The delayed growth in the economy since the recession partially results from the lack of new businesses. Many Americans are under the impression that startups are as strong as ever, but the data presented in this article indicates otherwise. In 2006, 558,000 new businesses were formed. 2015, on the other hand, saw the creation of only 414,000 new businesses. While other aspects of the economy (such as unemployment) have recovered fully, businesses are still forming at a slower rate than before the recession.
This "start-up slump", as it is called by economists, owes itself in part to the burgeoning presence of multinational corporations. It has become increasingly difficult for new businesses to compete with the presence and scale of the largest corporations, such as Wal-Mart. Some attribute the slump to the abilities of the larger companies to block competitors and create barriers of entry to their respective industries. The trend of acquisitions, such as Google acquiring YouTube, has also allegedly discouraged many would-be entrepreneurs. Other potential cuprits include the decline of community banking, increased regulation, and the aging of the baby boomer generation.
https://nytimes.com/2017/09/20/business/economy/startup-business.html
This is a very interesting article, I had no idea that employees in small businesses made up the largest portion of all employees. That number has been declining steadily and that is probably because of the reasons you stated above. Another point that was brought up in the article was how the start up slump has allowed the most productive companies to become complacent. The largest and most productive companies aren't growing as fast as they used to because there is not as much pressure on them to innovate. I think at some point there would have to be a slowdown in the number of new businesses being created but I would also expect major companies to keep innovating at the same rate. The fact that they aren't is a little worrisome.
ReplyDeleteA few other difficulties that start ups face are competition from overseas businesses that can sell goods more cheaply and the difficulty that small start ups have compared to big companies in borrowing from banks to grow. One example of the international competition comes form Chinese firms. China's share of exports globally has increased to fourteen percent according to an article in this week's issue of The Economist (see below). And competition from Chines firms is expected to increase, according to The Economist. In addition, women have even more difficulty than men in starting businesses and borrowing money to finance them, according to a recent Wall Street Journal article (see below).
ReplyDeletehttps://www.economist.com/news/leaders/21729430-does-it-play-fair-how-china-battling-ever-more-intensely-world-markets
http://www.wsj.com/public/page/news-small-business-financing.html
Start Ups are definitely facing an increasingly difficult business environment, as tighter regulations and foreign competition come in. I am a believer that small businesses and start ups are great for the economy as they create jobs in communities and give people competitive and adequate wages. It will be interesting to see the benefit of President Trump and his economic policy. He has stated multiple times that he will create jobs and give small businesses more opportunities. Also, big companies and firms are constantly getting bigger, either through m&a or by creation. Its tough for small companies, with very little clout and capital, to match to efficiencies and processes of an amazon, Tesla, apple, Walmart, etc.
ReplyDelete