Friday, January 15, 2010

Why is firm formation constant?

Interesting new Kauffman study.

Key findings:

“According to a new study released today by the Ewing Marion Kauffman Foundation, however, new-business creation in the United States is remarkably constant over time. Exploring Firm Formation: Why Is the Number of New Firms Constant? reveals that none of the factors that might bear on prospective entrepreneurs' decisions to form new companies—recessions, expansions, tax changes, population growth, scarce or abundant capital, technological advances or others—has much impact on the pace of U.S. startups.”

So can we all go home now?

“… the study showed that entrepreneurship education and venture capital, two indicators that have received heightened attention in recent years, had no appreciable impact on entrepreneurial activity in the United States."

Not quite...

"However, the authors point out, it could very well be that entrepreneurship education, venture capital and similar entrepreneur-friendly measures have helped maintain a constant level of firm formation.”

*Sigh* What was it Truman said about looking for a one-handed economists?


  1. Wow, I would have never expected new firm formation to remain constant over time! I skimmed the report... and am left wondering how the entrepreneur's reasons for starting their firm changed over time.

  2. Yeah. I was pretty surprised too.