Is Entrepreneurship on the Decline in America?

That's what one economist is saying at US News and World Report. Snips:

[T]he population of U.S. firms is not a measure of new business creation. It is a measure of the stock of businesses in existence at any point in time. The population of businesses goes up if the number of new businesses started each year exceeds the number of existing businesses that fail each year. So we need to look at a different set of SBA numbers to figure out what happened to entrepreneurial activity over the 1997-to-2006 period.

The SBA's primary number for estimating business formation is the count of new employer firms founded in a year. The SBA reports that in 1997, 590,644 new employer businesses were started. In 2006, the agency estimates, 640,800 new employer businesses were created. That's a 7.9 percent increase over the decade.

The Census Bureau reports that in 1997, there were 272,912,000 Americans. In 2006, it estimated that the population had increased to 298,363,000 people. That's a 9.3 percent increase. Over the 10 years, the U.S. population increased faster than the rate of new employer firm formation.

Below is a graph I created of the per capita rate of employer firm formation in the United States since 1990. The trend is not good for entrepreneurship in America. Although the rate bounces around from 1990 to 2007, the per capita rate of new employer firm formation was 10 percent lower in 2007 than it was in 1990.

This bleeds over into the Gazelles vs. Mom 'n Pops argument that consumes many in the economic development arena, but it's worth considering.

Full story: http://www.usnews.com/blogs/outside-voices-small-business/2009/02/23/sba-data-show-a-declining-rate-of-entrepreneurship-in-the-us.html