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Report: Necessity Driving Entrepreneurship

New study reveals that more people are starting businesses as a source of higher income than out of opportunity.
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Necessity, not opportunity, is driving entrepreneurship, says a new report.

The Global Entrepreneurship Monitor, a nonprofit research consortium, Monday released its latest National Entrepreneurial Assessment for the United States. It has been conducting this research since 1999.

According to the report, in the United States, the percent of early-stage entrepreneurship activity that stemmed from individuals searching for some source of income rose from 23 percent in 2009 to 28 percent in 2010. Internationally, 20 percent of ventures were driven by necessity, and 54 percent by opportunity.

Roughly half of U.S. businesses (51 percent) were launched because entrepreneurs recognized an opportunity to maintain or improve their current income levels. That’s down from 55 percent in 2009and less than the worldwide average of 54 percent.

The study showed that entrepreneurship activity among Americans fell from 8 percent in 2009 to 7.7 percent last year, even though many respondents said economic conditions for new companies had actually improved over the course of the year.

"The picture of entrepreneurial activity in the U.S. painted by this report continues to exhibit elements of light and dark," GEM researchers said in a statement. "While some improvements have occurred, the extent to which the economic downturn affected entrepreneurial activity remains unclear."

Other findings: The gender gap among entrepreneurs is closing thanks to rising start-up activity among womenand a fall in activity among men. The number of women starting businesses was up to 5.6 percent last year from 5 percent in 2009. For men, numbers were down from 8.8 percent to 6.7 percent. 

More than half of women tend to focus on consumer services, with that area accounting for 53 percent of women's start-ups. But women tend to describe their businesses as medium- to high-technology ventures more often than men: 11 percent compared to men's 9.4 percent. (Not surprisingly, start-ups in general are more frequently centered on technology, with more than 10 percent of early stage entrepreneurs now active in technology. That's compared to just 1.7 percent in 2009.)

Entrepreneurs are aging: 7.9 percent of entrepreneurs involved in early-stage are over the age of 65 and 18 percent are over the age of 55. By region, the Midwest had the greatest surge in new business since 2009. Early-stage entrepreneurship there rose from 13 percent to 15.2 percent.

Last updated: Nov 15, 2011

Inc. contributing editor COURTNEY RUBIN was for five years a London-based staff writer for People magazine. Rubin, a former senior writer for Washingtonian magazine, has written for the New York Times magazine, Time, Marie Claire, and other publications. She is the author of The Weight-Loss Diaries.




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