Rural Entrepreneurship in a Time of Recession

Economic recessions increase costs, risk, stress, uncertainty, and business failures while decreasing the availability of employment. Individuals who seek to become self-employed in recessionary times, whether out of need or for opportunity reasons, face difficult and unique circumstances. We use cross-section repeated-measures rare events logistic regression to model the effects that living in rural America and changes in the economy have on the probability of individuals engaging in necessity or opportunity entrepreneurial activities both before the recession (2005–2007) and during the recession (2008–2010). Key findings indicate that before the recession, individuals living in rural metro and nonmetro counties were more likely to engage in opportunity-driven entrepreneurial activities when compared to individuals living in more urban counties. Positive employment growth rates before the recession also increased the probability that individuals in rural areas would engage in opportunity entrepreneurship. The recession marked a shift in the motivation of individuals in rural America to become self-employed. There is a clear decline in opportunity entrepreneurship and an increase in necessity entrepreneurship. In all rural and mixed-rural counties, college education positively predicts opportunity entrepreneurship, whereas individuals with incomes below $50,000 or working in a part-time job are more likely to engage in entrepreneurship driven by need.