Not enough ventured: and not enough will be gained until the state does more encourage entrepreneurs to create jobs at the rate they have in past recoveries.

• Author: Hood, John
• Position: Free & Clear

You've heard it many, many times: Most new jobs are created by small businesses, not large corporations. That's true, as far as it goes. But it doesn't go as far as it used to. As recently as 1993, more than half of U.S. workers were employed by companies with fewer than 250 people on their payrolls. That share declined in the ensuing two decades, falling to 47% in 2013.

Since the Great Recession, startups and small enterprises have played a much smaller role in the nation's job creation than they did during previous recoveries. For example, in the year that ended in March 2013, companies that were less than a year old created about 3 million jobs compared with 4.6 million in 2000.

The real story is not that hiring by large companies is sizzling but in what isn't happening. Though households and businesses are saving more, they aren't plowing that money into new ventures the way they once did. "Since the most recent recession began in December 2007, [business] births have experienced the steepest decline in the history of the series," the U.S. Bureau of Labor Statistics reports. "New establishments are not being formed at the same levels seen before the economic downturn began, and the number is much lower than it was during the 2001 recession."

State-level studies show how strong the relationship between entrepreneurial activity and job growth is. The most recent, published last year in the Journal of Entrepreneurship and Public Policy, found that an increase in a state's business starts was "robustly associated with an increase in economic growth." Another 2013 study, published in the Journal of Regional Science, showed that entrepreneurship was particularly important for job creation in rural regions such as Appalachia.

You can see the problem right here in North Carolina. Though job creation in our state has exceeded the national average most of the last three years, it hasn't been sufficient to re-employ everyone who lost a job during 2007-09 plus all the folks joining the workforce since. Our state still has hundreds of thousands of unemployed or underemployed workers. If this were a "normal" recovery, many of these people would have found jobs with startups.

After the dot-bomb recession of 2000-01, for example, Tar Heels started businesses at rates significantly higher than the national average, according to an index created by the Kansas City, Mo.-based Ewing Marion Kauffman Foundation. By the middle of the last decade, however...