October 22, 2014

Are Americans Becoming Interested in Entrepreneurship Again?

american entrepreneur

The recently released Global Entrepreneurship Monitor (GEM), a nationally representative survey of American adults, reveals that the fraction of Americans who intend to start a business rose to 12.5 percent in 2012 — a substantial increase from the 8.3 percent recorded in 2008.

What’s behind the change?

It doesn’t appear to be driven by a shift in Americans’ beliefs about their entrepreneurial abilities. In both 2008 and 2012, 56 percent of Americans said they had the skills to start a business.

It might be related to the rising fraction of Americans who believe that there are “good opportunities for entrepreneurship around them.” Only 37 percent of those surveyed by the GEM said that there were good start-up opportunities in 2008. In 2012, that fraction had increased to 44 percent. As the authors of the report explain, the current number “represents a jump of more than 20% from 2011 and the highest level recorded since GEM began in 1999.”

While more Americans perceive entrepreneurial opportunities than did five years ago, a greater fraction is also concerned about failing. In 2008, only 25 percent of those surveyed by GEM feared entrepreneurial failure. By 2012 that fraction had increased to 32 percent.

Americans are beginning to act on their increasing entrepreneurial intentions. According to the GEM, the fraction of respondents with start-ups less than three-and-a-half years old jumped in 2011 and continued to rise in 2012, to the highest level since the survey was initiated in 1999.

Other sources show similar patterns. Census Bureau data on new employer firm formation showed a 2.3 percent increase in the number of firms per thousand people (from 1.28 to 1.31) between 2010 and 2011. (Government figures for new employer firm formation for 2012 haven’t been released yet.)

However, the rise in entrepreneurship appears concentrated among people just beginning to launch their businesses. While the fraction of Americans who had a business three-or-fewer months old grew between 2011 and 2012, the share with businesses between 3 months and three-and-a-half years old declined.

While start-up activity may be climbing out of its trough, existing entrepreneurs still appear to be exiting at elevated rates. Bureau of Labor Statistics data don’t show evidence of an increase in fraction of self-employed Americans. As the figure below shows, after declining continuously for several years, the self-employed share of the civilian labor force remained stable at 6.02 percent between April 2012 and April 2013. If the fraction of Americans starting businesses is rebounding, but the share of self-employed Americans is flat, then the fraction of self-employed exiting must still be high.

American Entrepreneur Photo via Shutterstock

12 Comments ▼

Scott Shane


Scott Shane Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool's Gold: The Truth Behind Angel Investing in America ; Illusions of Entrepreneurship: and The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By.

12 Reactions

  1. I would think that at least some of the increase in entrepreneurship has to do with middle-aged and older workers losing their jobs and being unable to find new ones. They become self-employed out of necessity, not choice.

  2. I have seen this shift since 9/11. Many people already wanted to go it alone, but were afraid. But when major event rock the world, people change their thinking. This has continued with the economic bust, the change in healthcare plans that are causing companies to exit employees, etc. But mostly, people seem to want a different lifestyle. They want control of their time and their income.

  3. With the job market continuing to be a difficult place for millions of people I would hope that more of them turn to entrepreneurship. It’s a chance to take control of your destiny and create something.

  4. The causes of the rise in entrepreneurship is simple. There are no good jobs, so we make our own. When I lost my job, I was tired of being under appreciated, under paid, overworked, and treated like crap (In some cases I would be forced to work 2 months straight with no days off, and hadn’t had a raise in years [not even cost of living adjustments] this I was told was because the company wasn’t doing to well with the recession, but it was doing well enough to buy 3 competitors)…… So I decided not to work for other people any more.

  5. Just last year i did the same, 5 years in a row I received 2% increase per year. Living in California. This is nothing. Seams more like a slap in the face, still the company acquires more and more acquisitions. I can’t wait to be totally independent. I am currently still under the corporate thumb.

  6. Scott,
    Seeing some of the responses here, I’m wondering if there was any effort in the survey to determine whether lack of jobs or unhappiness with a current position or company was a motive for increased interest in entrepreneurship.

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