Today we released the 2009 Kauffman Index of Entrepreneurial Activity.  This piece is important because it is the earliest indicator we have of how the composition of who is becoming an entrepreneur is changing.  Given the recession, the 2009 numbers are particularly of interest.  As a quick background, the Kauffman Index measures entrepreneurship as the percentage of the adult, non-business owner population that starts a business each month, thus the Kauffman Index captures all new business owners, including those who own incorporated or unincorporated businesses, and those who are employers or non-employers. 

You can find more of an overview of the findings on the main Kauffman website, but 2009 is notable in that it does show the highest index rating for the U.S. generally, African-Americans, and men.  But rather than regurgitate what we have released there, I wanted to post a few additional tables that I found very interesting showing the composition changes over time of who is becoming an entrepreneur.  So here Rob Fairlie (the study's author) and I have applied the Kauffman Index rates of entry for the different demographic groups to the Current Population Surveys weights for these populations over time.  This isn't information we focus on in the current report but I do think we might add it in next year as we only really went down this route in the last few days.

	Ages 20-34	Ages 35-44	Ages 45-54	Ages 55-64
1996	35%	27%	24%	14%
1997	35%	28%	21%	16%
1998	34%	29%	21%	16%
1999	33%	30%	22%	16%
2000	29%	27%	26%	18%
2001	30%	27%	25%	18%
2002	29%	28%	26%	17%
2003	26%	30%	25%	19%
2004	30%	26%	24%	21%
2005	31%	25%	23%	20%
2006	28%	25%	27%	20%
2007	28%	26%	27%	19%
2008	28%	25%	26%	21%
2009	25%	27%	26%	23%

	White	Black	Latino	Asian
1996	77%	9%	11%	4%
1997	77%	9%	11%	3%
1998	78%	8%	11%	4%
1999	75%	10%	11%	4%
2000	74%	11%	12%	3%
2001	73%	10%	13%	5%
2002	73%	11%	12%	4%
2003	70%	9%	16%	5%
2004	72%	9%	15%	5%
2005	71%	10%	14%	5%
2006	70%	10%	15%	5%
2007	67%	9%	18%	5%
2008	65%	8%	21%	6%
2009	66%	10%	19%	5%

	Native-Born	Immigrant
1996	86%	14%
1997	87%	13%
1998	86%	14%
1999	85%	15%
2000	84%	16%
2001	84%	16%
2002	82%	18%
2003	81%	19%
2004	79%	21%
2005	82%	18%
2006	80%	20%
2007	76%	24%
2008	74%	26%
2009	76%	24%

	Less than High School	High School Graduate	Some College	College Graduate
1996	17%	33%	27%	23%
1997	17%	31%	28%	24%
1998	15%	33%	26%	26%
1999	14%	33%	27%	27%
2000	16%	33%	28%	24%
2001	14%	30%	25%	31%
2002	14%	31%	25%	29%
2003	17%	29%	26%	28%
2004	14%	29%	27%	30%
2005	16%	29%	28%	28%
2006	14%	29%	28%	29%
2007	15%	28%	24%	32%
2008	16%	31%	24%	29%
2009	16%	31%	23%	30%

So, what we see here is that partly because of changing propensities to enter entrepreneurship (the Kauffman Index) and partly because of changing demographic patterns of the labor force that new entrepreneurs are getting older, more educated, less white and more likely to be immigrants.

Kauffman Index microdata for 2009 will be made available in the next couple of months.  Currently, microdata is available through the website through 2008. 

A lot of times I find out about new data sources through working papers or conference presentations.  In this case, Ben Hallen at the University of Maryland and Rory McDonald have a working paper on super angel investors which uses a new database – CrunchBase – and Ben seemed enthusiastic on the data, so I thought I’d take more of a look.  Incidentally, also keep an eye out for the updated version of this paper as it was really interesting but for now the paper is not posted online and interested scholars should contact the scholars directly.

CrunchBase, which advertises itself as the “free tech company database,” is a great concept and one that can only become more powerful as more users see it and use it.  It’s essentially technology company data collected via wiki.  Here were the overview stats as of 5/14/2010:


While many researchers will have concerns about data gathered using a bottom-up process, I suspect the data is actually much more accurate than we would expect.  Now, this isn’t to say that the data should be taken as is shown because even CrunchBase acknowledges the following on their FAQ web page:


Most large data sets (even government data) have a significant amount of error at the individual firm level which, if random, washes itself out as the data gets aggregated up.  Now, the true test of CrunchBase as a research tool will be to see if they close the cycle with researchers providing data and receiving updates back.  In my experience, scholars are great at taking data, complaining about, and spending tons of time cleaning it but rarely actually do many scholars go to the next step of showing data producers where there were errors or things that could be improved.  I hope for CrunchBase’s sake that this paradigm begins to change. 

In any case, for those looking at technology companies CrunchBase definitely seems worth a further exploration.  I hope that those of you who have explored this data further than I have will offer comments related to how good or bad CrunchBase is at curating the data to allow for longitudinal analysis.

The Council for Community and Economic Research (C2ER) and the Council of Development Finance Agencies (CDFA) recently released the C2ER-CDFA State Business Finance & Incentives Resource Center. C2ER and CDFA members can use this to research business incentives and development finance programs across the country.  The C2ER-CDFA State Business Finance & Incentives Resource Center is a national database with more than 1,700 programs from all 50 states and federal agencies. Programs are cataloged and searchable by state, type (i.e. bonds, grants, loans, loan guarantees, tax credits, etc.), category (i.e. tax, direct business financing, indirect business finance, etc.), and business need.

I've been lamenting for the last couple of months the dearth of good policy data sets that could enable analysis of actual policy impacts across states on important topics.  Today, I am pleased to report the introduction of a new database that does just this, although I wish it did so over time and also was open to all scholars, not just the members of the associations which sponsor it.  But, all good things come with time, I hope, and I am a huge supporter of C2ER and would recommend membership.  I've downloaded two sample documents from the website so people can see more of what they'd actually get in this database: listings at the state level and detail about individual policy.  With state-level, longitudinal business tabulations/databases now available from Census and rich, although not yet longitudinal files from the Bureau of Labor Statistics, we should see examinations in this area of scholarship expanding greatly.

Business plans are an as yet relatively untapped source for researchers but that might change with the release of the Business Plan Archive. 

The University of Michigan has released the fourth wave of data for the Panel Study on Entrepreneurial Dynamics 2, which is following 1,214 nascent entrepreneurs working on starting a business in the United States during 2005.  The Codebook contains basic distributions of how the nascent entrepreneurs responded in the aggregate to questions in the baseline and first three follow-ups.   The PSED is useful for examining the start-up process across a nationally-representative set of industries and variety of topics.  The data are publicly available for download at no cost and without registration. 

Incidentally, I will be participating in a workshop along with the principal investigators on the PSED at the 2010 Academy of Management meetings (information below). 


Chair: Paul D Reynolds; George Mason U.; 
Presenter: Per Davidsson; Queensland U. of Technology; 
Presenter: Teresa Virginia Menzies; Brock U.; 
Presenter: Yuli Zhang; Nankai U.; 
Presenter: Vyacheslav Dombrovsky; Stockholm School of Economics, Riga; 
Presenter: Jolanda Hessels; EIM / Erasmus School of Economics; 
Presenter: Gry Agnete Alsos; Nordland Research Institute; 
Presenter: Mikael J Samuelsson; Stockholm School of Economics; 
Presenter: Richard Curtin; U. of Michigan, Ann Arbor; 
Discussant: Howard Aldrich; U. of North Carolina; 
Discussant: David Audretsch; Indiana U., Bloomington; 
Discussant: Mahesh P Bhave; Alliant International U.; 
Presenter: Rolf Sternberg; U. of Hannover; 
Presenter: E.J. Reedy; Kauffman Foundation; 

Understanding the origins of new businesses, the firm creation process, has been dramatically affected by the implementation of longitudinal studies of the start-up process (Davidsson, 2006). National projects in nine countries share the same research protocol and a conscious effort has been made to harmonize many details of these projects. The teams in all countries continue to make progress either in collecting additional follow-up data—as in Australia, China, Germany, Latvia, Netherlands, Sweden and the second U.S. project [PSED II]—or completing additional analysis and assessments of the existing data sets—as in Canada, Norway, and the original Netherlands, Sweden and U.S. projects [PSED I]. The Kauffman Firm Survey [KFS], designed to provide tracking of post firm birth ventures is harmonized with U.S. PSED II. This workshop will provide an update of the developments over the past year among these complementary projects, providing a guide to those teams in additional countries that may wish to implement their own panel studies. Following commentaries on the contributions of these projects to understanding business creation and unexplored opportunities, there will be an opportunity for an open discussion of future directions for this research paradigm.

What is shared capitalism?  When I first came across the term last year, I just stared at the words for a while.  Shared capitalism...was this something akin to social entrepreneurship? intrapreneurship? or something totally different? 

Well, if you follow the lead of the Foundation for Enterprise Development, then shared capitalism is most equivalent to capitalism where employees have some share of ownership in a company.  If you are still a bit confused, then I suggest you take a look at the Shared Capitalism and Employee Ownership: The Scholarly Agenda Proceedings of the 2009 Beyster Fellowship Symposium.  In particular, there is an extensive list of new and existing data sources for research in this area starting on page 12 of the document. 

A WSJ article from Tuesday got me thinking about career satisfaction.  I am intentionally leaving off the term "job" here as I think it biases the concept to people who work for others, although that is purely speculative and not based on cognitive interviewing.  The article was referencing a Conference Board survey that has been done historically and was fielded again in 2009 asking 5,000 U.S. households about their job satisfaction.  The trends are clearly headed in the wrong direction:



Since we know that the proportion of people in the U.S. that are working for themselves as small business owners or in some form of self-employment hasn't changed that much over this period, I find it puzzling that decreasing levels of job satisfaction aren't leading to more business starts.  In my mind, and I think in many conceptualizations of entrepreneurship, the entrepreneur is the dissatisfied employee who also sees an opportunity and eventually decides to strike out on their own. 

It is interesting to put the Conference Board research next to a similar question asked of population of small business owners courtesy of the NFIB:



It is amazing to me that the NFIB had only twelve percent of their sample reporting a satisfaction level of 5 or below.  This particular survey was completed in 2001 so there might be macroeconomic effects here but doubtful they'd be of a magnitude large enough to make a difference. 

So, this is a post without much of a conclusion.  Job satisfaction is down...new business starts are steady...small business owners overwhelmingly satisfied...what's keeping this system so out of equilibrium?  I would conjecture that perhaps there is a possible measure of job lock somewhere in all of this but I don't know exactly what it would be.

Related post: Gallup Finds Business Owners Happiest

The WSJ has a new listing out of "promising" young firms that might be of interest to readers.  This list is a classic example of why people default to using venture capital data frames: 1) venture capital is perceived as a good proxy for "innovativeness" and "high-potential" and 2) the data can be disclosed with actual business names.  But I'd caution readers to remember that venture capital funding is historically coast-centric and that while venture capital data is often a helpful starting point for considering innovation young firms, it is not often an ending point.  The majority of young, high-potential firms in the country will exist for years before receiving venture capital backing (if that ever occurs). 

Intrapreneurship, or the process of an individual (or team) starting a business (or business line) for an existing employer, is a concept not often measured within existing entrepreneurship metrics.  This makes sense since it is more difficult for government statisticians to capture intra-firm dynamics in a meaningful way, industrial organization scholars are more focused on the behavior of the firm (not the entrepreneurs running them or employees of), and entrepreneurship scholars, for the large part, are focused on owner-operator firms with little systematic tracking of other key employee actions.

All of this makes noteworthy a recent report out from the Global Entrepreneurship Monitor team of scholars looking at the topic of intrapreneurship.  Intrapreneurship is a concept that GEM has measured for some time in their screener at the national level but this new effort to conceptualize and inquire at the household level in Brazil, Chile, Ecuador, Iran, Republic of Korea, Latvia, the Netherlands, Norway, Peru, Spain, and Uruguay stands out for going into greater depth than previous work.  Specifically, the scholars have screened for intrapreneurship using the following logic process.



If each implementing national team has implemented these concepts with strict adherence to protocol and is working with a quality survey vendor, then I think this was a really helpful exercise.  First, the questions and logic are simple and straight forward.  Second, capturing intrapreneurship should be a strength of household survey frames, which GEM uses.  And, lastly, the scholars attempt to differentiate across different levels of intrapreneurship, although there are still broader conceptions of intrapreneurship that have been employed by others.

The authors come to the conclusion that "on average, less than 5 percent of employees are intrapreneurs, and that in most countries its incidence in the adult population is significantly lower than that of early-stage entrepreneurial activity," but probably more importantly to me is their finding that "the prevalence of intrapreneurship is about twice as high in high income countries as in low income countries."  This makes a lot of sense since higher-income countries tend to have larger business organizations and thus the likelihood that a working age individual is employed at large business organization increases as countries develop.  But on a related topic, I am puzzled by their finding that the prevalence of intrapreneurs increases with the size of the business.



If this is an unweighted measure, as I think is the case, then I worry this will lead to the conclusion that employees at smaller companies are less "intrapreneurial" but in fact, I suspect that if you weighted this so that it was on a per employee basis then the resulting outcome would be much more balanced. 

Additionally, I wanted to point out the similarities of some concepts being measured here and those which are measured in other survey frameworks looking at innovation.  Specifically, this survey protocol and the Oslo Manual, which the Organisation for Economic Co-operation and Development (OECD) uses to measure innovation at the firm level, both appear to look at whether the new business activity involves a new product or service.  There is a lot of potential overlap in concepts between entrepreneurship and innovation so this isn't surprising but should be noted.

Read the full report, Intrapreneurship - an international study.

I was reminded last week of some work I had done a couple of months back which looked at COBRA health insurance.  The reminder came from a posting the Bureau of Economic Analysis did to clarify its treatment of COBRA payments in the national accounts. 

My earlier work was to comment on the Bureau of Labor Statistics' (BLS) Current Population Survey module on displaced workers.  I had earlier posted draft comments but received some great input from a colleague, Margo Quiriconi, on that draft so here are my final comments submitted to BLS.  What amazed me in reviewing this module was that in the midst of a national debate on health insurance and the Great Recession that BLS hadn't taken more care to revise the module.  Set to go to the field in January in the exact same form it was fielded two years ago no one seems to be worried about measuring really important aspects of health insurance in the displaced worker population like COBRA insurance or where people displaced from their job in this Great Recession are receiving their health insurance (if they are).  At this point, it is too late to change anything for this module, but it is, in my opinion, a real missed opportunity to collect relevant and meaningful information on an important population.  This could be a great module to someday finally answer the question about health care job lock by looking at people who are displaced but had access to health insurance through another source and whether that effects one way or the other their propensity to start a business.