Is America Losing Its Startup Edge?

from the not-good dept

We've talked, in the past, about the paradox of job creation by the government. Too often the government acts as if "job creation" is about propping up or subsidizing big companies, hoping that they'll hire lots of people. And, intuitively, you can see the appeal there for two reasons. First, it's much easier to think that Giant Telco A will likely hire another 5,000 workers to dig ditches if the government gives them a bunch of money, than it is to think that random startup A will hire 5,000 people. Second, often the disruptive innovations that actually do create economic growth and jobs comes at the expense of legacy companies in older industries. And the fear there is always job losses. So, some new startup comes along with a technology that makes life more efficient and makes stodgy old legacy company obsolete... and upfront you're going to see job cuts at the legacy company, even if the end result is many more jobs (and greater economic efficiency).

But the truth is that if the government wants to really create new jobs, it needs to support the startup ecosystem. Research from the National Bureau of Economic Research (NBER) and the US Census Bureau last year found that startups really are the key to both gross and net job growth. So if the government really wants to encourage economic growth and new jobs it should be focused on making sure the startup ecosystem is strong and vibrant. Unfortunately, that doesn't appear to be the case. When we see proposals like SOPA, which will hinder startups by placing tremendous liability on them and scaring off investors, we get worried.

Already, the situation isn't great. While the US certainly has the reputation for being friendly to startups, Aaron DeOliveira, points us to a report that shows that the US is actually 23rd on a list of startups per working-age population within countries that are members of the OECD. Even France is ahead of us.

This does not bode well for the US economy or for job growth. For innovation to thrive, we need the creative destruction and economic and job growth brought about by startups and entrepreneurs. We don't get that when the government is "captured" by the large legacy players who are only focused on "protecting" and defending their turf, rather than fostering innovation, growing the economy and creating jobs.

Filed Under: america, innovation, jobs, startups

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  1. identicon
    Lawrence D'Oliveiro, 10 Jan 2012 @ 9:58pm

    Re: The US, with it's very laissez-faire attitude manages to let innovation markets continue longer than other countries, before they're locked down. Which allows those markets to mature into more optimal setups.

    And a classic illustration (or not) of your point is the US mobile phone market. Whereas the European Government regulators decided to mandate a common interchangeable standard (GSM) where switching network was as simple as changing a SIM card, the US chose to sit back and “let the market decide”. The result is a hodge-podge of incompatible mobile phone networks, where the customers are essentially locked in.

    Everywhere else in the world, you can buy mobile phones at an unsubsidized price, SIM-free, and then get a SIM for the network of your choice. And switch network if you’re not happy with the service. Only in the US do you have to choose which network you want to use first, and then get your phone through that network, so it only works with that network and no other.

    And the limitations on competition are starting to affect the introduction of new products: for example, the current king of Android phones (at least as of this month), the Samsung Galaxy Nexus, was shipped first in Europe and elsewhere, with the US well down the list of priorities.

    So tell me again, which market is “locked down”, and which one has been able to “mature into more optimal setups”?

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