Abstract
This paper identifies two types of factors that influence the rate of creation of new firms; macroeconomic and microeconomic. The macroeconomic climate that appears to be most conducive to the formation of small businesses is what might loosely be called sluggish. Lower rates of growth of GNP, lower inflation rates, and greater growth in the unemployment rate were followed by increases in the rate of new incorporations. The cross-sectional or micro-economic factors which lead to higher rates of entry into different industries include higher growth rates in sales, higher research and development intensity, and higher profit rates. We do not find any of the traditional barriers to entry to be related to the rate of new firm creation.
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