Is “The American Dream” moving overseas?
It appears entrepreneurial activity has slowed in the US, but is growing overseas.
Why is the spirit of change/innovation important to any economy?
A new Brookings Institute study reveals a drop (by nearly half) in new business creation (“entrepreneurship”) and business risk-taking overall across the last 30-40 years in the US. Even in Silicon Valley itself, considered the hotbed of business creation in the US, according to the study, the percentage of new businesses was dramatically reduced over the last three to four decades.
During a recent OnPoint show, four thought-leaders, including Danielle Kurtzleben, economics and business correspondent for Vox.com, Nancy Koehn, historian and professor business administration at the Harvard Business School (HBS). Ray Hennessey, editorial director of Entrepreneur.com. (@Hennesseyedit), Lina Khan, policy analyst in the Markets, Enterprise and Resiliency Initiative at the New America Foundation. (@linamkhan)
Why are economists like Danielle Kurtzleben, economics and business correspondent for Vox.com, concerned? She explains, “This sort of ‘churn’ or ‘business dynamism,’ which includes moving from job to job and learning new skills, is essential to growth.” Another word she uses to describe it is “creative destruction” (linking “entrepreneurship” to “innovation.”) She warns, “Productivity is reduced when there is less change.” Based on observations of global competitive trends, she warns, “If you are not moving workers around, this really could put a crimp on growth.”
Nancy Koehn, historian and business administration professor at HBS, whose work focuses on entrepreneurial leadership, is equally disturbed. She says, that, in this study, “we see an ongoing and steepening trend, especially in the last six years.” She underlines, “This is a big deal.” Why? Because, she explains, this means that job creation and innovation are also down. This has cultural implications as well because America has always been the place defined by its entrepreneurial spirit. She calls it “can-do” and “make-it-up-as-you-go-along,” and “do-something-different” and states that these concepts have been part of the “American Dream.” She says that the definition of “entrepreneurship” (coming out of HBS in the 1970’s) is “opportunity driven vs. resource constrained,” and that this is the root of economic growth and the rise of new, successful businesses, concluding, “Entrepreneurial activity is important to the beginnings of big business…..This trend is worrisome for what it portends for 20-30 years from now.”
The speakers agreed that, while entrepreneurship and the innovation mindset is markedly subdued in the last 30 years in the US, overseas, it is “catching fire.”
It will be interesting to verify this trend of entrepreneurial activity growing overseas while stagnating in the US with real data and to see if, over time, what these economists predict, will reshape the global playing field for new business growth.