How Can I Measure Entrepreneurial Activity in My Region? Introducing the New Kauffman Index of Entrepreneurship

Kauffman Index of Entrepreneurship

How can I actually measure the entrepreneurial activity in my region?

This is a question we at the Kauffman Foundation often hear from economic and policy leaders. As cities around the globe rally to foster entrepreneurship, the challenge of how to consistently measure and benchmark progress remains largely unanswered.

While anecdotal evidence abounds, most ecosystems struggle to answer straight forward, yet often elusive, questions: How many new startups does our city or state have? How much are our ventures growing? How many of our businesses are surviving?

To answer these questions and address this challenge, we introduce the New Kauffman Index of Entrepreneurship, the first and largest index tracking entrepreneurship across city, state and national levels. In the end of May, we will introduce the first of various research installments under the umbrella of the new Kauffman Index of Entrepreneurship.

For the past 10 years, the original Kauffman Index – authored by Robert W. Fairlie – has been a leading indicator for entrepreneurship in the United States, used by entrepreneurs and policy makers, from the federal to state and local levels. The Kauffman Index has also been one of the most requested and far-reaching entrepreneurship indicators in the United States and, arguably, the world.

In the policy world, the Index has been referenced in multiple testimonies to the U.S. Senate and House of Representatives, by U.S. Embassies and Consulates across various countries – including nations like Spain, Ukraine and UK; by multiple federal agencies, by state governments and governors from 15 different states; from Arizona to New York; and by the White House Office of the President of the United States. 

On the academic side, more than 200 research papers quote the Kauffman Index. In media circles, the Kauffman Index has been highlighted in more than 100 media channels, including most major publications like the New York Times, the Wall Street Journal, TIME, CNN, the Financial Times and Harvard Business Review.

Originally, the Kauffman Index tracked one of the earliest measures of business creation: When and how many people first start working for themselves, becoming entrepreneurs. Now, we are expanding it to include other dimensions of entrepreneurship.

The new and expanded Kauffman Index of Entrepreneurship 2015 remains focused primarily on entrepreneurial outcomes, as opposed to inputs. That means we are more concerned with actual results of entrepreneurial activity – things like new companies and growth rates.

Among other variables, the Kauffman Index algorithm takes into account:

  • Startup Density
  • Startup Rates
  • Venture Growth and Scale-Ups
  • Survival Rates            
  • % of Business Owners in the Population

And with the Kauffman Index of Entrepreneurship 2015, all these data will be presented at three geographic levels:

  • national
  • state
  • metropolitan – covering the 40 largest metropolitan areas in the U.S. by population

The new Kauffman Index of Entrepreneurship is based on extensive entrepreneurship research, and our algorithm attempts to present a balanced perspective on how to measure entrepreneurship. Nonetheless, entrepreneurship is a complex phenomenon, and we expect to further build-out and enhance the Index in the coming years, particularly as new data become available from an expanded Survey of Business Owners.

The Kauffman Index 2015 series will include two more reports that follow the Startup Activity report, one on “main street” businesses and one on growth ventures, and a final report that synthesizes all three reports into one view of U.S. business activity for the year.

To help state and local leaders access the data relevant to their locales, the index will offer enhanced, customizable data visualization, benchmarking tools and detailed reports diving into the trends of different ecosystems across the United States.

We look forward to sharing our insights with you. If you want to be the first to know when the report is out, sign up below.

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