Study: Necessity entrepreneurship rising

The study found between 2007 and 2010, when the country was in the throes of an economic recession, the amount of necessity entrepreneurship rose from 16 percent to 28 percent of total entrepreneurship nationwide. The researchers define necessity entrepreneurs as those who start new ventures after losing jobs or experiencing pay cuts.

Bruning was laid off from Willow Brook Foods in 2008 – just months before the food processing company closed its doors in Springfield – and in June of that year he opened a mechanic’s shop at 2140 S. Campbell Ave. Bruning’s research led him to an industry that was blossoming as cost-conscious consumers began to invest in automotive repairs rather than replace their banged-up vehicles. A call this morning to Family Auto Repair was not returned by deadline, though the voicemail said the shop was experiencing high call volumes.

MU researchers say such entrepreneurial trends could spell positive economic activity down the road.

“From economic stress, great ideas are born,” said Thomas Johnson, study co-author and a professor in University of Missouri’s Truman School of Public Affairs, in a news release. “Many large, profitable businesses have been created due to entrepreneurship during economic downturns. Hopefully, that will be the case for this period as well.”

The study, which was published in the Entrepreneurship Research Journal, identified opportunity entrepreneurship as business ideas resulting from perceived opportunities, which is more common during flourishing economic times.

MU researchers examined data from the Global Entrepreneurship Monitor survey and matched the data with locations across the country, the release said.

A May 2010 Kauffman Foundation report supports MU’s findings.

According to the Kauffman Index of Entrepreneurial Activity, 340 individuals out of every 100,000 in 2009 opened a small business, a rate 4 percent higher than recorded a year earlier. Kauffman’s 2009 data reveals there were 27,000 more small-business starts per month than in 2008 and 60,000 more per month than in 2007. The Kauffman study found 2009 to have the highest level of startups in 14 years, even outpacing 1999 and 2000, the peak of the technology boom.

“We’ve seen similar trends occur in past economically slow periods that have led to economic booms,” said Maria Figueroa-Armijos, a public affairs doctoral candidate at MU and co-author of the latest study, in the release. “The doldrums in the 1980s led to increased entrepreneurship and the economic growth in the 1990s.”

Figueroa-Armijos also said the results show the need for increased support of necessity entrepreneurs.

“Currently, there is much more economic support for opportunity entrepreneurs than for people starting their own businesses out of necessity,” she said. “With the rise of necessity entrepreneurs during the recession, there is obviously a need for more help from lenders and policy makers. These necessity entrepreneurs could create jobs and economic growth for long-term economic prosperity.”