Kauffman Index of Entrepreneurial Activity: 1996-2008
Robert W. Fairlie
University of California, Santa Cruz - Department of Economics
April 30, 2009
Overall, the 2008 entrepreneurial activity rate increased slightly over 2007. An average of 0.32 percent of the adult population (or 320 out of 100,000 adults) created a new business each month - representing approximately 530,000 new businesses per month - as compared to 0.30 percent in 2007. While entrepreneurial activity has remained generally consistent over the past decade, the Kauffman Index points out important shifts in the demographic and geographic composition of new entrepreneurs across the country.
The annual Kauffman Index of Entrepreneurial Activity, a leading indicator of new business activity, provides the earliest documentation of new business development across the United States. Analyzing matched monthly data from the Current Population Survey since 1996, the Kauffman Index allows comparisons of new business creation over time.
Key findings include:
• The oldest age group - ages 55 to 64 - experienced a big increase in business-creation rates from 2007 to 2008 and, as a result, has the highest level of business creation (0.36 percent).
• The activity rate increased sharply for immigrants in 2008 - from 0.46 percent in 2007 to 0.53 percent in 2008 - further widening the gap between immigrant and native-born rates. Although the increase in entrepreneurship rates among immigrants was driven entirely by low- and medium-income-potential types of businesses, immigrants also are more likely than U.S. natives to start high-income-potential types of businesses.
• Latinos’ entrepreneurial activity rate increased from 0.40 percent in 2007 to 0.48 percent in 2008, continuing an upward trend that began in 2005. Over the thirteen years of the study, Latinos have had the highest percentage increase in entrepreneurial activity (from 0.33 percent in 1996 to 0.48 percent in 2008).
• Asian-Americans’ entrepreneurial activity also increased sharply, from 0.29 percent in 2007 to 0.35 percent in 2008. Non-Latino white business-creation rates increased slightly, while African-American rates slightly declined.
• Entrepreneurial activity increased from 2007 rates for both men and women (from 0.41 percent to 0.42 percent for men and from 0.20 percent to 0.24 percent for women).
• With the exception of the Midwest, all regions saw increased entrepreneurial activity from 2007 to 2008.
• The states with the highest 2008 entrepreneurial activity rates were Georgia, New Mexico, Montana, Arizona, Alaska and California.
• The states with the lowest entrepreneurial activity rates were Pennsylvania, Missouri, Wisconsin, West Virginia, Iowa and Ohio.
• Among the United States’ fifteen largest metropolitan statistical areas, Atlanta had the highest entrepreneurial rate (0.74 percent) in 2008. Philadelphia had the lowest rate (0.16 percent).
Number of Pages in PDF File: 36
Keywords: entrepreneurship, index, immigrant, women, business entry, Current Population Survey, Kauffman Foundation
JEL Classification: D2, D5, E32, E66, H32, J1, J21, L00, L6, L7, L8, M13, N10, O18
Date posted: May 5, 2009