Freshly released government data show that new business formation rebounded in 2011, after four years of decline, from the depths of the Great Recession. This is a welcome development—new businesses are the engine of job creation in the United States economy and an important source of innovation and productivity. Perhaps most importantly, the rise in new business formation between 2010 and 2011 was geographically dispersed throughout the United States.
While the rise of new business creation in 2011 is a significant development—it is the first annual gain in five years and the largest percentage annual increase in nearly a decade—the bulk of this paper examines two classes of new businesses that most closely resemble entrepreneurship: companies less than one year old with one to four employees and
those with five to nine. This analysis finds that the smallest of these new firms represent most of the increase in firm formation in 2011:
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This study is part of the Kauffman Foundation research series Firm Formation and Economic Growth.