Kauffman Index of Entrepreneurial Activity 2010 Report

Executive Summary

In 2009, the number of people reporting entry into entrepreneurial activity in the United States reached its highest point over the last fourteen years. This increased rate of entrepreneurship was seen across most demographic categories, with the largest increases coming among older individuals and African-Americans. While the West continues to have a higher rate of entrepreneurship than other parts of the country do, it showed a sharp decline in 2008. These trends and many more are discussed here in the Kauffman Index of Entrepreneurial Activity, the leading indicator of new business creation in the United States.

Capturing new business owners in their first month of significant business activity, this measure provides the earliest documentation of new business development across the country. The percentage of the adult, non-business-owner population that starts a business each month is measured using data from the Current Population Survey (CPS). In addition to this overall rate of entrepreneurial activity, separate estimates for specific demographic groups, states, and select metropolitan statistical areas (MSAs) are presented. The Index provides the only national measure of business creation by specific demographic groups.

New 2009 data allow for an update to previous reports, with consideration of trends in the rates of entrepreneurial activity over the fourteen-year period between 1996 and 2009. The Kauffman Index reveals important shifts in the national level of entrepreneurial activity and shifts in the demographic and geographic composition of new entrepreneurs across the country. Key findings for 2009 include:

• In 2009, 0.34 percent of the adult population (or 340 out of 100,000 adults) created a new business each month, representing approximately 558,000 new businesses per month. The 2009 entrepreneurial activity rate represents an increase over the 2008 rate of 0.32 percent and represents the highest level over the past decade and a half.
• Overall, men are substantially more likely to start businesses each month than are women. The entrepreneurial activity rate for men increased slightly from 0.42 percent in 2007 to 0.43 percent in 2008. The Kauffman Index for women also increased slightly, from 0.24 percent to 0.25 percent.
• The entrepreneurial activity rate among African-Americans increased from 0.22 percent in 2008 to 0.27 percent in 2009, reaching the highest level over the past decade and a half.
• The Latino entrepreneurial activity rate decreased from 0.48 percent in 2008 to 0.46 percent in 2009, and the Asian entrepreneurial activity rate decreased from 0.35 percent in 2008 to 0.31 percent in 2009. The non-Latino white business-creation rate increased from 2008 to 2009 (0.31 percent to 0.33 percent).
• The immigrant rate of entrepreneurial activity declined slightly from 0.53 percent in 2008 to 0.51 percent in 2009, but remained substantially higher than the native-born rate of 0.30 percent.
• The oldest age group (ages fifty-five to sixty-four) experienced the second-largest increase in business-creation rates from 2008 to 2009, contributing to a two-year upward trend. Among this group, entrepreneurial activity rose from 0.36 percent to 0.40 percent. The age group thirty-five to forty-four also experienced a large increase in entrepreneurial activity from 2008 to 2009 (0.35 percent to 0.40 percent). The youngest age group (twenty to thirty-four) has a substantially lower entrepreneurship rate (0.24 percent).
• Entrepreneurship rates increased the most for college-educated individuals (0.31 percent to 0.34 percent), and high school individuals (0.35 percent to 0.38 percent) in 2009.
• The construction industry had the highest rate of entrepreneurial activity of all major industry groups in 2009 (1.55 percent). The second-highest rate of entrepreneurial activity was in the services industry (0.42 percent).
• The entrepreneurial activity rate declined sharply in the West, from 0.42 percent in 2008 to 0.38 percent in 2009. Business creation rates increased in the Midwest and South, but the West continues to have the highest rates.
• The states with the highest rates of entrepreneurial activity were Oklahoma (470 per 100,000 adults), Montana (470 per 100,000 adults), Arizona (460 per 100,000 adults), Texas (450 per 100,000 adults), and Idaho (450 per 100,000 adults). The states with the lowest rates of entrepreneurial activity were Mississippi (170 per 100,000 adults), Nebraska (200 per 100,000 adults), Pennsylvania (200 per 100,000 adults), Alabama (210 per 100,000 adults), and Minnesota (220 per 100,000 adults).
• The states experiencing the largest increases in entrepreneurial activity rates over the past decade were Georgia (0.20 percentage points), Arizona (0.14 percentage points), Tennessee (0.13 percentage points), the District of Columbia (0.12 percentage points), and Massachusetts (0.10 percentage points). The states that experienced the largest decreases in their rates were New Mexico (-0.20 percentage points), Alaska (-0.15 percentage points), North Dakota (-0.12 percentage points), and Nebraska (-0.10 percentage points).
• Among the fifteen largest MSAs in the United States, the highest entrepreneurial activity rate in 2009 was in Houston (0.63 percent). The large MSA with the lowest rate of entrepreneurial activity was Seattle (0.16 percent).