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Two recent reports highlight the importance of early-stage entrepreneurship for US economy

April 07, 2022
By: Emily Chesser

Two recent reports feature evidence demonstrating the importance of early-stage entrepreneurship for the United States economy. The first report from the Kauffman Foundation released four indicators used to track early-stage entrepreneurial development. The second report from the Economic Innovation Group studies how dynamic the U.S. economy is and recommends ways to increase the economy's dynamism, many of which center around startups and new small businesses. Both reports highlight new ways to measure early-stage entrepreneurship and offer ways to expand these businesses.

The Ewing Marion Kauffman Foundation released its 2021 National Report on Early-Stage Entrepreneurship in the United States last month. This report features four indicators used to track annual early-stage entrepreneurial development. These indicators include the rate of new entrepreneurs each month, the share of new entrepreneurs measured by the percentage of new entrepreneurs creating a business out of opportunity rather than necessity, startup early job creation measured by the total number of jobs created by startups per capita, and startup early survival rate calculated as the one-year average survival rate for new business ventures. According to the report, the national rate of new entrepreneurs in 2021 was 0.36, which means that out of every 100,000 adults, 360 became new entrepreneurs in a given month. This indicator and the others identified in the report revealed the lingering impact of the COVID-19 pandemic on early-stage entrepreneurship following job losses and shutdowns.

Another report released by the Economic Innovation Group features similar themes. This report centers on the idea of economic dynamism, the rate of change across the economy. EIG lists the primary indicators for economic dynamism as the rate of business formation and closure, the frequency of job changes, and the propensity of workers to change locations. According to the report, encouraging a dynamic economy can create better job opportunities for marginalized workers and accelerate wage growth. The report also noted the unique role startups play in promoting economic dynamism. According to the report, since the Great Recession, the total number of new jobs generated by startups has decreased from 2.8 million jobs per year to 2.3 million jobs per year, reducing the number of pure gains in employment. The report recommends removing barriers to competition in the labor market, embracing the advantage of attracting skilled immigration, and reducing opposition to proposed developments to help renew the economy.

entrepreneurship, report