Is America the best place on Earth for entrepreneurs?

Is the U.S. the best place to start a new business? Image from smallbizdaily.com.

Is the U.S. the best place to start a new business? Image from smallbizdaily.com.

Now that I’m self-employed, I run into a lot of other independent business people. Call us indies or solo practitioners—we’re the ones with the big ideas and the not-so-big bank accounts. We’ve exchanged the security of a good-paying corporate or association job for the freedom to make it on our own.

And it’s okay because we live in the best place in the world for entrepreneurs, right? This is the original “rags-to-riches” republic, where anyone can start with just an idea and amass a fortune. Our business folklore is chock-full of checkered stories of hardworking, bootstrapping dreamers and schemers who made it big. It’s the quintessential American success story!

Except, it may not be true. The other day, my own “dreaming and scheming” was cut short by an article I saw on The Atlantic magazine website, “Think We’re the Most Entrepreneurial Country In the World? Not So Fast.”

Written by Jordan Weissman, it paints a sober picture of America’s place in the business startup firmament. By his account, we’re not number one, not even close by some measurements. As I read through it, crestfallen, I was reminded of those reports we hear from time to time about how America has slipped in one area or another such as math and science education, longevity or healthcare.

“Say it ain’t so!” I thought.

But Weissmann’s article is well-researched and quotes economic data that measures world business startup activity in various ways. For example, the U.S is:

  • Ranked 24th in the Organization for Economic Cooperation and Development’s (OECD) startup rate index, behind Mexico, Hungary, Italy, Lithuania, Brazil and even Luxembourg!
  • Ranked towards the middle to the bottom of OECD’s startup job creation index. Small startup firms are only responsible for a measly 2 to 3 percent of jobs in the U.S.
  • Ranked fairly high on the Global Entrepreneurship Monitor’s (GEM) “desperation index” of countries where entrepreneurs start businesses out of necessity (such as job loss) rather than desire. We’re at 21 percent compared to, say, Norway at less than 5 percent.
  • Considered merely mediocre in the innovation department when you look at GEM’s innovative products index.

But…as we all know, data can be sliced and diced in different ways. So before you pack it up and move to Denmark, consider that by these other measurements we’re still No. 1:

  • GEM’s startup activity index ranks the U.S. on top, with about 12 percent of U.S. adults running businesses that are less than three-and-a-half years old. That’s nearly twice the world average of 6.9 percent. GEM’s survey counts all businesses, even those that don’t have a payroll. So this would include self-employed individuals, who make up a large part of America’s working population.
  • The U.S. ranks among the highest in LLC startups, according to the World Bank.
  • The U.S. is ranked No. 1 in the Global Entrepreneurship and Development Index (GEDI). The GEDI ranks 79 countries for entrepreneurial performance, and the U.S. topped the 2012 GEDI index. The creators of the GEDI, professors Zoltan Acs and Lazslo Szerb, note that other indices such as GEM’s and the World Bank’s have many shortcomings, so they created a more complex measurement. (Incidentally, Denmark was No. 1 in 2011.)

Regardless of which data you go by, the U.S. is still a very good place to start a new business. The GEDI says the U.S. received the highest score for two important factors: “a very well developed institutional business environment with low levels of business risk (1.00) and a high level of urbanization and domestic market size (1.00).” I’m not sure what that means exactly, but I think it’s a good thing for entrepreneurs!

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