How The US Start-Up Industry Is Faltering

One of the long-term strengths of the US economy has been that it fostered the growth of new businesses. Some provided employment for only a few, while others grew into giants. But that dynamic process of new businesses ultimately benefited not just those who worked in them, but also innovation, productivity, and consumers. But as I have pointed out in the past, there are a variety of signs that this business dynamism has been declining. Here are some additional pieces of evidence: 

Thomas Astebro, Serguey Braguinsky, and Yuheng Ding discuss "Declining Business Dynamism Among Our Best Opportunities: The Role of the Burden of Knowledge" (September 2020, NBER Wroking paper 27787). They write: 

We employ the nationally representative Survey of Doctorate Recipients to show a decline over the past 20 years in both the rate of startups founded and the share of employment at startups by the highest-educated science and engineering portion of the U.S. workforce. The declines are wide-ranging and not driven by any particular founder demographic category or geographic region or scientific discipline. 

Here's a figure focused just on those with PhDs in science and engineering fields. As the authors note: "The figure reports the share of PhDs in science and engineering who are employed full-time with non-zero salaries in new (five years old or less) private for-profit companies (startups) compared with PhDs in science and engineering who are employed full-time with non-zero salaries in all private for-profit businesses." The dashed line shows the share of this group who are employees in startups, while the solid line shows the share who are founders of start-ups. 

 

They argue that when dealing with new technology, the benefits of working established firm may be rising. They point out that PhDs in science and engineering who are starting firms now do tend to hae more business experience, suggesting that the task of running a new technology-based business might be becoming more complex, even as the potential rewards for doing so may be diminishing. 

1 2 3 4
View single page >> |
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.