Is Entrepreneurship Declining?

Posted by: John Tozzi on July 01, 2009

Scott Shane says yes.

Steve King says no.

I’d like to see a closer analysis of the trends in the past 10 years. There’s been a fundamental shift in how people start businesses and the types of ventures they start in the last decade. Technology has lowered barriers to entry in many industries, and the Internet has opened up new markets. Scott writes about the Wal-Mart effect:

Large, efficient companies are able to out-compete small start-ups, replacing the independent businesses in many markets. Multiply across the entire economy the effect of a Wal-Mart replacing the independent restaurant, grocery store, clothing store, florist, etc., in a town, and you can see how we end up with a downward trend in entrepreneurship over time.

But there’s a separate trend we could point to: The emergence of niche markets where many small players compete, without the dominance of a Wal-Mart-like giant, or even mass markets where niche players are gaining a foothold. For example, big brewers still control most of the U.S. beer market, but microbrews are growing faster: “In 1978 there were a total of 42 breweries in the U.S., including industrial breweries. Today there are 1,390 craft breweries, microbreweries, and brew pubs.”

I can’t argue with the entrepreneurship numbers. But as one of Scott’s commenters points out, you get different trend lines depending on where you start counting. I think there could be an inflection point around the beginning of this decade that reflects growth of new types of ventures. Curious to hear more thoughts on this in comments or on Twitter.

Reader Comments

Robbin Block

July 1, 2009 12:17 PM

Not only is entrepreneurship data open to interpretation, it isn't easy to get all the data in the first place. From where I sit, it seems like more and more people are either thinking about it or starting a business. As you mention, low barriers to technology are driving niche players, but other groups are fueling startups. My workshops are filled with laid off or disenfranchised corporate workers, Mom's, retirees, kids who can't afford college, grads who can't find jobs, etc. I'm not sure how you'd track these groups with any precision. They may be starting small, but who knows where they'll go or when they'll become part of the statistics.

Brig Burton

July 1, 2009 01:59 PM

Entreprenuers I talk with are still moving forward, but there's more caution and calculating going into decisions than before.

Tighter credit is forcing us to work intelligently with what we have, to focus, and to work harder.

Catherine Wood Hill

July 1, 2009 08:37 PM

Right now, considering the economy and the credit situation, entrepreneurs have to be very smart with their budgets, savvy with their marketing and slow to bring on new employees for fear that their won't be credit available for expansion in the future.

We launched http://www.lagrandedame.com three months ago and are having to be much more conservative with our expansion than we would have been in a different climate and as a born and bred entrepreneur, it is frustrating! I can't speak for the last decade of entrepreneurial growth but I can say that the current climate is stifling innovation.

Robert W Price

July 2, 2009 02:06 PM

Entrepreneurial capitalism is key to the success for entrepreneurship. But few words are as abused in the lexicon of the business world, as ill defined in the management literature, and as open to multiple meanings as entrepreneurship. The concept of entrepreneurship has been in our modern society for thousands of years and in the history of economic study the word has been overused, and in some cases underused. Carl Voigt, dean of the Marshall School of Business at the University of Southern California, explains, “We sort of defined entrepreneurialism too narrowly as someone who wants to start their own business. But entrepreneurialism can also mean finding new business opportunities and expansion at existing companies.” Starting with practically nothing, an entrepreneur is one who organizes a new venture, manages it, and assumes the associated risk. For our research the term entrepreneur is broadly defined to include business owners, innovators, and executives in need of capital to start a new project, introducing a new product, or expanding a promising line of business. We include technology transfer experts, technologists at leading universities, and consultants and advisors assisting in all aspects of venturing. An entrepreneur’s principal objectives are profit and growth, and they will employ formal strategic management practices to achieve them. We use a broader definition and scope of entrepreneurial activity, segmenting all entrepreneurial activity into seven types of entrepreneurs: small business and lifestyle, franchise, professional fast growth and serial, corporate, creative disrupters and innovators, extreme, and social and nonprofit. Robert W. Price, Executive Director, Global Entrepreneurship Institute, http://www.gcase.org

BizBox

July 2, 2009 02:43 PM

Martin Lindeskog

July 3, 2009 02:44 AM

I think both Scott Shane and Steve King are right. I have reviewed one of Scott Shane's book on Small Business Trends and he knows how to find data, statistics etc.

The important thing is to create an environment that is friendly for entrepreneurial ideas and initiatives.

Speaking as a "new media citizen journalist", I think we could see many negative trends about the attitude against business and entrepreneurs, but philosophically speaking, I am an optimist that we have a change the direction of the society and economy in order to strive for a second renaissance.

John G

July 10, 2009 08:15 PM

Scott Shane makes broad generalizations. He seems to pick and chose random data from whatever sources he can and come to ridiculous generalizations. He needs to be taken to task for this.

Tracy N

July 14, 2009 02:06 PM

This is the perfect climate to start your own company. My friend told me about a great deal he got at MyCorporation.com -- right now they are helping the entrepreneurs in this bad economic time -- check out their summer sale at
http://mycorporation.intuit.com/

Steve

July 22, 2009 02:04 PM

I'm not sure if entrepreneurship is declining, but it's not too hard for many startups to get ahead these days with the availability of so many resources on the Internet. Social media is a great enabler in this case, but those who don't make use of YouTube, Facebook, AdWido and the like will fall behind.

robert livingston

July 23, 2009 11:51 AM

Maybe entrepreneurship is on the decline, but remember George Bush once said "its too bad the french don't have a word for 'entrepreneur'. In any event, the investment bankers are doing great in 2009. We can help you go public and raise capital for your company.

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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