Study: Men twice as likely to start a business
Men started twice as many new businesses last year as women. Is it a statistical blip, or a new trend?
(FORTUNE Small Business) -- The percentage of women starting new businesses dropped to a 10-year low in 2007, according to a new study released Thursday by the Kauffman Foundation. Meanwhile, men and immigrants became entrepreneurs at an unprecedented pace.
The annual Kauffman Index of Entrepreneurial Activity is based on an analysis of monthly surveys conducted by the U.S. Census Bureau and the Bureau of Labor Statistics. In 2007, three out of every 1,000 adults in the U.S. - 0.3% percent of the population - chose the entrepreneurial path each month and created a new business, up from 0.29% in 2007. Men saw a big bump: Among their population, 0.41% started a business each month last year, up from 0.35% in 2006. The entrepreneurial rate among women, however, dropped from 0.23% to 0.20%. Those divergent paths widened the longstanding gender gap among entrepreneurs.
"Men now are twice as likely as women to start businesses each month, a larger differential than in any previous year," the study found. The Ewing Marion Kauffman Foundation, based in Kansas City, is nonprofit organization focused on promoting entrepreneurship.
Robert Fairlie, an economics professor at the University of California at Santa Cruz who prepared the study, cautioned that the finding may be a one-year anomaly. But he also left open the possibility that the numbers could signal a disturbing trend.
"Female rates of entrepreneurship are substantially lower than the male level," Fairlie said. "There was some closing of that gap in the '70s and '80s, and it's a little bit concerning now that it looks like the gap has widened, at least for this year."
There may be other explanations for the statistical decline. The study does not count individuals who start a business while holding on to their current employment, as many new women business owners do, said Candida Brush, professor of entrepreneurship at Babson College. Brush was not involved in the Kauffman Foundation's study.
"The reality is that most people start a business while working in another job," Brush said. "If you include people who are in that process, we actually find that women are more likely to start a business when they're working, as opposed to when they've not."
Brush said the index's immigrant data might actually be its more valuable finding.
"That's so under-explored," Brush said. "We really know very little about [entrepreneurial] differences between Hispanics and Asians and Blacks."
Immigrants started businesses as a clip of 0.46% each month in 2007, up from 0.37% in 2006 - the biggest increase for immigrants in the 12-year history of the study. In the report, Fairlie estimates that 460 out of every 100,000 U.S. immigrants start a new business each month, compared to 270 of every 100,000 native-born Americans.
Better recruitment of international talent, the need to fill skill gaps (especially in fields such as engineering) with people from abroad, and more global ownership of businesses opening in the U.S. are all possible reasons for a rise in new immigrant-owned businesses, according to Ivan Light, a sociology professor at UCLA who studies immigration and entrepreneurship. Light was speaking hypothetically because he had not seen the Kauffman Foundation study.
Conversely, the rise in immigrant self-employment could also be a sign that jobs are hard to find.
"If economic conditions for the foreign-born deteriorated, fewer could find work and more would be forced into marginalized forms of small business," said Light. He pointed to the economic slowdown in the 1990s, when more Mexicans started working for themselves and self-employment rose within the demographic.
On a geographic level, three areas - Idaho, Arizona and Washington, D.C. - tied for the #1 "most entrepreneurial" spot. Each had an entrepreneurial-activity rate of 460 monthly new-business launches per 100,000 adult residents.
On the other end of the scale, West Virginia held the lowest spot (80 launches per 100,000 residents), followed by Alabama (100 per 100,000 residents). (For more on top locations for launching a business, see FSB's "100 Best Places to Live and Launch" list.)
The full Kauffman Index of Entrepreneurial Activity is available for download on the foundation's website.