Is U.S. Entrepreneurship Declining? (CRS Report for Congress)
| Release Date |
Oct. 23, 2024 |
| Report Number |
IF12792 |
| Report Type |
In Focus |
| Authors |
Adam G. Levin |
| Source Agency |
Congressional Research Service |
Summary:
Researchers note that “entrepreneurship has typically been
defined as an action, process, or activity that involves the
startup and growth of a new enterprise.” Much research and
data over the past two decades points to a decades-long
slowdown in multiple measures of entrepreneurship. While
the various causes cited include factors such as difficulty
accessing capital and a decline in the working-age
population, among others, researchers largely agree that
U.S. entrepreneurship has declined over several decades.
This In Focus analyzes trends in entrepreneurship over the
past four and a half decades as well as more recently.
One way to assess entrepreneurship is examining
establishment entry and exit rates. The U.S. Census Bureau
(Census) defines an “establishment” as a physical location
where economic activity occurs, and defines a “firm” as a
group of one or more establishments under common
ownership and control.
The establishment entry rate is the count of new
establishments in a given year divided by the average count
of establishments that year and the previous year. Some
researchers use establishment entries as a proxy for
entrepreneurship. The establishment exit rate is the same
calculation as the entry rate, but for closing establishments.
The U.S. establishment entry rate, with some fluctuations,
has largely declined since the late 1970s. The establishment
entry rate in 1978 was 15.1; by 2022, it was 11.6. However,
the establishment exit rate has stayed fairly level, nearly
drawing even to the entry rate in 2021 before declining
slightly in 2022. While establishment entry and exit rates
tend to align with periods of economic growth and
contraction, the long-term trends of decreased entries and
level exits have held steady during the different points in
the economic cycle. Figure 1 presents establishment entry
and exit rates from 1978 to 2022.
