Fire Up America’s Jobs With Aid for Startups

From Bloomberg.com:

Politicians, even those who vilify corporate America, inevitably laud small businesses.

They are right to appreciate the enormous role that entrepreneurship plays in the U.S. economy, but it’s not clear how much public policy can do to conjure up entrepreneurs.

.... In 2009, new businesses created 2.33 million jobs,

   while older businesses destroyed, on net, more than 7 million jobs. The share of Americans working in startups has fallen to 2 percent in 2009 from 3.8 percent in 1979.


Historical View

The history of America’s local economies illustrates the dangers of relying solely on large, established companies. Fifty years ago, the economist Benjamin Chinitz noted that New York appeared more resilient than Pittsburgh, which he credited to the entrepreneurship inculcated by New York’s garment industry.

Chinitz noted that “the average establishment in the apparel industry, for example, has one-sixth as many employees as the average establishment in primary metals.” Since big companies produce middle managers more than entrepreneurs, he said, “You do not breed as many entrepreneurs per capita in families allied with steel as you do in families allied with apparel.”

Chinitz’s claim has been supported by many studies that have identified strong links between initial measures of entrepreneurship, such as average establishment size and the share of employment in startups, and regional economic success, typically measured by employment growth....

... I am less optimistic about the ability of the government to make the U.S. more entrepreneurial by playing venture capitalist or by reducing financial regulations. My colleague Joshua Lerner ... has written an excellent book, titled “Boulevard of Broken Dreams,” which describes the vast number of failed public efforts to boost entrepreneurship.


Train Smart People

... the best way to encourage local entrepreneurship is to attract and train smart people and then get out of their way ... the U.S. can best lay the foundation for long-term entrepreneurship by improving education, so that more Americans acquire the knowledge needed for technological innovation.

An even easier way to engender entrepreneurship is to import it from abroad. The Kauffman Foundation, which is “devoted to entrepreneurship,” notes that, “Immigrants found companies here at greater rates than native-born Americans do, and are disproportionately successful in starting successful high-tech firms.” Kauffman advocates the expansion of visas for foreign entrepreneurs and more green cards to enable foreign students who study science to work in the U.S....

(Edward Glaeser, an economics professor at Harvard University, is a Bloomberg View columnist. He is the author of “Triumph of the City.” The opinions expressed are his own.)

-----------------
Link: http://www.bloomberg.com/news/2012-03-26/fire-up-america-s-jobs-factory-with-aid-for-startups.html