Decision 2016: Don’t Forget Entrepreneurs
I am proud to have served on the Steering Committee for President Barack Obama’s Global Entrepreneurship Summit happening this week in Silicon Valley. Given this is likely the last “entrepreneurship summit” for this President – and with a big decision looming this November on his replacement – we thought it worth taking a step back for a quick look at the role of governments and policymakers in enabling a flourishing entrepreneurial climate.
Public policy has been undeniably part of the history that has shaped the path of American entrepreneurship. From the nation’s very early immigration waves from Europe, government policy has both hindered and enabled entrepreneurship to flourish – sometimes intentionally, other times not.
And more recently, emerging entrepreneurial ecosystems are leap-frogging old paradigms developed for yesterday’s geography of entrepreneurship, experimenting with lots of policy levers in an attempt to become the birthplace of a new wave of technological revolution.
While to a great extent, it is through city-level policy levers that nations are reshaping the geography of entrepreneurial innovation and national policy matters. For example, many European countries are well ahead of the U.S. on fostering entrepreneurial migration. As Boyd Cohen notes: “If the creative class is highly mobile, then countries that facilitate their immigration will have significant advantages in attracting and recruiting entrepreneurs in the future.”
As Americans begin to look more earnestly at electing a new government leader in a few months, it is worth exploring which policies implemented to date at the national level have most heavily shaped our nation’s entrepreneurship ecosystem. Here are three I believe have impacted entrepreneurs in the U.S:
Affordable Care Act (ACA)
Enacted in March 2010, the Affordable Care Act (ACA) is a complex piece of legislation designed to reform the system that was in place for health care.
For entrepreneurs, ACA’s main promise rests in the measures toward cost-containment for insurance premiums and regulations to increase the number of options available to small businesses and their employees (e.g. health care exchanges).
The debate is not yet completely settled. ACA information reporting by employers with 50 or more full-time employees (including full-time equivalent employees) only began in 2015 (known as Section 6056 rules), and it is in this new requirement that many believe the positive effects on new and young businesses will be offset. New information reporting by issuers, self-insuring employers, and other coverage providers also took effect in 2015, and first reports are due in 2016. Furthermore the IRS recently extended the time for employers and providers to meet their 2016 reporting requirements.
While the impact is not clear yet, it is undeniable that the previous health insurance system was heavily biased toward the steady job, adding disincentives for entrepreneurial activity. While not a panacea, the ACA was America’s first firm step toward phasing out the long history of employer-based insurance, which clearly undermines the chances for new and young business to grow.
The Jumpstart Our Business Startups Act (JOBS) Act was signed into law in April 2012, which institutionalized crowdfunding.
As previously reported in this blog, the JOBS act achieved the following major changes:
- The JOBS Act exempted companies with up to $1 billion in annual revenue from certain Sarbanes-Oxley regulations governing financial disclosure and governance requirements for up to five years.
- The JOBS Act expanded the threshold of shareholders for private firms from a maximum of 500 to 2,000, before they are required to file with the SEC.
- The JOBS Act went even further than expected in reviewing regulations by removing a SEC regulatory ban on solicitation – allowing startups to advertise for investment and accept capital from “small investors.” Startups theoretically are now able to solicit equity investments through the Internet, social media or elsewhere, and accept up to $1 million annually without having to register the shares for public trading with the SEC.
Due to delays in rulemaking by the U.S. Securities and Exchange Commission (SEC), many provisions have just begun to be fully implemented.
While positive overall in terms of incorporating rethinking of entrepreneurial finance, you can also find unintended consequences of this legislation, which I discussed in a post last month.
The Bayh-Dole Technology Transfer Act, passed in 1980, made it easier for research findings funded by the government to make the leap from university labs to the marketplace, by allowing universities and other institutions that receive federal research dollars to grant licenses to companies that wish to commercialize discoveries made by academic researchers. As a result, universities have greatly expanded their patenting and licensing activities.
However, as more knowledge of the entrepreneurial process became available, it became clear that the framework has fallen short in terms of maximizing the pipeline flow of scientific output that can reach the commercialization stage. "The Bayh-Dole Act has had such far-reaching influence in both academia and American society, but it certainly is not a law that should be set in stone," expressed one academic researcher, voicing the concerns of thousands of academic researchers and innovation thought leaders.
The Kauffman Foundation’s State of the Field on University Tech Transfer provides key analysis to move forward in this regard.
As many Americans admit, we “grew up with the prevailing paradigm” that the U.S. has always been and will always be the leading hub for innovation and entrepreneurship. However, our nation cannot rest on its laurels. The American entrepreneurial economy is one of the strongest in the world, but other countries are fast trying to build nations of entrepreneurs as is evident by the global make-up of the participants of this week’s summit at Stanford. In short, there is a lot of urgent business for the next Administration for us to unleash the new digital disruption wave of entrepreneurs in the United States.
Like us at the Policy Dialogue on Entrepreneurship, Josh Lerner and William A. Sahlman of the Harvard Business School have long called for U.S. leaders to wake up to the need to reinvigorate American entrepreneurship, noted that policymakers “must recognize entrepreneurship as a process, not an act. Their decisions change the climate for new enterprises at each stage of that process, sometimes dramatically – whether or not those decisions are made with entrepreneurship in mind.”
As we all look ahead to a summer of national debate as to who will occupy the White House next and control the Congress, I hope Americans will keep in mind our entrepreneurs who create value and jobs, but most importantly, shape our nation’s future competitiveness.
Photo credit: Flickr
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