#188. Entrepreneurial Activity

Posted on | The Agurban

Entrepreneurial Activity

The Ewing Marion Kauffman Foundation, based in Kansas City, Missouri, was established with a vision of advancing entrepreneurship and improving the education of children and youth. Ewing Kauffman began working as a salesman for a pharmaceutical company following his service in the Navy during World War II. In 1950, his innately entrepreneurial spirit led him to start his own pharmaceutical company in the basement of his home. When he sold his company to Merrell Dow in 1989, it had grown to become a global diversified health care giant with nearly $1 billion in sales and employing 3,400 associates. Ewing Kauffman established the Foundation with the same sense of opportunity he brought to his business endeavors, and, with the same convictions. Kauffman wanted his foundation to be innovative-to dig deep and get at the roots of issues to fundamentally change outcomes in people’s lives.

Each year, the Foundation releases the Kauffman Index of Entrepreneurial Activity, which is a leading indicator of new business creation in the United States. Capturing new business owners in their first month of significant business activity, this measure provides the earliest documentation of new business development across the country.

The Index provides the only national measure of business creation by specific demographic groups. While the entrepreneurial activity rate has remained roughly consistent over the past decade, the Kauffman Index reveals important shifts in the demographic and geographic composition of new entrepreneurs across the country.

In 2007, 0.30 percent of the adult population or three hundred out of one hundred thousand adults created a new business each month, representing approximately four hundred ninety-five thousand new businesses per month. This total rate of business creation increased only slightly from 0.29 percent in 2006.

In 2007, there are some interesting differences in changes in entrepreneurial activity rates for population subgroups.

First, trends in entrepreneurial activity diverged for men and women. For men, the entrepreneurial activity rate increased from 0.35 percent in 2006 to 0.41 percent in 2007. In contrast, the entrepreneurial activity rate for women decreased from 0.23 percent in 2006 to 0.20 percent in 2007. Second, Latinos experienced a large increase in the entrepreneurial activity rate in 2007. The entrepreneurial activity rate increased from 0.33 percent in 2006 to 0.40 percent in 2007. A related finding is that the rate of entrepreneurial activity among immigrants, already high relative to the native- born, increased substantially between 2006 and 2007, from 0.37 percent to 0.46 percent, considerably higher than the native-born entrepreneurial activity rate of 0.27 percent.

Entrepreneurial activity rates varied substantially across states, from a low of 0.08 percent in West Virginia to a high of 0.46 percent in Idaho. Entrepreneurial activity rates also were high in the District of Columbia (0.46 percent), Arizona (0.46 percent), Tennessee (0.44 percent), and Louisiana (0.44 percent). In addition to West Virginia, the lowest rates of entrepreneurial activity were found in Alabama (0.10 percent), Delaware (0.14 percent), Pennsylvania (0.15 percent), and Ohio (0.19 percent). The states experiencing the largest increases in entrepreneurial activity rates over the past decade were Mississippi (with an increase of 0.14 percentage points), Hawaii (0.11 percentage points), Rhode Island (0.08 percentage points), and Massachusetts (0.07 percentage points).

As you know, Encouraging an Entrepreneurial Approach is one of the keys in my book Boomtown USA – The 7 Ā½ Keys to Big Success in Small Towns. Nearly every day I read about entrepreneurs, from teenagers to retirees, starting new businesses. We will continue to follow this trend.

For the complete report, visit 2007 Kauffman Index of Entrepreneurial Activity.