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Research Shows Entrepreneurs Are Starting or Running Businesses Near Pre-Pandemic Levels

The GEM 2021/2022 Global Report is the first published report of its kind that examines entrepreneurship one year into the COVID-19 pandemic.

More American entrepreneurs are increasingly starting and running businesses despite the dramatic economic effects of the pandemic. This is according to new data reported in the Global Entrepreneurship Monitor’s (GEM) 2021/2022 Global Report: Opportunity Amid Disruption, released at Expo 2020 Dubai.

“Much like with crises throughout history, the COVID-19 pandemic crisis surfaced new opportunities for entrepreneurs around the nation,” said Babson College Professor Jeffrey Shay, one of the report co-authors. “While some of the United States’ entrepreneurs may have chosen this route due to economic necessity, many have done so because of opportunity and positive perceptions of starting a business and self-confidence in their skills and abilities.”

Data shows positive perception

One key GEM measure is the level of Total early-stage Entrepreneurial Activity (TEA): the percentage of 18 to 64-year-old adults actively engaged in starting or running a new business. While the country’s TEA declined in 2020, it recovered quickly in 2021, to the nearly pre-pandemic level of 16.5 percent. The new report shows Americans recognized a need for innovation and quickly acted to identify new opportunities. Moreover, some 66 percent of adults believe it is easy to start a business and 63 percent reported that the pandemic introduced good opportunities to start a business in their area.

In 2020, 36 percent of the US respondents intending to start a business soon said it was due to the pandemic, one of the lower rates among peer economies at the time. Now in the 2021 data, many entrepreneurs are seeing the COVID-19 era as presenting opportunities: 52.6 percent of TEA respondents see new opportunities as a result of the pandemic. Additionally, 60.8 percent of these respondents plan to use more digital technologies to grow their business in the next six months, indicating a willingness to adjust strategy and invest in the new consumer demands.

The rise of solopreneurship

A strong characteristic of entrepreneurs starting or running businesses during COVID-19 is that it appears to be accelerating the rate of single-employee companies, known as “solopreneurship,” a trend that started a few years earlier.

In 2021, the rate of U.S. adults expecting to remain as the only employee in their business was up by nearly 20 percent from 2020. Like entrepreneurship more generally, some of these solopreneurs start their business out of economic necessity, but many do so out of opportunity. This means business opportunity, or the opportunity for more flexible work arrangements, became more essential during COVID-19.

Implications for policymakers

In the United States, federal and state policymakers could consider these factors in crafting policies. While many are looking to push employers to classify contractors as benefit employees, policymakers could instead assist these solopreneurs by providing decent options for health care, savings and other benefits. More Americans are revealing their preference for flexible work, but current policies disincentivize these potential entrepreneurs.

Entrepreneurship trends from around the world

  • In 15 out of 47 economies, more than half of entrepreneurs starting or running new businesses agreed that the pandemic had led to new business opportunities. But in 2020, this had been the case for just nine out of 46 economies.
  • In 2021, more than 50 percent of entrepreneurs agreed that starting a business had become more difficult in 18 of 47 economies. In 2020, almost twice as many (33 out of 46 economies) had 50 percent or more of their would-be entrepreneurs agreeing that this was the case.
  • More than one in two adults agreed their household income had decreased in 22 of the 47 economies.

Read how to make diversity and inclusion a priority during COVID.

About GEM

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 towards entrepreneurship. The National Expert Survey (NES) looks at the national context in which individuals start businesses.

GEM 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. www.gemconsortium.org

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