Midwest lags in start-up data; But NE Ohio is called 'surprisingly robust' in entrepreneurship

BYLINE: Shaheen Samavati, Plain Dealer Reporter

The Midwest trailed the nation in the number of start-up businesses last year, according to a study being released today by the Ewing Marion Kauffman Foundation.

The Kauffman Index of Entrepreneurial Activity shows the number of new businesses started each month since 1996. The Kauffman Foundation, based in Kansas City, primarily works to advance entrepreneurship in the United States.

The number of people in the United States starting new businesses over the past decade has stayed fairly consistent, according to a written analysis by the study's author, Robert Fairlie, a researcher at the University of California in Santa Cruz. He reported that 0.29 percent of Americans started a business each month in 2006, the same percentage as the previous year.

Ohio's entrepreneurial index decreased from 0.27 percent in 2005 to 0.22 percent last year. The percentages were nearly in line with the rest of the Midwest.

Decline in self-employment isn't necessarily a bad thing for the region, said Scott Shane, a professor of entrepreneurial studies at Case Western Reserve University's Weatherhead School of Management.

"It doesn't mean much in terms of entrepreneurship the way people popularly think of it," he said.

Many of those who reported being self-employed aren't likely to be starting companies that have a high potential for growth, he said.

Most are in fields such as farming, painting, writing and housekeeping.

That could explain why the study showed Montana, Mississippi and Georgia as rating the highest in entrepreneurial activity in 2006. Michigan, Pennsylvania and South Carolina were at the bottom of the list. "A lot of people go to work for themselves because there are no other jobs," Shane said.

Fairlie got his data from the Current Population Survey, a monthly survey conducted by the U.S. Census Bureau and the Bureau of Labor Statistics.

Those surveyed are asked about their employment. Fairlie looked at people who said they owned their own businesses who had not reported being self-employed the previous month.

Contrary to the study's findings, Shane said entrepreneurship is "surprisingly robust" in Northeast Ohio. He noted the increasing number of spin-offs from Case and the Cleveland Clinic.

"In terms of high-potential start-ups, we've seen a robust set of companies and an increase since 2000," he said.

To reach this Plain Dealer reporter: ssamavat@plaind.com, 216-999-4331