Worst of Times May Mean More Entrepreneurship, Kauffman Study Says
by Christina Lee on June 16th, 2009
A note to hope to budding entrepreneurs – a study released last week found that more than half of Fortune 500 companies had been founded in a recession or bear market.
The Kauffman Foundation cross-examined data from the U.S. Census Bureau, Fortune 500, and Inc. magazine to figure out how recessions affected new firm formations.
The study found that in general, bad economic times for the nation may not always impact entrepreneurship in the same way. After all, an individual may feel more apt to start a business once laid off, while entrepreneurs could target the newly unemployed as potential new hires.
Around 51 percent of Fortune 500 companies formed during such times, by comparing their founding years to expansion and contraction dates recorded by the National Bureau of Economic Research (NBER). That percentage jumps to 57 percent when excluding companies founded before 1855 – when NBER started tracking economic cycles.
A good portion of the most famous examples – Sears, 3M, Ford, General Electric – all rose during the Second Industrial Revolution, though this time was surprisingly riddled with economic contractions, the study said.
Current times, however, also may not be no more or less favorable for entrepreneurship than the past. Whether they are born in 1977 or 2001, the rate that new firms survive from age one to age five has remained remarkably similar, despite changing economic conditions.
More information about The Kauffman Foundation’s findings can be found in the study, “The Economic Future Just Happened.”