Startups Down But Entrepreneurs Eternally Confident

Entrepreneurship dipped in 2011, but still remains above pre-recession levels, according to data from the Kauffman Index of Entrepreneurial Activity. The Index, released in March 2012 by the Ewing Marion Kauffman Foundation, captures annual information about new business owners in their first month of significant business activity in the United States.

In June 2012, Kauffman conducted a nationwide email survey of new business founders who formed their businesses within the past 12 months. Of the 698 respondents, 551 “are confident or very confident that their businesses will be more profitable in the next 21 months than today.”

Nevertheless, this was 3% less than Kauffman’s confidence survey three months earlier. And one-third of the entrepreneurs expect consumer demand to deteriorate in the next 12 months.

The Entrepreneurial Index shows that 0.32% of American adults created a business each month in 2011, a 5.9% drop from 2010 but still among the highest levels of entrepreneurship over the past 16 years. However, startup founders remained more likely to go it alone than to hire others.

“The Great Recession has pushed many individuals into business ownership due to high unemployment rates,” a Kauffman executive said. “However, economic uncertainty likely has made them more cautious and they prefer to start sole proprietorships rather than more costly employer firms. This ‘jobless entrepreneurship’ trend negatively affects job creation and the larger economic recovery.”

This article is from the January/February Issue of the CIMS Innovation Management Report.

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