Senior entrepreneurship: Catching a second wave
Director of the Ozmen Center for Entrepreneurship
This blog was published by the Oxford Institute of Population Ageing at Oxford University on March 2, 2022.
There may be some concern that entrepreneurial activities would decrease as countries go through population ageing. This concern is more pronounced in higher-income developed economies, which exhibit a faster aging trend. The underlying assumption with this argument is that entrepreneurship is driven by younger individuals in the population. With falling fertility rates and ageing populations, it is thought that entrepreneurship falters as the demographic structure shifts towards older populations. There is another interesting trend, however. In line with the faster ageing in developed countries, we also see a higher degree of entrepreneurship by older individuals in those countries compared to countries with younger populations. It is also not clear if there is a decrease in entrepreneurship in ageing countries over time that would cause major concern. For example, data from the Early-Stage Entrepreneurship Series of the Kauffman Indicators of Entrepreneurship does not show a steady decrease in entrepreneurship, measured by the rate of new entrepreneurs, over the 1996-2020 period. On the contrary, the rate of new entrepreneurs actually increased about half the time, with a particularly strong increase from 0.31% in 2019 to 0.38% in 2020.
It is particularly important that there has been a rise in “senior entrepreneurship,” which one can define as entrepreneurial activities by individuals who are 50 or older. According to Kauffman Indicators of Entrepreneurship, the 45-54 age group had the highest rate of new entrepreneurs (0.49%) in 2020, compared to younger age groups. The rate for that age group also showed a clear upward trend in the 1996-2020 period. There was sharp increase of about 38% in the rate of new entrepreneurs for the 45-54 age group from 2019 to 2020. Even the rate for the 55-64 age group (0.41%) was significantly higher than the rate for the 20-34 age group (0.28%) in 2020. In a recent article, Elizabeth Isele and Edward Rogoff show a similar pattern using other measures such as the total entrepreneurial activity (TEA) by the Global Entrepreneurship Monitor (GEM) and data from the U.S. Census Bureau and other sources. All these point to the fact that there is more senior entrepreneurship now than what we have seen in the last few decades.
Why is the rise in senior entrepreneurship important? Societies can benefit a lot from older entrepreneurs. They bring a lot of experience and knowledge from their previous employment. They also have more accumulated wealth compared to younger age groups, which would provide them with financial resources to start new businesses and create jobs for the economy. Given the older entrepreneurs’ financial resources and wealth of experience, those new businesses may have considerable social impact as well. Isele and Rogoff also point to a positive health impact since the involvement of older individuals in entrepreneurship may help with their mental well-being.
At the same time, there are few things we need to keep in mind regarding senior entrepreneurship. Older entrepreneurs may not tolerate risk as well as younger entrepreneurs. It is important to note that not all are opportunity entrepreneurs. Some of those who lose their jobs before retirement may turn to entrepreneurship out of necessity. A report by the Organization for Economic Cooperation and Development (OECD) notes that older entrepreneurs may be “pulled” or “pushed” into entrepreneurship. Older entrepreneurs may also lack some technical skills needed in the business world these days. Therefore, if we are looking at more senior entrepreneurship now and in the future, governments, business groups and other stakeholders should be supportive. After all, any kind of entrepreneurship has the great potential to bring considerable economic and social outcomes that benefit the entire society.