Economic factors and the Kauffman startup activity index

Abstract

Purpose The purpose of this study is to examine entrepreneurial activity in the USA and whether it supports a “pull” or a “push” theory of startup creation. The “push” theory argues that individuals are pushed into entrepreneurship by negative external forces, such as job dissatisfaction, difficulty finding employment, insufficient salary or inflexible work schedule. The “pull” theory contends that individuals are attracted into entrepreneurial activities seeking independence, self-fulfillment, wealth and other desirable outcomes. Design/methodology/approach This paper incorporates three well-established measures when looking at impact factors; unemployment rates, gross domestic product (GDP) and household income. The current study is unique in that it introduces the Kauffman Startup Activity Index (KSAI) as the measure of entrepreneurial activity when examining impact factors. Findings The results of this study support the “pull” theory (or the entrepreneurial effect) of startup activity and further supports the idea that entrepreneurs look for opportunities in the marketplace, rather than being “forced” into self-employment. Research limitations/implications Research is limited to having US data at the national level. Follow-up research could include parsing the data out to the state and local levels. Social implications The results of this study suggest to the economic development community that incentives during times of economic growth could further incent entrepreneurial activity. Originality/value The tact used by the authors is unique in that it relied upon three historical variables – unemployment rates, US GDP and household income – and introduced a new variable, the KSAI, rather than the previously relied upon national startup activity data or startup activity.