New businesses are clearly the engine of job creation in the United States, creating an average of about 3 million new jobs each year and accounting for virtually all net new job creation.
But in recent years, that job creation engine has begun to break down. The number of new businesses launched each year—and the number of new jobs created by those new firms—has suddenly and significantly declined.
If America’s entrepreneurs have historically served as the engine of job creation, launching new businesses at a remarkably consistent rate for decades regardless of broader economic circumstances, as research has demonstrated, what is suddenly in their way? What explains the drop-off in new business formation and the decline in the number of new jobs those businesses create? Unless these key questions can be answered—and unless those answers help produce compelling policy solutions—the U.S. economy stands little chance of creating the jobs necessary to put millions of unemployed Americans back to work.
There are any number of ways to assess the condition, challenges, and prospects of America’s new and young businesses. One might visit various start-up incubators and accelerators—facilities that provide support, technical assistance, and mentoring services to entrepreneurs as they perfect their product or service idea—or interview a number of entrepreneurship experts. One could construct a detailed survey of active entrepreneurs, ...