More Americans found and pursued new opportunities to endure and persist through the continued impact of the pandemic, according to new data reported in the Global Entrepreneurship Monitor (GEM) 2021/2022 U.S. Report by Babson College released by Babson College.
The GEM report, which polled more than 2,000 U.S. adults in 2021, also shows the Total Entrepreneurial Activity (TEA) rate edged up to 16.5 percent last year, after exhibiting a slight drop in 2020 to 15.4 percent.
The GEM report also found trends and insights among young, Black, and female entrepreneurs.
This year’s Global Entrepreneurship Monitor report presented a pattern of high entrepreneurship rates and entrepreneurial intentions among the youngest adult age group, individuals 18-24, part of “Gen Z.” This trend hasn’t been seen in recent GEM report history.
More broadly among the 18-34 age group, 67 percent emphasized a focus on environmental sustainability and 58 percent were highly likely to take actions to maximize social impact and positively impact their communities.
GEM Report findings also show that 18- to 24-year-olds also had high entrepreneurial intentions (20 percent), high entrepreneurship rates (19 percent) but also high business closure rates (6.2 percent).
“Generally entrepreneurship rates peak among those who are old enough to have enough work experience, resources, and networks, but this GEM survey shows a growing interest in entrepreneurship among young people, who can bring novel ideas, their knowledge of youth market segments, and their openness to risk and learning to the entrepreneurship ranks,” said GEM U.S. Team co-leader and Babson College Entrepreneurship Professor Donna J. Kelley.
“Young adults may lack such advantages as access to financial resources and a track record to demonstrate their capabilities,” said Smaiyra Million, the Executive Director of the Arthur M. Blank Center for Entrepreneurship at Babson College. “Therefore, it’s important colleges and other programs build skills and instill ambitions for entrepreneurship so students can experiment with ideas and gain experience and confidence, particularly in building impactful solutions.”
Of the ethnicities surveyed and reported, GEM data reveals that Black people rated highest in several categories regarding entrepreneurship. Eighty-one percent of Black people state that entrepreneurship is a good career choice (79 percent Hispanic, 74 percent White).
Nearly one-fourth of Black people (23 percent) have entrepreneurial intentions, twice the percentage of White people. And nearly one-third (32 percent) are entrepreneurs, over 2½ times the rate reported among White people.
The GEM research indicates that women and people of color have high regard for entrepreneurship and are starting businesses that benefit their communities and the American economy. However, Black and Hispanic entrepreneurs have lower established business ownership rates (5.1 percent versus 10.3 percent for White people and 5.4 percent for Black people) and higher closure rates than White entrepreneurs (6.2 percent versus 3.5 percent for White people and 5.4 percent for Black people).
Women in the United States are highly likely to believe that entrepreneurship is a good career choice (78 percent), slightly more so than men (75 percent). Most women also believe that entrepreneurs receive high status (80 percent) and positive media attention (75 percent). However, fewer women (58 percent) than men (69 percent) believe it’s easy to start a business.
Unique this year and perhaps closely linked to the pandemic are the changes in fear of failure between men and women. Historically, the gap has remained significant, with women reporting a fear of failure at a higher rate than men. However, in 2021 women’s perceived fear of failure was nearly equal to that of men, with women at 43.4 percent (down from 46 percent last year), and men at 41.8 percent (up from 37 percent last year).
“The GEM results emphasize a need to support entrepreneurs of all ages and backgrounds. This includes identifying the gaps hindering young entrepreneurs, women and communities of color, and offering solutions that provide opportunity, connection, and sustainability in support of their vision and create rewarding livelihoods for their stakeholders, families, and themselves,” said Stephen Spinelli Jr., Ph.D., President of Babson College. “The world is facing so many problems and entrepreneurial leaders have the tools to solve them. GEM will help us continue to learn from entrepreneurs and help guide them as they shape the world of tomorrow.”
Additional key findings
The impact of the COVID-19 pandemic continued to be far-reaching, and entrepreneurs didn’t escape its negative effects.
This year’s business closure rate was among the highest reported in GEM’s history at 4.3 percent. Other high points were reported in 2007 (4.8 percent) and 2008 (4.5 percent), around the time of the global economic recession). This year also witnessed a high percentage of entrepreneurs and business owners seeking new opportunities and implementing adaptive actions, perhaps as a response to the environmental shock of the pandemic. More than half of entrepreneurs (52 percent) thought that COVID-19 provided new opportunities to pursue with their businesses. Forty-three percent of established business owners stated their expectations for growth were higher than they were the prior year.
- In 2021, 35 percent of entrepreneurs thought that starting a business was more difficult than it had been a year earlier versus 82 percent in 2020 who stated that it was more difficult than the prior year.
- Although one-third of entrepreneurs and established business owners already used a range of digital technologies in their business, another one-fourth adopted or enhanced their use of digital technologies as a result of the pandemic.
- A nearly equal percentage of entrepreneurs (42 percent) and established business owners (43.5 percent) stated that the federal government had responded effectively to the economic consequences of the pandemic, with similar proportions (46 percent of entrepreneurs and 43 percent of established business owners) stating the government had not responded effectively.
- Over two-thirds of entrepreneurs (68 percent) and over half of established business owners (54 percent) indicate that they prioritize the social and/or environmental impact of their businesses above profitability or growth.
- Nearly half (49 percent) of entrepreneurs and established business owners stated they had taken action over the past year to minimize the impact of their business on the environment.
- Half (50 percent) of entrepreneurs and 39 percent of established business owners say they have taken steps to maximize social impact with their businesses over the past year.
About Babson College:
Babson College prepares and empowers entrepreneurial leaders who create, grow and steward sustainable economic and social value everywhere. We shape the entrepreneurial leaders our world needs most: those with strong functional knowledge, skills and vision to navigate change, accommodate ambiguity, surmount complexity and motivate teams in organizations of all types and sizes. An international leader in entrepreneurship education recognized globally by U.S. News & World Report, our undergraduate, graduate, executive programs and partnership opportunities are tailored to the needs of our world.
Global Entrepreneurship Monitor (GEM) is a consortium of national country teams, primarily associated with top academic institutions, that carries out survey-based research on entrepreneurship around the world. GEM is the only global research source that collects data on entrepreneurship directly from individual entrepreneurs. GEM’s Adult Population Survey (APS) provides analysis on the characteristics, motivations, and ambitions of individuals starting businesses, as well as social attitudes toward entrepreneurship. The National Expert Survey (NES) looks at the national context in which individuals start businesses.
This is the 23rd annual GEM survey. Academic research teams in 50 economies collected and analyzed data on a comprehensive array of indicators about entrepreneurship and businesses. The GEM United States Team, based at Babson College, has participated in GEM every year, administering an annual adult population survey to more than 2,000 Americans. Based on the 2021 results, it’s estimated that around 33.5 million Americans were starting or running new businesses, and nearly 18 million were running established businesses.
In numbers, the Global Entrepreneurship Monitor is:
- 20+ years of data
- 150,000+ interviews a year
- 100+ economies
- 500+ specialists in entrepreneurship research
- 300+ academic and research institutions
- 200+ funding institutions
The Global Entrepreneurship Monitor began in 1999 as a joint project between Babson College (USA) and London Business School (UK). The consortium has become the richest resource of information on entrepreneurship, publishing a range of global, national, and special topic reports on an annual basis.
For more coverage on how female entrepreneurs adapted during COVID-19, read our interview with Alex Ostebo, Founder of Kameo, on helping the entertainment industry survive during a pandemic.