The Morning Economic Report
5:30 am
Fri May 23, 2014

American Entrepreneurship - 5/23/14

Americans cannot be blamed for considering their nation highly entrepreneurial.  After all, this is the country that produced social media giants like Facebook, Twitter and LinkedIN in recent years and many more companies beyond those.  But a new study supplied by the Brookings Institution concludes that the U.S. economy is less entrepreneurial now than it has been at any point during the past 3 decades. 

Moreover, during the most recent 3 years of the study, 2009, 2010, and 2011, businesses in America were collapsing at a more rapid rate than they were being formed – that’s a first.  As reported in the Washington Post, overall, new business creation, which for these purposes is measured as the share of all businesses less than 1 year old, declined by about half between 1978 and 2011.  

The Brookings authors clearly state the implications of slower business formation – if the decline persists, America is in for a period of slow economic growth for the indefinite future.  While all states registered large declines in new firms, New York’s decline was less profound than in other states, perhaps because of a large immigrant population with a propensity toward entrepreneurship.