With a first-time report on minority entrepreneurs, an influential research project on U.S. entrepreneurship detected declining activity among American entrepreneurs from 2005 to 2007, reflecting a likely sign of the U.S. economy’s broader decline in 2008.
Babson College and Baruch College just released the Global Entrepreneurship Monitor (GEM) 2006-2007 National Entrepreneurial Assessment for the United States of America, and it reports that new entrepreneurs declined from 12.4 percent in 2005 to 9.6 percent in 2007 in the 18- to 64-year old U.S. age cohort.
From 2005 to 2006, new or early-stage entrepreneurs declined from 12.4 percent to 10 percent of 18- to 64-year olds in the U.S. “This means that an estimated 2.4 percent less of the U.S. population for that age group pursued entrepreneurial careers,” the report states.
It also means the economy had 550,000 fewer new business owners in 2006 than in 2005, the study shows.
One of the study’s co-authors says that despite weakening conditions in the economy, it’s very possible that Americans may see increases in entrepreneurial activity in the U.S. “There are two kinds of entrepreneurs: there are the people ‘who want to’ and there are the people ‘who have to’. We call those ‘opportunity’ entrepreneurs and ‘necessity’ entrepreneurs. And I think this significant downturn in the economy is going to create a lot of ‘have to’ or ‘necessity’ entrepreneurs,” says Dr. Ed Rogoff, the chair of the management department in the Zicklin School of Business at Baruch College in New York City.
In addition to reporting on general entrepreneurship trends, the assessment reveals that minorities demonstrated higher rates of entrepreneurship than did Whites, and they showed the same demographic and motivation as White entrepreneurs in terms of business types, growth expectation and education. In reporting on U.S. minority business owners, the GEM surveyed entrepreneurs from four groups: Korean-Americans, Mexican-Americans, African-Americans and a White control group.
Another important finding for minority entrepreneurs reports their motivation for turning to entrepreneurship. Seventy percent of African-Americans, 57.1 percent of Korean-Americans, and 72.6 percent of Mexican-Americans say they launched their businesses after believing they were denied a job because of their race and ethnicity.
