For the past 15 years, the Kauffman Foundation has been a leader in gathering and analyzing data related to entrepreneurial activity in the United States. Many governmental, economic development, higher education, and private sector policy leaders have turned to the Kauffman Foundation to understand how to nurture the development of entrepreneurs in their geographic areas.
The Kauffman Index of Entrepreneurial Activity by State report does an excellent job of providing a snapshot of entrepreneurship rates in the 50 states in the U.S.
The Kauffman report had several key conclusions related to entrepreneurial activity in the United States. Please find below a summary of some of the key findings.
1. The rate of business creation declined from 340 out of 100,000 adults in 2010 to 320 in 2011 (a 5.9% drop).
2. Both men and women experienced declining rates of entrepreneurial activity in 2011.
3. Immigrants were more than twice as likely as native-born Americans to start new businesses in 2011.
4. People in the 20-34 and 45-54 age groups experienced increases in entrepreneurial activity from 2010 to 2011, while the age groups of 35-44 and 55-64 suffered decreases.
5. The construction industry had the highest level of entrepreneurial activity in 2011 (1.68%) – the services industry was second at 0.42%.
6. From 2010 to 2011, entrepreneurial activity rates decreased in all regions of the country, except for the Northeast, which experienced a minimal increase.
7. Entrepreneurship is the highest in the West and the lowest in the Midwest.
8. The highest rates of entrepreneurship in 2011 were in Arizona (first), Texas, California, Colorado and Alaska, while the lowest rates were in West Virginia (last), Pennsylvania, Hawaii, Illinois and Indiana.
9. The states experiencing the largest increases in entrepreneurial activity rates over the past 10 years were Nevada (first), Georgia, Massachusetts, Tennessee and California, while Wyoming (last), New Mexico, Alaska, Iowa, Indiana and Oregon.
10. In terms of the largest Metropolitan Statistical Areas in the U.S., Los Angeles (first), Atlanta, Phoenix, Miami and Riverside-San Bernardino ranked the highest in entrepreneurial activity, while Detroit (last), Chicago, Philadelphia, Washington D.C. and Boston ranked the lowest.
Like every report, it is important to review the details of the information presented to understand the methodology and data sources used to reach key conclusions. There are certainly some interesting takeaways from the Kauffman report.
People in the West, Southeast, Southwest and Mountain states are more willing to take the risk of failing as an entrepreneur, as compared to people in the Midwest, Plains, Mid-Atlantic and Northeast United States. The people living in the West and South are simply more comfortable with taking risk as a part of their culture.
Another interesting finding relates to the much higher level of entrepreneurial activity in the immigrant community in the United States. This finding seems to support the widely helf belief that there is a “hunger” amongst many of the ethnic groups that immigrate to our country in hopes of making a better life for their families. This “drive” pushes them to want to build their own businesses.
The other finding that I would point out relates to the decline in entrepreneurship from 2010 to 2011. In some cases, you see more people take the entrepreneurial plunge if they leave or lose their job. However, the prolonged economic downturn and financial crisis in the United States has impacted the availability of capital and confidence in the economy. As a result, many people started sole proprietorships versus launching small businesses that employed other people.
In conclusion, some states and regions are fortunate to be located in areas where risk taking is more acceptable. These areas need to capitalize on this cultural aspect of their area as the economy hopefully improves over the next several years. Other areas of the country that have a legacy of having larger companies and manufacturing industries need to look at ways to improve their “environment” in order to encourage additional entrepreneurial activity and help ensure a healthy economy. The United States was originally built by people looking for a better life for their families. Now is the time for all Americans to look at ways they can help make our country, once again, become economically strong.
Larry Gigerich serves as Managing Director of Ginovus. Ginovus is a leading provider of national site selection, community comparative analysis and economic development incentive procurement & management services to private sector, educational, governmental and not-for-profit organizations throughout North America. Ginovus is headquartered in Indianapolis, Indiana.
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