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Rate of New Business Formation (Startups) Is Not What You Think

This is a syndicated repost courtesy of True Economics. To view original, click here. Reposted with permission.

Much has been written, taught and said about the New Age of Entrepreneurship and the new generations of entrepreneurs, allegedly springing up across the modern economies. The problem is, for all the marketing hype and academic programs enthusiasm, entrepreneurship (new business formation) is actually running pretty low.

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Here is the U.S. data on new business formation:

While other data, e.g. Kauffman Foundation, shows relatively stable and even higher rates of entrepreneurship over recent years, much of this data aggregates both incorporated and non-incorporated businesses, including sole traders and self-employed. This is reflected in the fact that entrepreneurship rates in recent years have been sustained solely by a massive increase in entrepreneurship uptake by individuals with less than high school education and of older age cohorts:

Source: https://indicators.kauffman.org/wp-content/uploads/sites/2/2019/02/2017-National-Report-on-Early-Stage-Entrepreneurship-February-20191.pdf

Over the same time, cohorts with higher education have seen a decrease in their entrepreneurship rates, driven in part by their rising share of population, their rising numbers, and, well, yes, lower incentives to undertake entrepreneurial risks.

Now, as to the age of entrepreneurs we have.

Source: https://indicators.kauffman.org/wp-content/uploads/sites/2/2019/02/2017-National-Report-on-Early-Stage-Entrepreneurship-February-20191.pdf 

In  summary, the above table shows that the rates of entrepreneurship amongst the Millennials have declined, the rates for GenX-ers (35-44 cohort) have risen, but are quite volatile, with significant increases (2009-2010) associated with greater involuntary entrepreneurship (high unemployment), while overall increases in entrepreneurship have ben sustained by entrepreneurs of ages 45 and older.

So, to that often repeated popular and academist ‘truism’ of the New Age of Entrepreneurship and the great entrepreneurial spirit of the younger generations… errr, not quite.

Note: caveats notwithstanding, good data on the subject is available here: https://www.kauffman.org/currents/2019/02/indicators-provides-early-stage-entrepreneurship-data.

Wall Street Examiner Disclosure:Lee Adler, The Wall Street Examiner reposts third party content with the permission of the publisher. I curate posts here on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. Some of the content includes the original publisher's promotional messages. I may receive promotional consideration on a contingent basis, when paid subscriptions result. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler, unless authored by me, under my byline. No endorsement of third party content is either expressed or implied by posting the content. Do your own due diligence when considering the offerings of information providers.

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