In the early 1980s, buffeted by a severe recession and nearly 11 percent unemployment, the economic future of the United States appeared gloomy. Yet America did not collapse; instead, the economy surged. The late 1970s and early 1980s turned out to mark an inflection point as technological advances building for two decades were catalyzed by new entrepreneurial firms in the seventies, eighties, and nineties.
This pattern of innovation and job creation in new firms has characterized the last 30 years, with firms less than five years old accounting for nearly all net job creation since 1980. Yet the recession of 2007-09—as severe if not worse than the 1981-82 recession—has once again called into question U.S. economic prospects and, in particular, the fate of entrepreneurs. As the world celebrates Global Entrepreneurship Weekthis week, what is the state of entrepreneurship?
Statistical indicators paint a mixed picture.
The Kauffman Index of Entrepreneurial Activityshowed a slight uptick in 2008. Numbers from the Bureau of Labor Statistics(BLS), by contrast, chart a steady decline in new establishment creation. (An establishment includes both an entirely new company and a new location opened by an existing company.)
Today, the Organisation for Economic Cooperation and Development(OECD) is releasing a new round of Timely Entrepreneurship Indicatorsthat appear to convey a dreary message: entrepreneurship is falling. For most of the 10 developed countries included in the report, firm creation has fallen since 2007—worryingly for the United States, the OECD data show steadily falling firm formation in every year since 2005, including the first half of 2009.