Economic slowdown not stalling start-ups

April 26, 2008 — -- Entrepreneurs in the USA launched more small businesses in 2007 than the year before in the West, the Midwest and the South — apparently not scared of the economic slowdown that began last year, according to a report released Thursday.

Regions and states with stronger economic and population growth last year saw an upsurge in entrepreneurs launching businesses, says Robert Fairlie, an economics professor at the University of California, Santa Cruz, and co-author of an annual report on entrepreneurs by the Ewing Marion Kauffman Foundation.

The report found that the highest "entrepreneurial activity rates" were in the District of Columbia and nine states: Idaho, Arizona, Tennessee, Louisiana, Wyoming, Vermont, Montana, Georgia and California.

The 10 states with the lowest activity were West Virginia, Alabama, Delaware, Pennsylvania, Ohio, Connecticut, Rhode Island, Hawaii, Washington and Virginia.

The study, which analyzed data from the Census, the Labor Department and the IRS, also found that:

•Despite the downturn, entrepreneurs continued to launch businesses in 2007.

About 495,000 businesses a month were started last year, with 300 of every 100,000 adults, or 0.30%, involved in start-ups.

That's a slight rise over the 0.29% of adults who launched companies in 2006, according to the study.

•Immigrants sped past native-born Americans in starting businesses. Their entrepreneurial activity rose to 0.46% in 2007 from 0.37% the year before, compared with 0.27% of native-born Americans.

Latinos — U.S.-born and immigrants — outpaced all ethnic groups, with their entrepreneurship rate rising to 0.40% in 2007 from 0.33% the year before.

•Age trumps youth. The Google Myth says that a greater number of young people — such as Larry Page and Sergey Brin who started Google in their 20s — launch start-ups and small businesses than older professionals and entrepreneurs. One problem: It's untrue.

The data show that the highest proportion of people who start businesses are in the 35-to-44 and 45-to-54 age groups, says Robert Litan, vice president of research at the Kauffman Foundation.