Are Americans Becoming Interested in Entrepreneurship Again?

Scott Shane

Tuesday, September 17th, 2013

The recently released Global Entrepreneurship Monitor (GEM), a nationally representative survey of American adults, reveals that the fraction of Americans who intend to start a business rose to 12.5 percent in 2012 — a substantial increase from the 8.3 percent recorded in 2008.

What’s behind the change?

It doesn’t appear to be driven by a shift in Americans’ beliefs about their entrepreneurial abilities. In both 2008 and 2012, 56 percent of Americans said they had the skills to start a business.

It might be related to the rising fraction of Americans who believe that there are “good opportunities for entrepreneurship around them.” Only 37 percent of those surveyed by the GEM said that there were good start-up opportunities in 2008. In 2012, that fraction had increased to 44 percent. As the authors of the report explain, the current number “represents a jump of more than 20% from 2011 and the highest level recorded since GEM began in 1999.”

While more Americans perceive entrepreneurial opportunities than did five years ago, a greater fraction is also concerned about failing. In 2008, only 25 percent of those surveyed by GEM feared entrepreneurial failure. By 2012 that fraction had increased to 32 percent.

Americans are beginning to act on their increasing entrepreneurial intentions. According to the GEM, the fraction of respondents with start-ups less than three-and-a-half years old jumped in 2011 and continued to rise in 2012, to the highest level since the survey was initiated in 1999.

Other sources show similar patterns. Census Bureau data on new employer firm formation showed a 2.3 percent increase in the number of firms per thousand people (from 1.28 to 1.31) between 2010 and 2011. (Government figures for new employer firm formation for 2012 haven’t been released yet.)

However, the rise in entrepreneurship appears concentrated among people just beginning to launch their businesses. While the fraction of Americans who had a business three-or-fewer months old grew between 2011 and 2012, the share with businesses between 3 months and three-and-a-half years old declined.

While start-up activity may be climbing out of its trough, existing entrepreneurs still appear to be exiting at elevated rates. Bureau of Labor Statistics data don’t show evidence of an increase in fraction of self-employed Americans. As the figure below shows, after declining continuously for several years, the self-employed share of the civilian labor force remained stable at 6.02 percent between April 2012 and April 2013. If the fraction of Americans starting businesses is rebounding, but the share of self-employed Americans is flat, then the fraction of self-employed exiting must still be high.

About Scott Shane

Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University.