The slow death of American entrepreneurship

In other words, maybe the U.S. hasn’t seen a decline in the kind of fast-growing startups that economists care about most. It’s possible that this kind of entrepreneurship is doing fine and it’s just being hidden by the long and well-documented decline in family-owned businesses.

The available evidence, however, doesn’t seem to support that theory. For one thing, the decline in entrepreneurship is remarkably broad-based, not isolated to the industries such as retail where big corporations have edged out family businesses. According to the Brookings paper, every major industrial sector, every state and nearly every large city has a lower startup rate today than it did three decades ago.3

Even the tech sector, the industry most closely associated with startups, isn’t immune to entrepreneurial malaise. According to a recent paper from the Kauffman Foundation, the tech industry’s startup rate rose sharply in the late 1990s but fell quickly after the tech bubble burst and, at least as of 2011, has yet to rebound. The tech sector still forms businesses at a higher rate than other sectors, but the decline in its startup rate has been just as steep.

Broad sectors don’t tell the whole story, however. After all, Walmart and Starbucks grew into some of the country’s biggest companies despite belonging to supposedly staid sectors. If we really want to distinguish high-growth, innovative startups from mom-and-pops, we have to drill down to the individual company level.