Pushing for More High-Growth Startups

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A lot of the entrepreneurs we talked to said that the most disappointing thing they faced in business was the amount of paperwork and regulatory burden they got stuck with as their companies grew. That can act as a disincentive to expansion or a disincentive to starting a company in the first place. It would be great to find some way to commoditize the paperwork and regulatory burdens so they're not so labor-intensive for growing companies.

Another point you make is that it's important to resist adding regulations that govern hiring, firing, and bankruptcy.

It's very important for employers to be able to hire and fire fluidly and to be able to exit a failed business quickly and without regulatory or other stigma. As paradoxical as it sounds, the U.S. gains a huge growth and productivity advantage from business failures, because they facilitate the reallocation of all sorts of resources, including people.

In our urge to prevent the next fiscal crisis, we have to make sure that we don't hinder the process of company deaths, births, or acquisitions.

Your study talks about targeting immigrant entrepreneurs for help. Why?

We have done studies in the past that show the huge importance of immigrant entrepreneurship in this country. Something like one-quarter of tech companies in the U.S. were founded by immigrants—and that's even truer in places like Silicon Valley. Basically, they are a free source of job creation for us.

It's something of a radioactive issue today, because people say, "How can you promote more immigration when we have all these Americans out of work?" But many immigrants clearly make jobs for Americans; they don't take them. With all the anxiety over China and India overtaking the U.S., it is crucially important that we remain open to those immigrant entrepreneurs.

You even recommend something like an immigrant entrepreneur visa program.

Or expansion of the EB-5 visa for immigrant investors who are bringing in money. It wouldn't take huge changes to include immigrant entrepreneurs in that program. In fact, there's a bill pending in the U.S. Senate that would establish a visa for immigrants who have $250,000 set aside to start a company. That's a wonderful first step, and it could be expanded so it's not tied only to entrepreneurs who already have the money.

One of the major programs of the Obama Administration is to extend tax credits to small companies that hire new employees. Is that going to be effective if it targets companies across the board, and not just those high-growth gazelles?

Well, that's what we're trying to find out. Job creation and entity formation is such a dynamic process that it's hard to address it statistically. You certainly don't want to provide incentives for artificial hires that will later be gratuitously destroyed at companies that are going under anyway.

Karen E. Klein is a Los Angeles-based writer who covers entrepreneurship and small-business issues.

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