Kauffman Index of Entrepreneurial Activity: 1996-2007

Abstract

The rate of entrepreneurial activity among women dropped sharply in 2007 while the activity rate among men and immigrants surged, according to a national assessment of entrepreneurial activity by the Ewing Marion Kauffman Foundation. According to the Kauffman Index of Entrepreneurial Activity, the only annual study to measure business startup activity for the entire United States adult population at the individual owner level, 495,000 new businesses per month were started in 2007 with 0.30 percent of the adult population (or 300 out of 100,000 adults) involved in the startup process. This entrepreneurial activity rate is a slight increase over the 2006 rate of 0.29 percent.

Several surprising findings from the Kauffman Index are:

1. Immigrants far outpaced native-born Americans in entrepreneurial activity, increasing from 0.37 percent in 2006 to 0.46 percent in 2007. Immigrants are now substantially more likely to start businesses than are native-born Americans, which remained constant at 0.27 percent.

2. Men are now twice as likely as women to start a business each month, a larger differential than in any previous year of the KIEA study. For men, the entrepreneurial activity rate increased from 0.35 percent in 2006 to 0.41 percent in 2007. The rate decreased from 0.23 percent to 0.20 percent for women.

3. The entrepreneurial activity rate among Latinos increased from 0.33 percent in 2006 to 0.40 percent in 2007, the largest increase for any major ethnic or racial group.

Data for the Kauffman Index of Entrepreneurial Activity are derived from the monthly Current Population Survey (CPS), a national population survey conducted by the U.S. Bureau of the Census and the Bureau of Labor Statistics. The detailed demographic information available allows researchers to estimate rates of entrepreneurial activity by race, education, region, age and immigrant status and is the most up-to-date estimate of new business activity and the only estimate of business creation by detailed demographic group. Unlike other studies that primarily capture the creation of new employer firms, the Kauffman Index of Entrepreneurial Activity captures all adults 20-64 who initially start a business, including those who own incorporated or unincorporated businesses and those who are employers and non-employers. Capturing new business owners in their first month of significant business activity serves as a leading indicator of new business creation in the United States.

Keywords: entrepreneurship, index, immigrant, women, business entry, Current Population Survey, Kauffman Foundation

JEL Classification: D2, D5, E32, E66, H32, J1, J21, L00, L6, L7, L8, M13, N10, O18