U.S. is a world of entrepreneurs

Journal Record, The (Oklahoma City), Sep 28, 1999 by John Cunniff

NEW YORK -- It may not rate up there with bowling or golf as a participant activity, but one of the most popular adult endeavors today is creating a business of one's own.

As many as 8.4 percent of American adults, 16 million in all, are at any given time attempting to start such businesses, according to a study by two recognized institutions. And since it takes money to lay the foundations for a business, an additional 4 million or so, including family members, say they've provided personal funds for start-ups in the past three years.

Among other things, the study by Babson College and the Kauffman Center for Entrepreneurial Leadership offers reassurance to aunts and uncles who thought they were the only ones being hit up for funds.

Starting a business is one of the defining characteristics of Americans, and it might become even more so, considering the leadership of fellows like Bill Gates, Michael Dell and as few other multibillion-dollar successes.

Moreover, the activity could intensify. The study finds that among major world economies, the United States and Canada have the highest proportion of adults aged 25-44 years, the age range of people most likely to start businesses.

The implications of a high degree of entrepreneurship are huge; the study's findings suggest a positive relationship between the level of entrepreneurial activity and Gross Domestic Product growth.

Small businesses, defined as those with fewer than 500 workers, employ 53 percent of the private work force, account for 47 percent of sales and make up 51 percent of private sector GDP.

In 1996, small businesses produced an estimated 64 percent, or 1.6 million, of the 2.5 million new jobs created, according to the study, which said such businesses account for 55 percent of all innovations.

In spite of this, the report questions whether the United States maximizes what most countries would consider a national asset, and it criticizes federal, state and local assistance programs as poorly publicized and marketed.

"Most nascent entrepreneurs do not know they even exist," it comments about public assistance programs, and argues that a mechanism is needed to coordinate and market them.

In spite of the efforts of public programs and the investments of venture capitalists, it contends that seed money is relatively hard to obtain in the United States.

In the end, informal financial support from friends, family and work associates contributes the lion's share of initial funds, an estimated $56 billion per year, it states.

While such private contributions or investments -- it sometimes is difficult to distinguish between them in a start-up situation -- are in the spirit of free enterprise and initiative, the authors suggests a little less regulatory restraint from the government might help the effort.

"Compliance with U.S. regulations and tax laws is labor intensive and costly," it says. "Moreover, regulations generally rely on punitive remedies to achieve compliance rather than incentives."

John Cunniff comments on economic trends for The Associated Press.