American Entrepreneurship on the Decline

New companies add much fewer new jobs than they did 30 years ago

America is obsessed with its entrepreneurs, perhaps now more than ever. We seem to worship them, as Malcolm Gladwell has put it, treating men like Steve Jobs, Bill Gates, and Mark Zuckerberg as "our new prophets." 

Yet, for all the attention we lavish on successful start-up founders as a culture, the unavoidable truth is that we're becoming less entrepreneurial as an economy. For roughly 30 years, new businesses have made up a steadily shrinking portion of companies in the United States while generating a declining fraction of new jobs. 

The reasons why are still unclear. But the change has accelerated since the recession and may be taking a toll on the recovery. Earlier this month, the Hudson Institute published a report noting that brand new companies added 2.34 million jobs in 2010, compared to an average of about 3 million a year dating back to 1977. Since 2009, we've averaged 7.8 start-up jobs per 1000 Americans, compared to 10.8 during the Bush years and 11.2 during the Clinton administration.