Today’s Drivers to Entrepreneurship


Tim J. Smith, PhD
Founder and CEO, Wiglaf Pricing

Published May 12, 2004

Entrepreneurship is an economic activity. The levels of entrepreneurship are correlated with economic factors. A growing economy, as measured by GDP growth, is correlated with increased entrepreneurial activity. Likewise, rising unemployment drives increases in entrepreneurship out of necessity. Firms established out of opportunity versus necessity are equally likely to succeed, but take on very different complexions. These facts have been established in the Global Entrepreneurship Monitor and were discussed in a prior Wiglaf Journal article.

How has entrepreneurship performed recently? While a national report is underway at Wiglaf, preliminary results for the State of Illinois can be released.

In the five years from 1999 to 2003, the Gross State Product of Illinois has been virtually flat in constant dollar terms while unemployment has increased by 52%. Based upon prior research, this would imply that many new businesses would have been initiated out of necessity. Figures from the IL Secretary of State support this conjecture, with a 44% increase in new corporations and LLCs. See the infographic to follow.

From the graph, we see that the establishment of new corporations follows the rise in unemployment. Overall, necessity is driving entrepreneurship in Illinois, and can be expected to be the same force behind entrepreneurship across the US today.

Necessity driven entrepreneurship takes on a very different character than the type of entrepreneurship that led up to the internet bubble. Necessity driven entrepreneurs are more likely to seek to establish a source of income rather than establish a source of large scale employment. They are more likely to establish a business that requires little investment rather than establish an asset intensive operation. And they are more likely to bootstrap their operations over securing venture capital.

The drivers to entrepreneurship today may be bad news for the venture capital community, but it reflects well on the resourcefulness and character of the millions of Americans that lost their jobs since 2001.



1. P. Reynolds, W. Bygrave, E. Autio, L. Cox, and M. Hay, Global Entrepreneurship Monitor 2002 Executive Report, Ewing Marion Kauffman Foundation, (2002).
2. A. Zacharakis, P. Reynolds, W. Bygrave, Global Entrepreneurship Monitor National Assessment: United States of America 1999 Executive Report, Babson College (1999).
3. Tim Smith, PhD, “Drivers to Entrepreneurship.” Wiglaf Journal (14 May 2003)
4. US Department of Employment, IL Department of Commerce and Economic Opportunity, and the IL Secretary of State.

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About The Author

Tim J. Smith, PhD, is the founder and CEO of Wiglaf Pricing, an Adjunct Professor of Marketing and Economics at DePaul University, and the author of Pricing Done Right (Wiley 2016) and Pricing Strategy (Cengage 2012). At Wiglaf Pricing, Tim leads client engagements. Smith’s popular business book, Pricing Done Right: The Pricing Framework Proven Successful by the World’s Most Profitable Companies, was noted by Dennis Stone, CEO of Overhead Door Corp, as "Essential reading… While many books cover the concepts of pricing, Pricing Done Right goes the additional step of applying the concepts in the real world." Tim’s textbook, Pricing Strategy: Setting Price Levels, Managing Price Discounts, & Establishing Price Structures, has been described by independent reviewers as “the most comprehensive pricing strategy book” on the market. As well as serving as the Academic Advisor to the Professional Pricing Society’s Certified Pricing Professional program, Tim is a member of the American Marketing Association and American Physical Society. He holds a BS in Physics and Chemistry from Southern Methodist University, a BA in Mathematics from Southern Methodist University, a PhD in Physical Chemistry from the University of Chicago, and an MBA with high honors in Strategy and Marketing from the University of Chicago GSB.