Nov. 18, 2008; Wellesley, MA…Although the U.S. continues to rank high in entrepreneurial activity, the new GEM study suggests a portentous weakening in the nation’s normally robust entrepreneurial engine.

According to the “Global Entrepreneurship Monitor (GEM) 2006-2007 National Entrepreneurial Assessment for the United States of America,” conducted by Babson College and Baruch College, while U.S. entrepreneurship was 50% higher than the average of all other high-income (GEM) countries and equals the rate in low-and middle-income (GEM) countries, there was a large decline in entrepreneurial activity from 12.4% in 2005 to just 9.6% in 2007.

Additionally, the U.S. showed a greater decline in growth among seven key industries in 2007 than in the recession of 2001, suggesting a precursor to a deeper recession in 2008 and/or 2009.

For the first time, GEM has reported on U.S. minority business owners and their families (through the Baruch College Minority Business Owners Survey (NMBOS)) from four groups: Korean Americans, Mexican Americans, African Americans, and a White American control group. It is clear that entrepreneurship offers immigrants and minorities a valid means to thrive in the U.S.

GEM found that minorities exhibit higher rates of entrepreneurship than whites and exhibit the same demographic and motivation patterns as white entrepreneurs in terms of types of businesses, growth expectation, education, and gender.

White Americans and Mexican Americans both exhibited fewer percentages of their entrepreneurs in the lower-income groups, and a higher percentage of their entrepreneurs in the higher-income groups than did African Americans and Korean Americans.  This was especially true for established businesses compared to start-up businesses (less than 42 months old).

Another key finding for minority entrepreneurs is their motivation for starting a business.  70.4% of African Americans, 57.1% of Korean Americans, and 72.6% of Mexican Americans started their businesses after perceiving that they were rejected for a job because of their ethnicity.

Go to:  www.gemconsortium.org to download the GEM 2006-’07 U.S. Report and to access the GEM Global data. Go to:  http://zicklin.baruch.cuny.edu/centers/field/research.htmlto request access to NMBOS data.

Key U.S. Findings:

·         Decline:  The U.S. ranked ninth and sixteenth in established business (more than 42 months) prevalence rates for high- income countries for 2006-’07, respectively. This decline in 2007 was due, in part, to other GEM high-income countries on average experiencing a high growth in the percentage of their entrepreneurs in established businesses, while the U.S. experienced a slight decline.

·         The percentage of early-stage entrepreneurial activity based on necessity has increased from 12.1% in 2005 to 15.6% in 2007.  This increase may be due, in part, to the economic slowdown in the U.S.

·         Gender differences remain high for both early-stage entrepreneurs and established business entrepreneurs with entrepreneurship rates for males 50% higher than that of females in the U.S.
 

·         40% of U.S. start-ups indicate they expect no job growth in the next five years.

·         Consumer-oriented startups dominated, but they declined somewhat in 2007. Startups in the business-services sector increased (22.5% in 2006 to 34.8% in 2007). Declines also prevailed in the transformation sector—manufacturing and construction industries—because of a downturn in the housing industry.

·         U.S. entrepreneurs express high satisfaction with access to public institutions for advice (Small Business Administration, Small Business Development Centers, economic development groups, Chambers of Commerce).  But Korean-Americans seek a much lower level of outside advice for their businesses.

·         GEM recommends that public policy makers continue to support early-stage entrepreneurship and small businesses with both national and local initiatives in education and business advice.