2022/2023 United States GEM Report / Key Insights

GROUNDBREAKING ENTREPRENEURIAL GROWTH: Closing Gender Divides and Building Socially and Environmentally Responsible Businesses

2022/2023 United States GEM Report / Key Insights

GROUNDBREAKING

ENTREPRENEURIAL

GROWTH: Closing Gender Divides and Building Socially and Environmentally Responsible Businesses

For 24 consecutive years, The United States Global Entrepreneur Monitor (GEM) team at Babson College has surveyed more than 2,000 adults annually in the United States, assessing their attitudes and perceptions about entrepreneurship and the rates and characteristics of those identifying themselves as entrepreneurs. This group is one of hundreds of academic research teams across 120 economies around the world that have contributed to the GEM research since 1999, highlighting the state of entrepreneurship in each participating economy.

The GEM report puts the current state of entrepreneurship into broader context. This year’s report analyzes data collected during the summer of 2022, and compares it with the ndings during the recent global pandemic, as well as over two decades of detailed longitudinal study in the realm of entrepreneurship.

In many respects, entrepreneurship in the United States has returned to the trends established prior to the COVID-19 pandemic, but the rate of business closures—a record high since 2020, demonstrate the fallout in business activity from the pandemic. Most notably, the results of the 2022 GEM survey reveal signi cant, upward progress in nationwide entrepreneurship, led by a growing cohort of entrepreneurs who are championing a greater push for building sustainable businesses.

“It’s remarkable to see this record-breaking entrepreneurial activity, especially among young people, women and innovators, who are not only reshaping the business landscape, but also propelling signi cant social and environmental advancements,” said GEM U.S. Team co-leader and Babson College Entrepreneurship Professor Donna J. Kelley. “As we continue to navigate the ever-evolving business landscape, it will be important to continue to support and empower entrepreneurs, celebrate their achievements, and promote inclusive and sustainable entrepreneurship for a better future.”

Record Setting Entrepreneurial Activity Driven by YOUNG ENTREPRENEURS

Entrepreneurship rose to record-breaking heights throughout the United States during 2022—19% of adults were in the process of starting or running a business less than 3.5 years old. This activity continues an upward trend that began in 2015 and only experienced a brief downtick during the rst year of the pandemic.

The rise in entrepreneurial activity was driven by the younger generation and a growing percentage of women, narrowing the gender gap with men. Adults aged 18-34 reported nearly twice the rate of entrepreneurial activity compared to those in the 35-64 age group. Businesses launched by younger entrepreneurs, women entrepreneurs, and those with innovative offerings were highly likely to be advancing greater social change and environmental sustainability, demonstrating how entrepreneurs can take the lead in addressing social and environmental problems.

Key Statistics:

19% 5.2%

of working-aged adults were in the process of STARTING or RUNNING a business less than 3.5 years old

18% OF WOMEN

&

20% OF MEN

27%

BUSINESS CLOSURE RATE (up from 2.9% in 2019)

RATE OF ENTREPRENEURSHIP among 18- to 34-year-olds (compared to 14.5% of 35- to 64-year-olds)

The Rising Impact of MANUFACTURING AND INNOVATIVE TECHNOLOGY

In 2022, entrepreneurs demonstrated a clear shift away from nance, real estate, and business services (30% in 2020 to 16% in 2022) toward manufacturing and logistics (12% in 2020 to 19% in 2022), with a small but notable increase in information and communication technologies (4.6% in 2020 to 6.8% in 2022).

“The pandemic exposed profound hurdles linked to offshore manufacturing, revealing America’s excessive dependency on foreign countries for the production of goods,” said Jeff Shay, co-author of the GEM report. “This surge in domestic manufacturing can be attributed to both escalating prospects and mounting pressure to produce within American borders. Furthermore, ampli ed interest in logistics could be traced back to extensive media coverage highlighting logistical predicaments witnessed in the USA during the pandemic, such as the sight of countless container ships idling at ports.”

Meanwhile, 40% of entrepreneurs were introducing something new to the market, representing nearly double the percentage reported two years ago in 2020. Additionally, nearly 40% of entrepreneurs use new technology and procedures to build their product or service, also close to double the 2020 number.

This surge in domestic manufacturing can be attributed to both escalating prospects and mounting pressure to produce within American borders.

– Jeffrey Shay, co-author of GEM Report

Key Statistics:

Entrepreneurs shifted away from FINANCE, REAL ESTATE, and BUSINESS SERVICES

30%

16%

12%

19%

Slight uptick in INFORMATION AND COMMUNICATION TECHNOLOGIES:

4.6%

IN 2020 IN 2020 IN 2020

vs. vs. vs.

6.8%

IN 2022 IN 2022 IN 2022 The 2022/2023 U.S. Global Entrepreneurship Monitor (GEM) Report / KEY INSIGHTS 5

WHO WERE THE ENTREPRENEURS?

Women and Entrepreneurship: Narrowing the Gender Gap and Growth within Manufacturing

The total rates of entrepreneurship activity in 2022 rose to the highest in GEM’s history:

18% FOR WOMEN 20% FOR MEN

The United States reported the second-highest rate of women’s entrepreneurship and the third-lowest gender gap among 21 high-income economies in 2022.

Women were at the forefront of manufacturing growth, with nearly 18% of women beginning in manufacturing (9% for men), and they were more likely than men to introduce products or services that were new to the world. Women’s participation in the wholesale and retail sector (accounting for 33% of women entrepreneurs) and in health, education, government, and social services (21%) also rose dramatically in 2022.

“Since Covid, there’s been a shift in how women are thinking about entrepreneurship. Instead of focusing on low-entry barrier and low-margin local companies like service businesses, they’re creating businesses to make a difference in the world, and in doing so, women are starting manufacturing, wholesale and retail businesses on a larger scale. We didn’t see this same shift for men. Technology may also be playing a role in this shift as it has become easier to sell and market products online,” said Candida Brush, a professor at Babson College and another author of this year’s report.

However, entrepreneurial intentions dropped by about one-fourth for women over the prior year (to 12%) while staying relatively steady for men (16%). Established business activity exhibited little change for both genders (8% for women versus 10.5% for men).

Women perceive entrepreneurship as a good career choice (78% versus 74% for men), although they were a little less likely to feel it is easy to start a business (64% versus 68% for men). Both genders continued to exhibit high con dence in their entrepreneurial capabilities (60% for women, 73% for men).

Key Statistics:

In 2022, among 21 participating high-income economies, the U.S. reported:

2ND-HIGHEST RATE OF WOMEN’S ENTREPRENEURSHIP

(after the United Arab Emirates)

3RD-LOWEST GENDER GAP

(only Spain and Qatar have equal TEA rates for men and women)

There is a clear call for enhanced support for entrepreneurship, which necessitates increased investment in education, robust mentorship programs, and strategic collaborations with academic institutions fostering an entrepreneurial mindset.

– Stephen Spinelli Jr. MBA’92, president of Babson College

High Rates of Entrepreneurship AMONG BLACK PEOPLE AND GROWING RATES AMONG HISPANIC PEOPLE

Of the racial/ethnic groups surveyed, Black people have the highest total entrepreneurship activity (35%), followed by Hispanic people (27%, an increase from 17% in 2021). The White population reports much lower rates of entrepreneurial activity (15%). Compared to White people, both Black people and Hispanic people hold a more positive view of entrepreneurship as a career (74%, 85%, 85% respectively). Hispanic people are the most likely to believe that entrepreneurs have high status (84%) and they have higher perceptions surrounding the ease of starting a business (76%). These patterns of high entrepreneurial activity and increased positive perceptions among racial/ethnic groups have continued to rise in recent years.

In contrast, despite the greater positive views of entrepreneurship in both communities, White people remain more likely to be running an established businesses (9.8%) than Black (6.5%) or Hispanic (7.3%) people. This raises several questions:

Will there be more established business activity from entrepreneurs of color in the future, given their high startup rates?

If not, what can be done to combat this disparity?

This persistent imbalance in total entrepreneurship activity across Black and Hispanic populations against the rate of established businesses, a disparity that has continued year over year, requires continued attention and support to fully close this gap.

74%

Key

85%

85%

60%

Statistics: hold a positive view of entrepreneurship as a career are motivated to generate wealth through entrepreneurship White people remain more likely to be running an established business

OF WHITE PEOPLE OF WHITE PEOPLE OF WHITE PEOPLE

9.8%

83%

6.5%

OF BLACK PEOPLE OF BLACK PEOPLE OF BLACK PEOPLE

90%

7.3%

OF HISPANIC PEOPLE OF HISPANIC PEOPLE OF HISPANIC PEOPLE

THE FUTURE OF ENTREPRENEURSHIP: Businesses Owners and Entrepreneurs Prioritize Environmental and Social Impact

Among entrepreneurs and established business owners, over half (55%) of both entrepreneurs and established business owners have taken steps to minimize their business’s negative environmental impact. For entrepreneurs, women (56%), the 18-34 age group (62%), and innovators (70%) were more likely to take such actions. Steps to help the environment may include energy-saving measures, reducing carbon emissions, introducing more efficient machinery, taking care of solid waste generated, and using recyclable materials as well as environmentally sound means of transportation.

With regard to steps that maximize social impact, 55% of entrepreneurs and 43% of established business owners took such action in 2022. Women (60%), those age 18-34 (63%), and innovators (70%) were most likely to indicate these actions. Examples of socially minded efforts may include: creating employment for young unemployed persons and other underserved segments of the labor market; incorporating social enterprises into the supply chain; ensuring a diverse workforce; prioritizing companies and/or suppliers that take action to respect human rights when buying a product or service; fighting against any form of child or slave labor; and investing in, or providing other support for social projects or organizations.

Key Statistics:

of both entrepreneurs and established business owners have taken steps to MINIMIZE THEIR BUSINESS’S NEGATIVE ENVIRONMENTAL IMPACT.

Among entrepreneurs, the most likely to take action are:

WOMEN

55% 56% 62% 70%

Those who took action with regard to social impact in 2022:

&

Among entrepreneurs, the most likely to take social action are:

60% WOMEN

18 –34 AGE GROUP 63% 18 –34 AGE GROUP

INNOVATORS 70% INNOVATORS

CONCLUSION

2022 set a new standard for entrepreneurial activity, reaching the highest-recorded level in the United States since GEM began in 1999. With heightened entrepreneurial engagement comes increased product innovation and greater opportunities for personal wealth generation. During dif cult or turbulent times, entrepreneurship offers an income source when job prospects are limited, provides resources to increase personal wealth, and enables individuals who aspire to make a difference in the world. These all remain driving forces for entrepreneurship throughout the United States.

While the results of the GEM report also show more entrepreneurs are projecting no job creation in 2022, that metric does not take into account the value those entrepreneurs still bring to their communities, including their families, employees, suppliers, and customers. Additionally, many entrepreneurs still continue to create new jobs, further growing the national economy as well as bringing new opportunities to workers within their communities.

It is essential that entrepreneurship be made accessible to all people, whether as a means of self-employment or as a small-scale operation. Collectively, the nation relies upon these individuals to generate new jobs, commercialize bene cial innovations, and grow the United States’ economy. Therefore, in the coming year the GEM results on job creation prospects, participation in technology industries, innovation, and international market reach are critical indicators to track.

As the environmental and social problems facing the world continue to unfold, it’s crucial that all entrepreneurs act responsibly and provide solutions to counter harm to the environment while also improving the well-being of people, particularly those who are underserved or disadvantaged. These efforts require conscious thought and action, and entrepreneurs are uniquely positioned to lead the way.

It is the hope of the research authors that the results can educate and inform a broad audience of academics, educators, policymakers, and practitioners—advancing knowledge, prompting further research, igniting debate, and guiding decisions that ensure America’s entrepreneurial culture continues to thrive.

Babson College prepares and empowers entrepreneurial leaders who create, grow, and steward sustainable economic and social value everywhere.

A global leader in entrepreneurship education, Babson offers undergraduate, graduate, and executive education programs as well as partnership opportunities. Babson is the co-founder and catalyst for the Global Entrepreneurship Monitor (GEM), the world’s largest and longest-standing globally focused entrepreneurship research project.

Authors of the 2022–2023 GEM Report: Donna J. Kelley, Jeffrey Shay, Mahdi Majbouri, Candida G. Brush, Andrew C. Corbett, Caroline Daniels

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