Understanding the Kauffman Index: Entrepreneurship Metrics in Smaller Metropolitan Areas

Recently we released the 2015 Kauffman Index: Startup Activity. This annual report produces timely statistics on startup activity nationwide and breaks it down for the 40 largest metropolitan areas in the United States. Looking at the metropolitan area level findings can lead to questions that we wanted to answer to give some context.

Q:       Why is the Kauffman Index only tracking the 40 largest metropolitan areas?

A:        When using survey-based data, it often is the case that only larger sampling areas can be included due to sampling size concerns. The Kauffman Index: Startup Activity uses the Current Population Survey to construct two of the components of the Index. To alleviate sampling size concerns we aggregate data to the year level and use moving averages. Even when using these data aggregation techniques, we are only able to make estimates for the 40 largest metropolitan areas.

Q:        My city/metropolitan area isn’t among the top 40 largest metropolitan areas in the United States. What do we know about startup activity in my city?

A:        For smaller cities we are able to get some information about startup activity from sources that use administrative data to make estimates that aren’t dependent on sample size. So, with the Kauffman Index: Startup Activity, we use administrative tax records from the U.S. Census Bureau’s Business Dynamics Statistics (normalized by population) for our estimate of the Startup Density measure. While we don’t publish density data for all metropolitan areas in the report, below are the results for all metropolitan areas for the Startup Density metric. Hover over individual points on the graphic to see the metropolitan area name and Startup Density measure: 

 

With 366 metropolitan areas, this is too much information to digest clearly. We’ve created a chart listing all metropolitan areas and their Startup Density measures.

A couple of comments on this list. First, there is a huge variety of Startup Density measures, ranging from 21.8 to 247.7 startup firms per 100,000 population. Although this range is large, a majority (87%) of metropolitan areas have between 60 and 180 startups per 100,000 population, showing some clustering.

Second, below we overlay the top 40 largest metropolitan areas (those used in the Kauffman Index: Startup Activity) in orange dots. The red lines indicate quartile cutoffs:

 

From this we can see that all of these marked metropolitan areas are disproportionately higher in startup density. There are no big metropolitan areas in the bottom 25 percent of all metropolitan areas ranked by density. This is an indication that higher startup density is associated with larger metro areas, although that is not exclusively the case.

Q:        What metropolitan areas have the highest Startup Density?

 A:        Below is a list of the top 25 metropolitan areas by Startup Density. Metropolitan areas highlighted in blue are those included in the Kauffman Index: Startup Activity.

Q: Why do Startup Density measure vary so widely between metropolitan areas?

A:        Forthcoming research from Siddharth Vedula and Alicia Robb will assess the composition of entrepreneurship ecosystems in U.S. metropolitan areas.  Check back for updates as this research is unveiled.

Check back at Growthology for more insights and Q&As related to the Kauffman Index: Startup Activity.  Have questions you would like to see answered? Email Josh Russell at jrussell@kauffman.org.

Metropolitan Area Density Measure and Rankings

Learn how to optimize your use of this visualization.

Optimizing the use of this visualization.

  1. Metropolitans highlighted in blue are those included in the Kauffman Index: Startup Activity. Click on their Startup Density measure to get a link to their Startup Activity profile.
  2. Choose a State or Metropolitan Area using the provided filter. Choosing a state will show you all metropolitan areas in that state. You can also show multiple states or metropolitan areas at a time. To reset the list, select “All” for state and metropolitan areas, or hit the button at the bottom of the graph.
  3. Questions? Email Josh Russell at jrussell@kauffman.org.
Return to the Metropolitan Area Density Measure and Rankings chart

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