NCPA - National Center for Policy Analysis

Boom Times Squelch Business Start-Ups

February 16, 2000

The number of businesses started or purchased fell 33 percent between 1995 to 1998 -- from 4.5 million to 3.1 million.

Several factors are responsible:

  • Fewer people are willing to give up the security of their jobs -- so they put plans to launch their own enterprises on hold.
  • In today's tight labor market, those who do get laid off -- a pool that often started home-based consulting firms in the past -- easily find new work.
  • The good economy means higher rents and competition for scarce workers.
  • A wave of mergers in many industries means that entrepreneurs who once competed with other small businesses find themselves confronted with much larger competitors.

Even the Internet plays a part. Fledgling companies which once had to compete only with local enterprises now face threats from suppliers outside their area.


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