American Entrepreneurship on the Rise

The 2012 Global Entrepreneurship Monitor (GEM) U.S. Report by Babson College and Baruch College shows that the total early stage entrepreneurial activity in the country increased 13 percent, the highest rate since 1999 when GEM first began tracking entrepreneurship. Among the findings, GEM found that a diverse population of age, gender, and immigrant status exists in the entrepreneurship community. This infographic summarizes some of the key trends and conclusions on the entrepreneurial activity and community in the country. The U.S. Chamber of Commerce also has released its Enterprising States report that assesses the entrepreneurial activity and strengths by state using a number of metrics.

The Global Entrepreneurship Monitor is an annual assessment of entrepreneurship activity across the world. Starting with its first report analyzing 10 countries in 1999, the 2013 report looks at nearly 70 countries. In its report on U.S. entrepreneurship, the average total early stage entrepreneurial activity rate is at 13 percent, which is the highest total since the survey began.

First generation U.S. immigrants are more entrepreneurial than the nonimmigrants. Sixteen percent of first generation immigrants are starting and running new businesses, compared to 13 percent of nonimmigrants. The entrepreneurial workforce is not stratified according to age, with 15 percent to 20 percent of workforce adults across all age groups engaged in entrepreneurship. By gender, there are seven women for every 10 men engaged in entrepreneurship. More than 70 percent of these businesses are focused on customer or business services.

However, the study finds limitations to the ability of entrepreneurs to start and grow their businesses. Many entrepreneurs are working out of their residency and rely on at least one family member as part of their labor force, and nearly a quarter of businesses employ a family member who is unpaid. Entrepreneurs are utilizing personal savings, family, and friends for startup capital, with sixteen percent of entrepreneurial funding coming from banks.

This bottleneck in capital financing for these enterprises is a major obstacle to small business growth in the country. In comparison to other countries, American entrepreneurs are experiencing a higher rate of business failure due to the availability of financing. Other problems facing entrepreneurs are market limitations, as only a small number of startup businesses have international customers, and then often represent only a limited amount of sales. And although there is an overall positive perception of people's capabilities to be successful as an entrepreneur, there is a growing pessimism of failure among those who saw an opportunity to launch a business.

Along with this report, the U.S. Chamber of Commerce has released its Enterprising States report, which analyzed all 50 states in 33 metrics. These metrics include seven economic performance indicators such as long- and short-term job growth; four export indicators; six innovation and entrepreneurship indicators which encompasses STEM job growth and concentration; six business climate indicators, for areas such as the legal and tax environments; six talent pipeline indicators, which focuses primarily on educational attainment, output, and efficiency; and four infrastructure indicators, which includes broadband capacity.

Data for each of the states was collected and normalized, then ranked according to a weighted index. Some states and regions outperformed others in the various categories, but the top states in economic performance are North Dakota, Texas, Utah, Wyoming, and Virginia, with Washington, Oklahoma, Louisiana, Maryland, and Iowa completing the top 10. In addition to the metric rankings, the report includes a one-page summary of each state.