Business Creation Stability: Why is it So Hard to Increase Entrepreneurship?

While much attention has been given to the dramatic global diversity in business creation-some countries have over ten times the activity of others-there has been less attention to the year to year consistency found in individual countries. This stability has occurred despite considerable government efforts in many countries to increase the level of activity. This leads to a major question: What accounts for the high level of temporal stability in business creation? The answer can be found in Business Creation Stability and has considerable implications for policies oriented toward increasing new firm creation. There has been research studying the level of business creation stability across regions within countries including the United States, the United Kingdom and Germany, and in all three cases, regions at the top and the bottom of the rank orders appear in the same positions over time. This pattern suggests that some stable national characteristics-or basic institutional features-are affecting individual decisions to participate in the firm creation process. The central challenge, then, is how to identify national factors that are both relatively stable and likely to have a major effect on decisions to participate in business creation. Business Creation Stability presents a conceptual model and strategy for assessment of this phenomenon. The final result is a more complete understanding of both the critical national features and the underlying processes affecting participation in business creation. The major policy implication that substantial increases in business creation will require a sustained multi-faceted approach is discussed in the conclusion.