New Businesses are Key to Surviving the Recession

10 08 2009

According to a Study by The Kauffman Foundation, new businesses are crucial to economic recovery.

“The Economic Future just Happened,” examines business start up’s during previous economic downturns, and concludes that over half of America’s Fortune 500 companies, started up during a recession or bear market.

The study provides a silver lining to the dark cloud that is currently hanging over the economy and shows that new businesses could lift the USA (and subsequently the UK) out of a recession through;

  • Job Creation – economic policy’s top priority
  • Innovation – driving economic growth

“Every generation of start-ups is often invisibly, both a renewal and restructuring on the economy.”

Kauffman Foundation: The Economic Future Just Happened.  June 2009

The media is saturated with doom and gloom stories about companies making large job cuts, or collapsing altogether, resulting in high levels of un-employment.

However, in the background many new companies are starting up every day, creating 6-8 jobs on average each time, thus silently lifting the economy.

A poll conducted by the Kauffman Foundation in March 2009 on Entrepreneurship and the Economic Recovery draws the same conclusions;

“Seventy-nine percent of Americans say entrepreneurs are critically important to job creation, ranking higher than big business, scientists and government.”

(Statistics taking from a random national sample of 2000 Americans.)

Vince Cable, Deputy Leader for the Liberal Democrats, speaking to business leaders in Milton Keynes recently said;

“Compared with a generation ago, we have more flexible labour markets, excellent entrepreneurs and companies who have niches, intellectual property rights and a very good position in international markets.”

“I suspect that some of them will become big players in the world. I also believe there is sufficient entrepreneurial spirit here to get us through this crisis.”

The Kauffman study shows that during the 2001-2002 recession, the number of new business start ups actually increased.

During an economic down turn, people may be less likely to leave secure job to ‘go it alone.’ However, with un-employment increasing rapidly there is a higher number of potential entrepreneurs, who may prepared to take a risk.

Therefore, it seems that the recession does not have a significantly negative impact of the formation and survival of new businesses, and entrepreneurship could be providing the economy with the lift that it needs.


Social enterprise in the US

8 05 2008

With the increased profile of social enterprise in the UK and recent criticisms of the treatment of social enterprise in the Enterprise Strategy, a new study of US research on social enterprise makes for interesting reading. 

Putting Entrepreneurship in the Social Sector is a new casebook from faculty at Harvard Business School which argues that the social sector in the US should take an entrepreneurial approach as, despite the best of intentions and trillions of dollars worth of assets, nonprofits have been unable to solve many of US society’s worst ills.  The book notes that students are increasingly interested in courses and careers related to social enterprise. 

The Harvard findings are echoed in a survey by the US-based Aspen Institute Center for Business Education on MBA student attitudes to business and society.  The survey found that social issues, ethics and corporate reputation are becoming increasingly important to today’s MBA students.

UK’s “hidden innovators”

6 05 2008

Research conducted by Cass Business School’s Centre for New Technologies, Innovation and Entrepreneurship (CENTIVE), and sponsored by Microsoft, has revealed that a latent pool of hidden innovators could potentially add a staggering £15 Billion to the UK economy by 2012 if the right conditions were created according to the latest government figures.

The report, which combined in depth statistical research with qualitative case study analysis, was conducted over a six month period. It examined how to unlock the barriers and pathways to entrepreneurial innovation in three important groups, recognised for their entrepreneurial potential: “Olderpreneurs” (those aged over 50), individuals with a Black Minority and Ethnic (BME) background, and people with a disability (including dyslexia). One key to untapping economic potential in these groups is developing entrepreneurial self belief through better mentoring and support.

[See also Enabled for enterprise and BME students encouraged to be enterprising]

Graduate entrepreneurship and business start ups/success

10 04 2008

Some 40 per cent of graduates from the top business schools are running successful entrepreneurial ventures 10 years after graduation, writes Arnoud De Meyer (director of the Judge Business School at the University of Cambridge) in a recent Financial Times article discussing one hundred years of MBA courses.  A follow-up interview with Marcos Galperín (who launched MercadoLibre – “Free Market” – the eBay of Latin America) demonstrates the impact that graduate entrepreneurs can have on a national and global basis.  Speaking about his successful venture, Galperín stated that “I could not have done this without the MBA”.

The National Council for Graduate Entrepreneurship (NCGE) was formed in 2004 with the aim of raising the profile of entrepreneurship and the option of starting a business as a career choice amongst students and graduates.  Four years on, and with an enhanced role arising from the 2008 Enterprise Strategy, the NCGE continues to monitor the evidence base supporting the importance of graduates setting up businesses.  For example, earlier this year the NCGE commissioned research into the graduate status of the founders of the UK’s fastest growing private companies, which showed that 70% of the UK’s fastest-growing companies were founded by graduates. 

Growing innovative start-ups

7 04 2008

The news that the number of start-up businesses in the UK has reached the highest level since records began 20 years ago is striking given the increasingly difficult trading conditions during the second half of last year. Research from Barclays indicates that a record 471,500 new businesses opened their doors in 2007, the highest annual volume since Barclays started tracking the market in 1988. This is an increase of 3% on 2006 (457,200). Within Scotland an 11% increase is reported in the number of new businesses started in 2007 – corporate services firm Oswalds note that 21,256 new companies were formed last year.

Such a trend requires considered and expert analysis and NESTA’s Policy & Research Unit (NPRU) is launching a new and timely research strand on growing innovative firms. The aim of this research is to investigate the path that growing firms follow; their impact on the economy; the barriers that they face; and the role of policy in helping to overcome them. NESTA is currently inviting tenders from researchers interested in pursuing work in this area (Invitation to Tender: Growing innovative firms), with a closing date for applications of 24 April 2008.

Meanwhile a recent Kauffman Foundation publication, Study of early years of start-ups, provides context from the US experience. This is the largest longitudinal study of new businesses ever conducted, following nearly 5,000 businesses founded in 2004 and tracking them over their early years of operation. The aim is to understand the characteristics of new business formation and sustainability with the intention of informing public policy to encourage entrepreneurial businesses.

Gender and entrepreneurship: more research

27 02 2008

Further to the research on gender and entrepreneurship outlined at last week’s PROWESS Conference, the International Journal of Entrepreneurship and Small Business (IJESB) has published a special issue on Gender and Entrepreneurship [5(3/4) 2008].  A range of topics are addressed from comparative and national perspectives; these include the effectiveness of women entrepreneurs, the influence of roles and identities on female entrepreneurial agency, and the perception of the importance of training for female entrepreneurs.

New research from Northumbria University on why women set up their own businessess in the North East reveals a range of factors which affect the decision of women to change direction in mid-life.  The factors include a combination of organizational sexism, personal and domestic circumstances, and the need to gain independance and control.

Fear of failure

20 02 2008

Fear of failure means that a third of would-be entrepreneurs may never get round to turning their idea into an actual business, according to a poll commissioned by Business Link, which found that more than 10 million people in the UK dream of packing in their jobs and starting their own business.  The survey found that the average worker spends three days a year day-dreaming about their future business from their desk, and one in five of those intending to start up a company plan to do so within 12 months.  The poll noted that motivations for starting a business include being unhappy at work (15%), to turn a hobby into a paid venture (25%), wanting to earn more money (37%) and wanting more freedom (40%) – it is interesting to compare that list with the results of the NCGE survey on motivations for would-be female entrepreneurs.

Some researchers would argue that failure can be a learning experience.  For example, Scott Shane urges readers of his blog to read Bounce by Barry Moltz.  He says that because people don’t like to talk about failure, there are far more stories about start-up success than start-up failure.  He days that the book “isn’t one of those feel-good-about-yourself-comeback-from-failure books that romanticize the notion of failure” but is about “accepting failure as a normal part of the process….. Given that entrepreneurs are more likely to fail than to succeed, and even those that succeed have some failures along the way, it’s really important for people to figure out how to deal with failure. To me, his points about one-hit-wonders, the timing of failure, the random walk in business, decision making, and the rarity of the redemption-from-failure stereotype, are particularly important and worth the cost of the book.  But I also suspect that many people will be comforted reading about Barry’s failures, which he courageously talks about”.

In addition, The Sunday Times has recently published two articles on business failure, looking at how to survive the emotional fallout of your firm going under and the practical steps that entrepreneurs can take to recover.