Another attempt, this one by Inc. magazine Leigh Buchanan, to explain two alarming facts about US entrepreneurship:
The Kauffman Foundation, citing its own research and drawing on U.S. Census data, concluded that the number of companies less than a year old had declined as a share of all businesses by nearly 44 percent between 1978 and 2012. And those declines swept across industries, including tech. Meanwhile, the Brookings Institution, also using Census data, established that the number of new businesses is down across the country and that more businesses are dying than are being born. All this at a time when entrepreneurship had reached its cultural apex and was widely viewed as the sole sizzling ember in an otherwise cooling economy. The business and academic worlds were left slack-jawed: How could this be?
The implications are huge. “New businesses are disproportionately responsible for the innovation that drives productivity and economic growth, and they account for virtually all net new job creation,” says John Dearie, executive vice president for policy at the Financial Services Forum. “I would say, as a policy person, this is nothing short of a national emergency.”
Buchanan explores a number of explanations: (a) demographics (the US population is getting older, population growth is slowing, and millennials may be more risk averse than boomers); (b) established firms are getting bigger and older and soaking up talent; and (c) a dearth of funding for infant firms with Buchanan noting that “between 2005 and 2014 the size of seed investments made by VCs stayed flat.”
Now based on just the above analysis, some obvious policy recs spring to mind: (a) more immigration, especially high-skill and entrepreneurs; (b) regulatory and tax reform, especially focusing on reducing incumbent advantage; and (c) encourage crowdfunding. Now as to the last point, the SEC finally issued crowdfunding rules recently to make easier for everyday Americans to invest in startups. But there seem to be big questions about their efficacy (here, here, and here).
Some of my posts on this issue:
Which country has the most billionaire entrepreneurs? (And how can we get more?)
Why more entrepreneurship means less self-employment
America suffering from ‘economic calcification’ – JP Morgan
Where are all the startups? More on America’s economic calcification
Crony Capitalism Needs a Kick in the Keister
Fighting the Crony Capitalist Alliance
Is regulation choking small business formation?
Do we want a dynamic, sustainable US economy? Here are 3 key steps to take
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