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Published: June 21, 2013

 
 

How the Great Recession Spurred Entrepreneurship

Interestingly, the types of businesses formed during the downturn are similar to those started in prosperous periods. In fact, the share of businesses created in each industry during boom and bust periods differs by less than a percentage point. The highest number of startups during the Great Recession appeared in the professional-services and construction sectors, followed by education and health services, wholesale, and retail. Manufacturing had the lowest rate.

Citing a study from 2009, which found that 57 percent of that year’s list of Fortune 500 firms got their start during previous recessions or bear markets, the author argues that many of the businesses created during the Great Recession could have staying power. “Therefore, one positive byproduct of the recent severe recession,” he writes, “is that a wide range of eventually successful firms might emerge and contribute to the long-run economy.”

Bottom Line:
The Great Recession caused many businesses to close their doors or file for bankruptcy protection, but the rapid rise in unemployment also drove an increase in entrepreneurship. For many people across the U.S., the potential opportunities from opening a new business outweighed the alternatives, despite slumping demand and tight credit. 

 
 
 
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