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New U.S. Start Ups Rise in 2010: That’s the Good News

Calculator keys (Investor.gov)

(Investor.gov)

According to the Ewing Marion Kauffman Foundation’s Index of Entrepreneurial Activity, American adults created 565,000 new businesses in 2010, which represents the highest level of entrepreneurship over the past 15 years. The foundation notes, however, that the dismal state of the economy and high unemployment may have pressed more individuals into going it alone, rather than starting companies that employ others.

This index, which Kauffman calls a leading indicator of new business creation in the United States, shows on average 0.34 percent of American adults created one business per month in 2010. This rate translates into 565,000 new businesses in 2010, and is consistent with 2009’s rate.

The recent upward trend in entrepreneurship rates, however, contrast with a downward trend in employer business creation. From 2007 to 2010, the quarterly employer establishment birth rate — an index of new businesses hiring employees compared to overall new business creation — dropped from 0.13 percent to 0.10 percent.

Kauffman found greater entrepreneurial rates among some ethnic groups and immigrants to the U.S. The business-creation rate among Hispanics rose from 0.46 percent in 2009 to 0.56 percent in 2010, the highest rate over the 15 years of data. The entrepreneurial activity rate for Asians also increased from 0.31 percent in 2009 to 0.37 percent in 2010. Both African-Americans and non-Hispanic whites, on the other hand, experienced declines in entrepreneurial activity rates.

Immigrants were more than twice as likely to start businesses each month than were the native-born Americans in 2010. The rate of entrepreneurial activity among immigrants increased from 0.51 percent in 2009 to 0.62 percent in 2010. The native-born rate is 0.28 percent. Kauffman says this is a gap that continues to widen each year.

The Kauffman report gives entrepreneurial rates only for very broad industrial categories, not specifically for scientific and engineering companies. The new business rate for the services category, where new scientific and engineering companies would reside, increased each month from 0.42 to 0.44 percent in 2010, a rate above the overall average of 0.34 percent.

Read more: Report: Startups Help Sustain Long-Term Job Growth

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