The Hustle

The ‘Era of Innovation?’ Not exactly: Western business dynamism has actually been dwindling for decades 

Despite today’s buzz about disruptive startups and innovation, studies show that entrepreneurship and innovation have been on the decline for decades.

October 9, 2019

In today’s age of unicorns and accelerators, where “disruption” is the hot biz buzzword and Entrepreneurship 101 is a core MBA req, some say we’re in the Fourth Industrial Revolution.

Despite all that, entrepreneurship and innovation have been declining in the West — particularly in the US — since the 1980s, according to new analysis from The Conversation

New firms have seen declines in market entry and share of employment

Over the past 3 decades, the ratio of US startups to total businesses has halved across all industries, paralleled by a 30% decline in employment share. Interestingly, the most educated entrepreneurs seem to be taking the hardest hit.

For several reasons, the economy is showing its age

The most commonly cited culprits are the slow-growing and aging population and declining labor mobility. Additional barriers include market saturation, an uptick in M&A, and the rise of “zombie firms.” 

Entrepreneurs also face challenges around talent acquisition and cybersecurity, while rising regulations and patent costs deter innovation.  

New players are critical to the economy as a source of innovation and job creation. More importantly, they put pressure on the powerful big dawgs to provide consumers quality offerings at competitive prices.

So whether it’s through pushing for a higher degree of big biz regulation, or encouraging entrepreneurship in all corners, it’s in everyone’s best interest to get the startups started back up.

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