According to a new report from the Brookings Institute, the proportion of U.S. companies less than two years old declined from 13% in 1985 to 8% in 2014. While the report can’t say why these economic engines are disappearing, it indicates that market concentration and a lack of interest in entrepreneurship may be to blame.
Tom Schryver, visiting lecturer at the Samuel Curtis Johnson Graduate School of Management at Cornell University and an experienced entrepreneur, served as a startup founder and senior finance executive of high-growth companies and says that startup activity declines in times of economic growth as entrepreneurs have access to other jobs.
“There is evidence that startup activity is counter-cyclical to general economic and employment trends. When the economy is hot and companies are hiring, talented people have many options, of which starting their own thing is but one.
“We saw the Kauffman startup index rise sharply in ’07 – ’09, as companies contracted – talented people had fewer options and companies were doing less to retain them, so more of them took the leap. This underscores the difference between people who become entrepreneurs because they have to, versus becoming entrepreneurs because they want to. What we’re seeing now is people, for the most part, in the latter group.”