Kauffman Annual Entrepreneurship Index

March 21, 2012

On Monday, the Ewing Marion Kauffman Foundation released their annual “Kauffman Index of Entrepreneurial Activity,” which shows that, although the rate of new business creation dipped during 2011 and startup founders remained more likely to fly solo than employ others, U.S. startup activity still remains above pre-Great Recession levels.

Among the key findings, the Kauffman Index shows a 5.9 percent drop from 2010 in the rate business to 0.32 percent per month in 2011. That said, Kauffman cites this rate of business formation as still among the highest levels over the past 16 years. Another key indicator of the Index is the quarterly employer firm rate, which remained stagnant from 2010 to 2011.

According to Robert Litan, vice president of research and policy at the Kauffman Foundation, today’s entrepreneurs, as a result of economic uncertainty are “…more cautious, and they prefer to start sole proprietorships rather than more costly employer firms. This ‘jobless entrepreneurship’ trend negatively effects job creation and the larger economic recovery.”

The Index examines entrepreneurship growth along a number or parameters including race, age, gender, geography and industry. There were relative uniform decreases among all races in terms of entrepreneurial growth. Individuals aged 45- to 54 and 20 to 34 experienced increases in entrepreneurial growth while 35- to 44-year-old and 55- to 64-year-olds experienced decreases in entrepreneurial activity.

Along gender lines, both men and women experienced slight decreases in entrepreneurial activity. Geographically, the Northeast was the only region in the U.S. that experienced a slight increase—all other regions showed decreases in entrepreneurial activity rates from 2010 to 2011. Among the various industries, construction had the highest entrepreneurial activity rate at 1.68 percent, continuing an upward trend over the past several years, followed by the services industry at 0.42 percent.

Please click here to view the full report.