KANSAS CITY, Mo., May 23, 2006 (PRIMEZONE) -- Immigrants far outpaced native-born Americans in entrepreneurial activity last year, while African Americans were the only major ethnic or racial group to experience a year-to-year increase in the rate of entrepreneurship, according to a national assessment of entrepreneurial activity by the Ewing Marion Kauffman Foundation.
The rate of entrepreneurial activity for immigrants in 2005 was 0.35 percent compared to 0.28 percent for native-born Americans, according to the Kauffman Index of Entrepreneurial Activity. In other words, approximately 350 out of 100,000 immigrants started a business per month in 2005 compared to 280 out of 100,000 native-born Americans. These rates represent approximately 85,000 immigrants creating new businesses per month and 379,000 native-born individuals creating new businesses per month.
While annual government statistics indicate that approximately ten percent of the U.S. workforce owns a business, the Kauffman Index illustrates the number of people starting new businesses each month. With 0.29 percent of the total adult population starting new businesses per month, there was an average of approximately 464,000 people creating new businesses each month in 2005. This rate represents a slight decline from the 470,000 people creating new businesses per month in 2004.
While the overall rate of adult entrepreneurial activity declined slightly between 2004 and 2005, the rate of African Americans starting businesses grew from 0.21 percent to 0.24 percent. In other words, 40,200 African Americans started a new business per month in 2004, and 46,700 African Americans started a new business per month in 2005. African Americans were the only ethnic or racial group to experience a gain.
A quick summary of the Kauffman Index findings from 2004 to 2005 show: a decline in activity for men (0.37 percent to 0.35 percent) and Latinos (0.34 percent to 0.32 percent); entrepreneurial activity among women holding steady with no change at 0.24 percent; and the graying of entrepreneurship, as older individuals (55-64) increasingly engaged in new business start-ups at 0.34 percent.
A state-by-state breakdown of entrepreneurial activity shows Vermont, Colorado, Montana, Wyoming and Idaho as the states with the highest rates of entrepreneurial activity. Those states with the lowest rates include Delaware, West Virginia, Alabama, Kentucky and Pennsylvania. The average for the states with the highest rates of entrepreneurial activity is three times higher than the average for the five lowest states.
Regionally, higher rates of entrepreneurial activity tend to be concentrated among the Mountain and Pacific states, while lower rates are concentrated among the Middle Southern and Midwestern states.
"The United States continues to be a very entrepreneurial nation," said Carl Schramm, President and Chief Executive Officer of the Ewing Marion Kauffman Foundation. "The large portion of entrepreneurial firms and the significant number of jobs created by smaller, newer and growing firms in America are a strong indication that the entrepreneurial sector, with its flexibility and capacity to adapt quickly, is poised to become an even more important factor in our nation's economic growth."
The Kauffman Index of Entrepreneurial Activity is the only study to measure business start-up activity for the entire U.S. adult population at the individual owner level. The data are derived from the monthly Current Population Survey (CPS), a national population survey conducted by the U.S. Bureau of the Census and the Bureau of Labor Statistics. The detailed demographic information available allows researchers to estimate rates of entrepreneurial activity by race, education, region, age and immigrant status.
"Although research on entrepreneurship is growing rapidly, there are very few large national datasets other than the Kauffman Index of Entrepreneurial Activity that provide information on recent trends in entrepreneurial business creation," said Robert W. Fairlie, of the University of California, Santa Cruz, who developed the Kauffman Index.
Besides year-to-year changes in entrepreneurship activity, the Kauffman Index captures long-term trends. Among these findings:
-- Over the last decade, the average rate of entrepreneurial
activity was 0.29 percent, which is the same as the 2005
rate or 290 for every 100,000 individuals. On average,
there were 437,000 people creating new businesses each month
over the ten-year period. Entrepreneurial activity appears
to be higher in the past few years than in the late 1990s
during the height of the Internet boom.
-- From 1996 to 2005, the average rate of entrepreneurial
activity for men was 0.36 percent. In contrast the rate
for women was 0.24 percent. The rate of entrepreneurial
activity for men increased to a high of 0.40 percent in 2003,
but has declined each year since then. Rates of entrepreneurial
activity for women have generally remained the same over the
past several years.
-- Over the past decade, rates of entrepreneurial activity were
highest for Latinos at 0.32 percent. The Latino rate of
entrepreneurial activity decreased from 0.34 in 2004 to 0.32
in 2005, continuing a downward trend that started in 2003 when
the rate was 0.40 percent.
Unlike other studies that capture young businesses that are more than a year old, the Kauffman Index of Entrepreneurial Activity captures all adults 20-64 who initially start a business, including those who own incorporated or unincorporated businesses and those who are employers and non-employers. The Kauffman Index of Entrepreneurial Activity, which is defined as the percent of the adult U.S. population of non-business owners who start a business as their main job each month, is conducted annually.
Further information about the Index report can be downloaded at www.kauffman.org.
The Ewing Marion Kauffman Foundation of Kansas City is a private, nonpartisan foundation that works with partners to advance entrepreneurship in America and improve the education of children and youth. The Kauffman Foundation was established in the mid-1960s by the late entrepreneur and philanthropist Ewing Marion Kauffman. Information about the Kauffman Foundation is available at www.kauffman.org.