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Kauffman report finds entrepreneurship grew in 2020, but entrepreneurship by choice declined

March 18, 2021

While the overall rate of new entrepreneurs experienced an increase throughout 2020, the share of those who created their business out of choice instead of necessity declined during the past year, reflecting the national economic instabilities caused by the COVID-19 pandemic. These trends, along with the levels of startup early job creation and startup early survival rates, are explored within the recently released National Report on Early Stage Entrepreneurship in the United States: 2020 by the Kauffman Foundation.

The rate of new entrepreneurs was higher in 2020 (.38 percent) than in 2019 (.31 percent), due in large part to the instability within the traditional work environment caused by the pandemic. The report notes that there was also an increase in the rate of new entrepreneurs during the Great Recession, but it was much smaller (.32 percent in 2008 and .34 percent in 2009).

The decrease in new entrepreneurs who began their business out of choice during 2020, known as the opportunity share, is the largest drop throughout the past 25 years, according to the Kauffman report. Between 2019 and 2020, the decline was 17.1 percentage points, while the decrease between 2008 and 2009 during the Great Recession was 6.9 percentage points.

Startup early job creation remained essentially unchanged from the previous year (5 jobs per 1,000 people) and its longer-term trends are worrisome, the report says, finding that levels remain substantially lower in recent years than in years prior to the Great Recession, peaking in 1997 at 7.9.

The entire Kauffman Foundation report, National Report on Early Stage Entrepreneurship in the United States: 2020, may be accessed here.