What is the Economic Impact of Start-ups?
Another excellent study by the Kauffman Foundation shows that the jobs created by new start-ups are durable.
By 25 years after firms start, only about 20 percent of them still exist, but the employment numbers appear to level off at around 68 percent of their initial values. The fact that establishments have decreased so rapidly yet employment has more or less leveled out means surviving firms continue to grow. Firms fail, but growth, even at these well-established firms, continues, keeping employment from dropping with the number of establishments.
Another Kauffman Foundation study showed existing firms are net job losers. Given this information why has the Obama administration (and Bush administration) focused on saving large established companies and consistently undermined start-up companies?
Since 2000 we have passed a number of laws and regulations that are killing innovation in the US. The incredible innovation of the 90s was based on technology start-up companies built on intellectual capital, financial capital, and human capital. All three of the pillars have been under attack since 2000. Our patent laws have been weakened reducing the value of intellectual capital. Sarbanes Oxley and now Financial Reform has made it impossible to go public reducing financial capital for start-ups and the FASB rules on stock options have made it harder to attract human capital to start-ups. The Decline and Fall of the American Entrepreneur: How Little Known Laws and Regulations are Killing Innovation explains these problems in more detail.
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