In the midst of the worst economic contraction since 1981-82, and possibly since the Great Depression, people are looking for a silver lining in the gloom. The Ewing Marion Kaufman Foundation recently conducted some interesting research which may just be the ray of light. They found evidence that this economic climate is an opportune time for new business creation.

The research study, titled “The Economic Future Just Happened,” where they analyzed data from the U.S. Census, the Fortune 500, and the Inc. list of America’s fastest-growing companies, resulted in three main findings:

1. Recessions and bear markets, while they bring pain and often lead to short-term declines in business formation, do not appear to have a significantly negative impact on the formation and survival of new businesses.
2. Well-over half of the companies on the 2009 Fortune 500 list, and just under half of the 2008 Inc. list, began during a recession or bear market. We also find that the general pattern of founding years and decades can help tell a story about larger economic trends.
3. Job creation from startups is much less volatile and sensitive to downturns than job creation in the entire economy.

While this data is far from conclusive and can only hint at broader trends, it does illustrate a more fundamental economic reality: each year, new firms steadily recreate the economy, generating new jobs and innovations. These companies may be invisible today, but they may one day grow into household names.

“You can see the story of the American economy in these numbers,” said Carl Schramm, president and CEO of the Kauffman Foundation. “History has demonstrated this time and again: new firms create new jobs and fuel our economy. Policies that support entrepreneurship support recovery.”

The study points out that while recessions often create widespread economic grief, they also can encourage potential entrepreneurs, acting “as an extra spur to founding a new company, if the founders perceive their prospective competition might be weakened.” Rising unemployment can benefit new enterprises: entrepreneurs may view unemployment as an opportunity to start a company, and seize the advantage provided by the ability to tap into a larger pool of potential employees.

“While startups may not begin with the intention of reaching the Fortune 500 list, they’re hard at work under the radar,” said Dane Stangler, senior analyst at the Kauffman Foundation and author of the study. “These companies may remain invisible to most of us, or they may one day grow into household names. Either way, they’re steadily recreating our economy-generating jobs and innovations.”

“We imagine the Fortune 500 to be giant dinosaurs lumbering across the landscape,” Stangler said. “That’s not the case. The turnover and churn on the list is remarkable. Successful, big companies have to be entrepreneurial, and they are.”

Many startups, growth companies, and even mature Fortune 500’s use M Squared Consulting as a ready resource to quickly staff up new initiatives or vet new business initiatives. Our proven talent-on-demand model enables them to parachute in seasoned expertise that can quickly execute. No matter where clients are on the business creation continuum - whether it is strategy, assessment, proof of concept, or launch - we enable them to scale quickly and confidently with objective, proven experts who are focused on delivering results.

This entry was posted by Kimball Norup on Tuesday, June 16th, 2009 at 8:27 am in Business Strategy, Executive perspective, Flexible Workforce. Feel free to leave me a message about this post below.