Entrepreneurship Takes Hit in 2001, Study Says

The recession and the lingering effects of the dot-com bomb took their toll on entrepreneurship in the United States last year, as fewer people launched new ventures or stuck with start-ups, according to a study of global entrepreneurship released Tuesday. The study ranked the United States seventh out of 29 countries on entrepreneurial activity, as measured by the percentage of working-age adults launching a new business or operating one less than 31/2 years old.

Mexico was ranked No.1, followed by New Zealand and Australia.

The U.S. rate of adults involved in young businesses or those still on the launching pad was 11.7%, down from 16.7% seen in 2000, according to the Global Entrepreneurship Monitor 2001 report from the Kauffman Center for Entrepreneurial Leadership.

An earlier, unrelated study estimated that high-growth entrepreneurial companies create about two-thirds of all new jobs in the U.S. economy. Researchers said the drop in entrepreneurial activity translates into lost paychecks.

The global study looked at two groups of entrepreneurs--would-be business owners who were in the process of launching a business but had yet to quit their day jobs, and ones that already had taken the plunge and were running shops less than 31/2 years old.

In the 2000 study, an average of 6.9% of working-age adults were in the second group, running young businesses, said Andrew Zacharakis, a professor of entrepreneurship at Babson College in the Boston suburb of Wellesley, and the leader of the U.S. research team. That figure dropped by half--to 3.5%--last year, he said.

“That was likely a function of the recession and the decline in overall economic activity, which caused some of those young businesses to lose customers,” said Zacharakis. “The recession caused a number of those new businesses to close.”

Although the study shows that fewer U.S. adults think good entrepreneurial opportunities will develop over the next six months, the study’s authors see positive signs long term, as more women and older workers gain ground in the entrepreneurial ranks.

“Entrepreneurship as a career option is a fundamental part of our economic system,” said Paul Reynolds, also a professor at Babson, and coordinator for the global research teams. “There is no threat to entrepreneurship that I see.”

Entrepreneurial activity dipped worldwide last year, said Larry Cox, a co-author of the report and director of research at Missouri-based Kauffman. But it remains high in nations that contribute to U.S. immigration, especially Mexico, which topped the list of the nations surveyed.

There, 18% of working-age adults were either launching start-ups or nurturing young businesses, according to the report, which was conducted by Babson College and the London Business School.

In addition, nations with more entrepreneurial zeal than the U.S. last year included South Korea, where the average was about 15% of working-age adults, and Brazil, which saw its quotient decrease from 21.4% in 2000 to 14.2% last year.