Babson College Data Signals Hope that Entrepreneurs Will Lead Post-Pandemic Revival
WELLESLEY, Mass., Sept. 2, 2020 /PRNewswire/ -- In the United States, total entrepreneurial activity (TEA) increased to 17.4% in 2019, a 10% increase over 2018 and the highest level reported in the Global Entrepreneurship Monitor's 21-year history. Additionally, established business activity in 2019 was up by more than one-third of the prior year's level to 10.6%, also the highest level ever reported in the United States by GEM. These are among the findings of the 2019/2020 U.S. Global Entrepreneurship Monitor Report, produced by Babson College and released today.
"Entrepreneurship is a critical contributor to economic growth and stability in the United States, and the COVID-19 pandemic has placed immense pressure and hardship on our nation's entrepreneurs and business owners," said GEM U.S. Team Leader and Babson College Entrepreneurship Professor Donna Kelley. "This report offers a lens into what entrepreneurship looked like in 2019, a time when entrepreneurship was thriving, exhibiting its highest level in over two decades. Moving forward, this research will help us understand the evolving nature and cycles of entrepreneurship in the United States over time. Moreover, the report showcases how at its peak, and when well-supported, entrepreneurship is this country's most powerful tool for economic advancement and post-pandemic revival."
"GEM is a valued and insightful resource supporting public policy, capital formation, and venture creation globally," said Stephen Spinelli Jr., PhD, President of Babson College. "Today, as our nation and the world continue to grapple with the ongoing impacts and uncertainty of COVID-19, entrepreneurship – and the solutions-oriented, opportunity-focused mindset of entrepreneurs – provides a path toward economic healing and value creation."
In light of COVID-19, entrepreneurial leaders from both startup organizations and large corporations have refocused their efforts on mass production of Personal Protective Equipment, turned a Navy ship into a hospital on the shores of New York City, and are leading the race for a COVID-19 vaccine. Leading up to the pandemic in 2019, entrepreneurial intentions in the U.S. had increased more than 10% since 2018, signaling a strong base for entrepreneurship that helped so many to innovate and advance necessary ideas in response to COVID-19.
Additional Key Findings
Established business activity in 2019 was up by more than one-third of the prior year level to 10.6%, also the highest level reported in the United States by GEM.
In 2019, the rate of women's entrepreneurship was 16.6% compared to 18.3% for men. Notably, the gender gap narrowed to an all-time low of less than two percentage points, one of the lowest gender gaps in the world.
In the United States, 55% of the adult population has started at least one business in their lifetime, with 26% saying they have started two or more businesses.
Business exit rates (2.2%), in which a business continued after departure of the entrepreneur, are slightly higher in the United States than in other high-income economies, reflecting high rates of startup activity and exemplifying American's willingness to take risks. However, the percentage of adults who closed a business in the last year (2.9%) is on a par with the high-income average.
The United States shows moderately low necessity motives for entrepreneurship (41%) and among the highest wealth motives (69%) within the 32 developed economies participating in the GEM survey.
Impact motives, having a goal to make a difference in the world, were cited by 66% of U.S. entrepreneurs, among the highest level in the developed economies.
The United States is distinct from the average of the other 31 high-income economies in having a high proportion of entrepreneurs in the manufacturing and transportation sectors (15% versus 11%), and in the finance sector (11% versus 4%), while participating less in the wholesale/retail sector (25% versus 35%).
Among U.S. entrepreneurs, 32.5% expect to create six or more jobs in the next five years, higher than the average of 28% for the other 31 high-income economies. An equal percentage state they will create one to five jobs. Overall, established business owners are only half as likely as TEA to project adding jobs in the next five years.
While 70% of entrepreneurs are not introducing a new product or service, 16% state their offerings are new to people in their local area; 5% report their offerings are new to people in the country; and 8% claim their products or services are new to the world.
In the United States, 60% of adults know at least one person who started a business or became self-employed in the past two years, with nearly half (46%) knowing more than one person who did so.
Entrepreneurial intentions increased over 10% in 2019: 20.4% of the U.S. adult population stated they intend to start a business in the next three years.
In the United States, a high majority of adults (71%) believe it is easy to start a business.
The United States has the highest expert rating on cultural and social norms conducive to entrepreneurship (7.7 out of 10) among all developed economies in GEM reporting, with the 31 other economies only averaging just above five on a 10-point scale.
In the United States, the highest TEA rates are among the age groups 25-34 and 35-44 (22%). However, those under 25 years of age are also starting businesses at a relatively high rate (16%).
About Babson College
Babson College is the educator, convener, and thought leader of Entrepreneurship of All Kinds(r). The top-ranked college for entrepreneurship education, Babson is a dynamic living and learning laboratory where students, faculty, and staff work together to address the real-world problems of business and society. We prepare the entrepreneurial leaders our world needs most: those with strong functional knowledge and the skills and vision to navigate change, accommodate ambiguity, surmount complexity, and motivate teams in a common purpose to make a difference in the world, and have an impact on organizations of all sizes and types. As we have for nearly a half-century, Babson continues to advance Entrepreneurial Thought & Action(r) as the most positive force on the planet for generating sustainable economic and social value.
Global Entrepreneurship Monitor (GEM) is a consortium of national country teams, primarily associated with top academic institutions, that carries out survey-based research on entrepreneurship around the world. GEM is the only global research source that collects data on entrepreneurship directly from individual entrepreneurs! GEM's Adult Population Survey (APS) provides analysis on the characteristics, motivations and ambitions of individuals starting businesses, as well as social attitudes towards entrepreneurship. The National Expert Survey (NES) looks at the national context in which individuals start businesses.
In numbers, GEM is:
20+ years of data
150,000+ interviews a year
500+ specialists in entrepreneurship research
300+ academic and research institutions
200+ funding institutions
GEM began in 1999 as a joint project between Babson College (USA) and London Business School (UK). The consortium has become the richest resource of information on entrepreneurship, publishing a range of global, national and 'special topic' reports on an annual basis.
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SOURCE Global Entrepreneurship Monitor; Babson College