The End of the Slump: U.S. Entrepreneurial Growth Rebounds, Says First-ever Kauffman Index of Growth Entrepreneurship
More startups and established businesses are growing quicker than in recent years but entrepreneurial growth is still in a long-term decline
Businesses made a broad-based return to growth in the latest data, indicating that U.S. entrepreneurial growth largely has rebounded from the Great Recession across industries and geographies, according to the 2016 Kauffman Index of Growth Entrepreneurship. National Growth Entrepreneurship results were released today, and state and metropolitan data will be released June 2.
The Growth entrepreneurship Index, the Kauffman Foundation’s new report on how much U.S. entrepreneurial businesses are growing, rose in the last year for the third year in a row. This year’s increase was driven by startups growing faster in their first five years than they were in previous years, and more young companies scaling up employment. The entrepreneurial growth increase in the 2016 Index represents the largest year-over-year increase in the past decade. Despite these promising markers, however, many U.S. growth indicators remain in a long-term decline.
“High growth, particularly among young firms, is an important contributor of jobs, output and productivity growth,” said Arnobio Morelix, senior research analyst at the Kauffman Foundation, which conducts the annual study. “Younger entrepreneurial firms again are contributing more broadly to business and job growth. While the indicators show that growth is still below the historical norms before the Great Recession, a third consecutive year of gains is an encouraging sign. In the past two years alone, these growing young companies created an estimated 200,000 jobs in the economy.”
The Growth Entrepreneurship Index was added this year to the Kauffman Index of Entrepreneurship series. The series also includes the Startup Activity Index, an early indicator of the beginnings of U.S. entrepreneurship, and the Main Street Entrepreneurship Index, which measures business ownership and density among established, local small businesses. Tracking growth entrepreneurship tells us how it is helping to drive job creation, innovation and wealth creation in the U.S. economy.
“Growth entrepreneurship affects all of us,” wrote Steve Case, chairman and CEO of Revolution LLC and co-founder of America Online, in the foreword to the Growth Index. “The Kauffman Foundation brings a powerful suite of data and research tools to help us understand growth entrepreneurship. The data here give new benchmarks of growth outcomes you’ve not had access to previously.”
The Growth Entrepreneurship Index relies on three indicators to look at business revenue and job growth: Rate of Startup Growth, Share of Scaleups and High-Growth Company Density.
Industries associated with technology, including IT, health and software, were among the top five industries with the highest shares of high-growth companies. However, high tech is not a prerequisite for high growth. Entrepreneurial growth is evident in other sectors, such as food and beverage, retail and government services, that are not always associated with fast-growing businesses.
”Entrepreneurial growth is a rare phenomenon,” said E.J. Reedy, Kauffman Foundation senior scholar and co-author of the Growth Index. “Tracking growth tells us about both the immediate and long-term economic benefits of job creation and productivity growth.”
The Kauffman Index of Entrepreneurship is the first and largest index tracking entrepreneurship across city, state and national levels. It also presents demographic characteristics of the business owners. The Kauffman Index of Growth Entrepreneurship is the first of three reports to be released under the umbrella of the Kauffman Index of Entrepreneurship in this year. The newest data allow for an update to annual reports dating back to 2008. Interactive data spanning all 19 years is available at www.kauffmanindex.org.
About the Kauffman Index of Entrepreneurship Series
The Kauffman Index of Entrepreneurship series includes a number of annual reports that measure U.S. entrepreneurship across national, state and metropolitan areas from different, complimentary perspectives. The series consists of three in-depth studies: Startup Activity, Main Street Entrepreneurship, and Growth Entrepreneurship. These studies focus primarily on the actual results of entrepreneurial activity, such as new companies, business density and growth rates.