Recent entrepreneurship research has shed new light on how important new companies—firms less than five years old—are to economic growth, so the next question raised by economists and policymakers might be: How do we increase the number of firm formations? In a review of research into entrepreneurial orientation to help find answers, another important question has arisen: Why does the level of firm formation remain virtually consistent from year to year?
This paper, the second in the Kauffman Foundation Research Series on Firm Formation and Economic Growth, explores this question and makes the following key points:
This paper examines the implications of each of these points, such as possible reasons why firm formation is constant and what it means for the wider economy, why efforts to increase entrepreneurship have not had much effect on the level of firm formation, whether or not the volume of startups really matters to the economy, and how the recession has impacted firm formation.
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This study is part of the Kauffman Foundation research series Firm Formation and Economic Growth.