NCPA - National Center for Policy Analysis

Encouraging And Keeping Entrepreneurs

August 17, 2010

Cities, states and regions often battle to get the best and the brightest young people to live and work in their locales.  Part of this competition involves attracting talented individuals, but another part involves keeping them in the place where they were born and raised, fighting what many observers call "brain drain."  Most of the discussion of brain drain focuses on people who work for others.  That's understandable given how most people are employed, says the U.S. Chamber of Commerce.  

But a recent working paper by Chad Moutray of the Office of Advocacy of the U.S. Small Business Administration, examines the issue of brain drain among the self-employed.  Looking at what happened to the 1993 cohort of college graduates over their first 10 years post graduation, he draws conclusions about the problem of entrepreneurial brain drain: 

  • For the most part, Dr. Moutray found that keeping talented young entrepreneurs isn't all that different from holding on to skilled young employees.
  • He explains, "In labor mobility, the self-employed are very similar to their wage and salary counterparts."  

And a new study from the Kauffman Foundation shows that keeping entrepreneurs is the key to replenishing the employment market: 

  • Most of the jobs start-ups create remain as the fledgling companies age, creating a lasting effect on the economy.
  • Although start-ups' employment after five years is 80 percent of what it was when the companies began, many of those jobs remain long term.
  • In the year 2000, start-ups created almost 3.1 million jobs.
  • Only half of those firms survived to 2005, but the surviving firms maintained 78 percent, or more than 2.4 million, of the jobs that existed in 2000. 

Entrepreneurs and small businesses power our nation's job creation machinery, which is why we need enterprising states and an enterprising federal government to do a better job of reducing uncertainty by crafting legislation and regulation that actually facilitates and encourages investment, says the Chamber. 

Source: Brad Peck, "Encouraging And Keeping Entrepreneurs," U.S. Chamber of Commerce, August 16, 2010. 

For Small Business Trends study:  

For Kauffman Foundation study:


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