Real Support for Entrepreneurs: What Are We Waiting For?
So we know that entrepreneurs are the primary engines of job creation in the United States. Research study after research study has confirmed that it is young firms that drive improvements in the employment situation. From 1980–2005, firms less than five years old accounted for all net job growth in the country. In 2007 alone, young firms (1-5 years old) accounted for nearly two-thirds of job creation. We also know more than half of the companies on the 2009 Fortune 500 list were launched during a recession or bear market, along with nearly half of the firms on the 2008 Inc. list of America’s fastest-growing companies. In light of all this evidence and in face of the employment crisis in the country, what can we do to truly support the entrepreneurs behind these young firms?
Despite their impressive resilience and track record, entrepreneurs, like all of us, feel the burden that entrepreneurs feel in today's economic climate. A new survey conducted by Douglas Schoen, LLC shows entrepreneurs are still actively working on their ventures, but are struggling to expand and create jobs in the current economy. Last year, only 8 percent of entrepreneurs have added employees. Perhaps most sobering is the fact that 71 percent do not expect to add any new jobs in 2010. So the key for recovery now is to ease this burden and create an environment that helps new companies grow.
Secretary of Commerce Gary Locke asked the right question in his address at the Kauffman Foundation’s State of Entrepreneurship event. “IBM, Disney, CNN, Microsoft, Whole Foods and Genzyme are just a handful of this country's bellwether companies that were founded during times of great economic difficulties. With this history in mind, the Obama administration is making the promotion of entrepreneurship a critical component of its economic recovery agenda. How Do We Help Entrepreneurs Thrive?”
Carl Schramm, president and CEO of the Ewing Marion Kauffman Foundation, proposed concrete, high-impact policy reforms that will support our growth drivers in last week’s State of Entrepreneurship address. It is well worth to highlight them here.
• Reform immigration policy, granting citizenship for foreign students graduating from American universities and other immigrants who want to start new companies and create jobs. Why? Over the last decade and a half, immigrants started 25 percent of all technology firms founded in the United States.
• Revise Sarbanes-Oxley regulations to allow company shareholders to choose whether their companies must fulfill some of the most onerous reporting requirements if they think the costs of compliance outweigh the benefits. “SOX was enacted, after all, to protect shareholders. So why not allow shareholders to vote on whether their companies will fulfill certain SOX requirements?” said Schramm.
• Provide a temporary payroll tax holiday to companies less than five years old to strengthen the incentive to hire.
• Give academic entrepreneurs the choice of multiple avenues to commercialize their research so their innovations can reach consumers more quickly. Referring the bottlenecks in the American innovation system, Secretary Locke said: "It's not tenable for the United States to continue with the status quo." Locke also announced at the event that on February 24, the new Office of Innovation and Entrepreneurship will host a forum with university leaders and key stakeholders on the roles of universities in innovation, economic development, job creation, and commercialization of federally funded research.
• Offer fellowships for doctoral graduates in scientific fields to educate them about how to start companies. This would allow our smart graduate and post-doctoral students in the hard sciences, engineering, and other fields to commercialize their breakthrough ideas.
• Finally, because the earlier we can interest students in entrepreneurship the better, provide entrepreneurship education and training to students in high school and college.
These measures to catalyze job creation would help set the country on a proven path to economic recovery. Entrepreneurship has always been a cornerstone of American capitalism. It’s now a matter of prioritizing enacting policies that will strengthen this cornerstone.
Jonathan Ortmans is president of the Public Forum Institute, a non-partisan organization dedicated to fostering dialogue on important policy issues. In this capacity, he leads the Policy Dialogue on Entrepreneurship, focused on public policies to promote entrepreneurship in the U.S. and around the world. In addition, he serves as a senior fellow at the Kauffman Foundation.