KANSAS CITY, Mo. (TheStreet) -- You might think the silver lining of an economic recession is that it impels unemployed geniuses to start new companies. Or you might think a recession scares would-be engineers into waiting for steadier times before launching a new venture. But you would be wrong either way, according to a new study.A report by the Kauffman Foundation, a nonprofit with $2 billion in assets that funds entrepreneurship efforts, says the number of companies started each year remained steady at 700,000 between 1997 and 2005, despite an "explosion in efforts to promote and increase new-firm formation." The number of U.S. colleges that offer entrepreneurship classes has ballooned from 200 in 1977 to 2,000 in 2005. Venture capital also expanded during that period from $424 million in 1978 to $100 billion in 2000. Those trends failed to increase the number of new companies, according to the Kansas City, Mo.-based foundation. Taxes didn't seem to affect the number of new firms. Economic booms and recessions also weren't factors, though the foundation is still crunching the numbers for 2008 and 2009, the most recent recessionary years. "Maybe we simply can't increase the number of high-growth firms," says Dane Stangler, a senior analyst at the Kauffman Foundation and co-author of the report. "But if there are ways to increase it, it's clearly not by what we've done in the past." So what would spur entrepreneurial growth in the U.S.? "We always come back to immigration," says Stangler, who says loosening visa restrictions would increase the number of small businesses and boost the economy.
While only a small percentage of immigrants start companies, it's growing. The immigrant entrepreneurial activity rate increased from 0.37% in 2006 to 0.46% in 2007. The U.S. economy has benefited from new technology firms started by immigrants, in particular. Although it wasn't included in this report, Kauffman says immigrants founded 7,000 tech companies between 1995 and 2006. They comprised 0.3% of all companies founded during that period, but they generated 10% of the new jobs, Stangler says. During that time, about 25% of tech companies in the U.S. had founders from other countries. In California's Silicon Valley, half of new tech companies were founded by immigrants. Google ( GOOG), for example, was co-founded by Russian Sergey Brin; eBay ( EBAY), was founded by Iranian Pierre Morad Omidyar; and Yahoo! ( YHOO), was co-founded by Jerry Yang, who immigrated to the U.S. from Taiwan when he was a child. "We're definitely talking about a population that makes jobs, not takes jobs," Stangler says. -- Reported by Carmen Nobel in Boston.