New Business Formations and Churn Dropping in USA

Over the last few decades “business dynamism” has been trending downwards and is highlighted in an article by Ian Hathaway and Robert E. Litan on “Declining Business Dynamism in the United States: A Look at States and Metros”


This is important as it’s an indication of innovation. The more business startups and their corresponding failures and exits, the more innovative an economy. It implies some leveling in terms of innovation, and slow growth, according to the authors:


“While the reasons explaining this decline are still unknown, if it persists, it implies a continuation of slow growth for the indefinite future, unless for equally unknown reasons or by virtue of entrepreneurship enhancing policies (such as liberalized entry of high-skilled immigrants), these trends are reversed.”


The Academic Entrepreneur agrees with the need for entrepreneurship enhancing policies such as immigration policy, as he’s written about many times before.  Also, university and research policy should be under consideration for revision as well,  precisely because the country is tracking the knowledge economy. Learning institutions besides higher education have important roles to play as well, such as the K-12 educational sector and the adult learning area.  Others such as those in the arts; incubators, entrepreneurial support organizations.


The research paper can be found here under the same title as the article. 


Anecdotally, the findings of this paper led the Academic Entrepreneur to reflect on a recent conversation he had with an American academic and Professor who now heads a research and policy effort in Canada. In comparing the differences between the potential for Canada and the United States in terms of new venture creation and innovation, the Professor strongly believed the following (paraphrased):

“In the United States, everyone is just trying to hold on to what they have. They try to set up barriers, to preserve what is, and talk a lot about what was. 

Canada, on the other hand, has its future ahead of it. They talk about what the possibilities are, and pursue the future up here”


What do you think about all of the above? Feel free to comment.




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