NCPA - National Center for Policy Analysis

Fewer New Businesses Launched Last Year

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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