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Fewer New Businesses Launched Last Year
Daily Policy Digest

Economic Issues / Entrepreneurs

Thursday, May 30, 2002
The sluggish U.S. economy and the events of September 11 combined to reduce entrepreneurship in 2001, according to a recent study by Babson College and the Kauffman Center for Entrepreneurial Leadership.

  • Just 12 percent of adults were involved in start-ups of new businesses or in a business less than four years old last year -- compared to 17 percent the previous year.
  • Among those who launched their own businesses, 89.7 percent elected to quit their current job for self-employment -- while 10.3 percent said they were forced to do so after losing their job.
  • Start-up financing, especially from venture capitalists, dried up last year.
  • Another factor in the decline was a shift in priorities -- with would-be entrepreneurs deciding to take fewer risks and spend more time with their families.
Historically, entrepreneurship rises in recessions because people leave companies to take advantage of lower start-up costs. That is still happening, the researchers say, though at a lower rate.

Source: Jim Hopkins, "Fewer Entrepreneurs Set Up Shop Last Year," USA Today, May 30, 2002.

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