When it comes to entrepreneurship, the spirit is willing and the flesh is getting there.

A new report from the Global Entrepreneurship Monitor (GEM), sponsored by Babson College and Baruch College, finds that 27 million working-age Americans--nearly 14 percent--are starting or running new businesses. That's a record high for this study, now in its 16th year. And it's an impressive showing for a developed economy, where finding work with an employer is easier and capturing market share harder than in less-developed nations.

Furthermore, a growing number of people consider entrepreneurship an attractive career option. Fifty-one percent of the working population believes there exist good opportunities for starting businesses, the first time that figure has risen above half. Better yet, 80 percent of those who plan to start businesses in the next three years are doing something about it, such as leasing space or registering their companies. How many startups will emerge from such preparation is, of course, unknown.

In another positive finding, existing entrepreneurial companies plan to do what they're needed to do: hire. According to GEM, 24 percent of U.S. entrepreneurs expect to employ 20 or more people in the next five years. That's up from 16 percent two years ago.

GEM presents a more upbeat view of entrepreneurship than do some other research organizations because it considers different data. Reports about declining startup rates from the Kauffman Foundation, the Brookings Institution, and Gallup are based on data from the Census Bureau and the Bureau of Labor Statistics. They look at companies that are a year old or less and have at least one employee.

GEM, by contrast, conducts surveys of individuals (206,000 across 73 economies in 2014). It looks not only at how many people are building businesses, but also at societal attitudes toward entrepreneurship and at different phases of startup activity--a more holistic view of the startup pipeline. So, for example, GEM data would capture both a three-year-old business and someone working on a startup in her spare time while still employed by another company.

Of course employee businesses--growth businesses in particular--are of greatest interest to policymakers and others concerned with job creation. Many of those expressing intent to start companies are single founders who may not hire others, according to Donna Kelley, a professor of entrepreneurship at Babson and leader of the GEM U.S. team. Still, "they do create jobs and incomes for themselves and also for others in their supply chains, as well as products and services for customers," she says. "So collectively they're valuable to an economy." (This aspect of GEM's research is particularly intriguing as the definition of entrepreneurship stretches to include more soloists and freelancers.)

Robert Litan, who has studied startup trends as a nonresident senior fellow at Brookings, is pleased to see numbers going in the right direction but more cautious about their significance. "This may be a canary in the coal mine about a potential reversal of the startup decline," he says. "But it will take a whole flock of canaries for many years to erase or even significantly turn around the 30-year decline in the startup rate."

Published on: Sep 2, 2015