overall business creation rate fell again in 2013.

According to the annual Kauffman Index of Entrepreneurial Activity, released today, the rate declined slightly from 0.30 percent of American adults per month starting businesses in 2012 to 0.28 percent in 2013.

That translates into approximately 476,000 new business owners per month in 2013 compared with 514,000 the year before.

For the first time in the 18 years this report has tracked entrepreneurship activity, the 2013 index includes new data on trends in entrepreneurship among new entrepreneurs who are not coming directly out of unemployment (sometimes called "opportunity" entrepreneurship).

The research indicates that the share of new entrepreneurs who are not most recently jobless was much higher in 2013 than at the end of the Great Recession.

"The 2013 business creation rate signifies a return to levels that we haven't seen since before the recession," said Dane Stangler, vice president of Research and Policy at the Kauffman Foundation, which conducts the annual study. "While we have speculated in recent years that changes in entrepreneurship rates could be driven by labor market conditions, this new data provides the strongest evidence we've seen of this correlation." 

The Kauffman Index reported last year that the new business creation rate had declined from 0.32 percent in 2011 to 0.30 percent in 2012.

The construction industry attained the highest level of entrepreneurial activity among industry groups in 2013, with a rate of 1.27 percent. The service industry had the second-highest rate, 0.37 percent.

The decline in business creation rates in 2013 was due primarily to a drop in business creation rates among men, but also stemmed from a slight drop in business creation among women.

  • Following a downward trend that began in 2011, the entrepreneurial activity rate among men declined substantially, from 0.38 percent in 2012 to 0.34 percent in 2013, reaching pre-recessionary levels. 
  • The entrepreneurship rate for women dropped from 0.23 percent in 2012 to 0.22 percent in 2013.
  • The entrepreneurship rate for all races and ethnicities declined from 2012 to 2013.
    •  Latinos, declined from 0.40 percent in 2012 to 0.38 percent in 2013.
    • Asian  decreased from 0.31 percent in 2012 to 0.28 percent in 2013;
    •  African-American rate slid from 0.21 percent in 2012 to 0.19 percent in 2013; and 
    • Whites dropped from 0.29 percent in 2012 to 0.27 percent in 2013.
  • Most age groups also experienced declines in business creation rates. 
    • The exception was the group aged 45 to 54, whose rate increased from 0.34 percent in 2012 to 0.36 percent in 2013.
  • Business creation was lowest among the youngest group, aged 20 to 34, whose rate declined from 0.23 percent in 2012 to 0.18 percent in 2013.
  • Business creation by veterans declined from 0.28 percent in 2012 to 0.23 percent in 2013. 
    • The share of all businesses created by veterans declined sharply over the past 18 years as the working-age veteran population declined over this period.
  • Eentrepreneurial activity among immigrants also decreased sharply in 2013, 
    • The rate among immigrants remains nearly twice as high as the native-born rate.

From a geographic standpoint, entrepreneurial activity rates declined in all regions of the country.

  • Montana had the highest entrepreneurial activity rate, with 610 per 100,000 adults creating businesses each month during 2013, followed by
  • 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).

The states with the lowest entrepreneurial activity were 

  • Iowa (110 per 100,000 adults), 
  • Rhode Island (140 per 100,000 adults), 
  • Indiana (160 per 100,000 adults), 
  • Minnesota (160 per 100,000 adults), 
  • Washington (170 per 100,000 adults) and 
  • Wisconsin (170 per 100,000 adults).

San Francisco's 0.57 percent entrepreneurial activity rate was the highest among the nation's 15 largest MSAs in 2013. Philadelphia scored the lowest rate, 0.18 percent.

The complete report plus interactive data of annual entrepreneurial activity nationally is available at 

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