Posted by Jonathan Adler:
Is America Becoming Less Entrepreneurial?
http://volokh.com/archives/archive_2009_07_05-2009_07_11.shtml#1246812618
Professor Scott Shane of CWRU's Weatherhead School of Management
[1]cites evidence that entrepreneurial activity is declining in the
United States. The number of employer firms created annually has
declined significantly since 1990, and the numbers of businesses
created and those claiming to be self-employed have declined as well.
Most Americans would like to believe that this country is getting
more entrepreneurial over time. While I wish this were true, the
data don�t agree. Policy makers need to take a look at these data
and acknowledge the pattern. More important, they need to
understand why the rate of entrepreneurship is declining over time.
What accounts for this trend? Shane thinks one reason is "the Wal-Mart
effect."
Large, efficient companies are able to out-compete small start-ups,
replacing the independent businesses in many markets. Multiply
across the entire economy the effect of a Wal-Mart replacing the
independent restaurant, grocery store, clothing store, florist,
etc., in a town, and you can see how we end up with a downward
trend in entrepreneurship over time.
That may be true. It seems to me that another likely contributor is
the increased regulatory burden. It is well documented that regulation
can increase industry concentration. Smaller firms typically bear
significantly greater regulatory costs per employee than larger firms
(see, e.g., [2]this study), and regulatory costs can also increase
start-up costs and serve as a barrier to entry. While the rate at
which new regulations were adopted slowed somewhat in recent years at
the federal level (see [3]here), so long as the cumulative regulatory
burden increases, I would expect it to depress small business creation
and growth.
References
1.
http://boss.blogs.nytimes.com/2009/06/30/are-we-becoming-less-entrepreneurial/
2. http://www.sba.gov/advo/research/rs264tot.pdf.
3.
http://cei.org/cei_files/fm/active/0/Wayne%20Crews%20-%2010,000%20Commandments%202009.pdf
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