2008: Entrepreneurship Thrived, Despite Worsening Recession

By November 23, 2009

It’s a given in the valley that recessions drive innovation. Perhaps they truly do: entrepreneurship thrived in 2008, according to the Global Entrepreneurship Monitor (GEM), an annual report put together by Babson College and Baruch College, released today. The report obviously doesn’t give the full picture, as the beginning of 2008 was positively sunny compared to its final four months, but the results are revealing in how entrepreneurs react when recession winds begin to swirl. In 2008, total entrepreneurial activity (TEA) grew to 10.8 percent, up from 9.6 in 2007.

For the great majority of entrepreneurs, opportunity trumped necessity in the creation of their enterprise. Eighty-seven percent started their business because of a business opportunity, while only 13 percent did so due to necessity.

Entrepreneurs got older in 2008, as there was an 8 to 9 percent to in entrepreneurial activity by people in the 18-44 age range and an increase of about the same amount in the 44-98-year-old group.

There was also an increase in TEA by women, which grew from 6.1 percent to 7.5 percent. The glass ceiling appears to remain in firmly place, though: on average, female entrepreneurs received eight times less funding to start their ventures than men did.

Women were also more likely to engage in entrepreneurial activity because of necessity than were men (21 percent to 5 percent), and – perhaps correspondingly, along with the difficulty in acquiring capital – had a greater fear of failure and a lower expectation that business success leads to higher status than their male counterparts.

Women were more likely to create consumer-oriented businesses than men (52 percent to 26 percent). Men were much more likely to launch business-service businesses.

While TEA was up in 2008, entrepreneurs planned on launching smaller businesses than in the previous year, and continue the shift away from a manufacturing economy to the business-services sector.

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