U.S. Entrepreneurship, Past and Future
by Christina Lee on November 21st, 2008
A recent study has led researchers to suggest that economic decline negatively affected U.S. entrepreneurship, after it revealed significant declines over the past three years.
Furthermore, they say that the emergence of start-up businesses could jump-start an economic upturn as they create jobs nationwide – that is, if such businesses strive for innovation, rather than mere economic survival.
The Global Entrepreneurship Monitor, an international research firm, found that more than 61 percent of businesses in 2007 were start-ups – an 8.6 percent decline from 2006, and a nearly 10 percent decline from 2005. It attributes such a drop to the great rise and fall of the housing market, which began in 2001 and ended in 2006.
During that same time period – with the unemployment rate peaking at 5.3 percent, and up to 71 percent of industries losing jobs – entrepreneurship generally declined as unemployment rose, according to the Global Entrepreneurship Monitor report. In addition, all of the net job growth from 1980 to 2000 came from firms less than five years old. Older firms, on the other hand, lost jobs.
Future economic growth relies upon such creation and destruction of jobs – as seen in 2007, when service-providing startups made up more than 75 percent of total job creation and losses, according to the Kauffman Foundation. And while new firms may not initially bring in a high amount of new jobs, over a few years they create new jobs, in addition to innovative goods, services and processes.
The research foundation’s latest report ranked Massachusetts, Washington state, Maryland, Delaware, and New Jersey as the nation’s most prepared for the future, or “the new economy” in summation. With this, companies of any industry should fare well if they embrace new technologies and business models, especially in an economic environment bound only to get more competitive.
The foundation also recommends that new businesses not be entirely inclusive and removed from other sectors of industries. Rather, future success “requires that a whole array of institutions – universities, school boards, firms local governments, economic development agencies – work in new and often uncomfortable ways,” especially with a growing global economy.