In these tough economic times, with the unemployment rate approaching nine percent and the economy shedding hundreds of thousands of jobs each month, what can the average American do to find work? According to a recent study by the Kauffman Foundation, people are increasingly relying on the one business it's hard to get laid off from-their own.
In 2008, according to data from the Kauffman Index of Entrepreneurial Activity, the number of Americans starting businesses each month increased slightly over 2007, moving from 300 out of every 100,000 Americans in 2007 to 320 out of 100,000 last year. As a whole, this means that over half a million new businesses were created each month during 2008.
Click to See America's Top 10 Most Ambitious Cities
Several of the largest metropolitan areas in the United States saw a substantial increase in entrepreneurship over the past few years. But 2008's most entrepreneurial cities aren't necessarily the ones we've come to associate with start-up business savvy, such as Silicon Valley or Seattle.
Atlanta tops the list of the most ambitious cities in America, with a business creation rate of 740 per 100,000 individuals. In addition, according to the study, Georgia experienced the largest increase in entrepreneurial activity over the preceding decade. The next four metropolitan areas with the largest increases in entrepreneurial activity are Phoenix, Riverside-San Bernardino, Los Angeles and Miami.
Which city comes in last in the Kauffman Foundation study? Philadelphia, which lags the top five most ambitious cities by nearly a 3 to 1 ratio.
On the state level, Georgia, Montana and New Mexico all demonstrated comparatively high rates of entrepreneurship-each with more than 500 people per 100,000 starting new businesses in 2008, while Pennsylvania, Missouri and Wisconsin had the lowest rates among the 50 states.
The Kauffman Index also found that new business creation was up across ethnic groups (except for African Americans), geographic regions (except for the Midwest) and both genders. However, this growth comes from the creation of "low-income-potential" and "middle-income-potential" businesses, according to study author Robert Fairlie, professor at the University of California, Santa Cruz. The rate of creation for "high-income-potential" businesses saw an annual decrease from 2007.
"The total business creation rate increased over the past year, but this masks diverging underlying trends. Entrepreneurship rates increased only for low-income types of businesses and not for high-income types, which may be early signs of how the recession is impacting firm formation," Fairlie said.
In other words, entrepreneurship based on ‘necessity' rather than ‘opportunity' is increasing and could explain the spike in low- and middle-range businesses and a dip in high-end businesses.
Robert Litan, vice president of Research and Policy at the Kauffman Foundation, notes that the idea of Americans taking businesses into their own hands during a recession is not a new one but rather a trend.
"The overall pace of entrepreneurial activity did not suffer during the recession in 2008, which is great news," Litan said. "This is consistent with historical patterns, to the extent we understand them, which indicate that entrepreneurial activity is largely insensitive to the economic cycle," he said, adding that "So far, at least through 2008, this pattern is holding up."
Click to See America's Top 10 Most Ambitious Cities