U.S. Entrepreneurial Competition is Waning, Indicators Caution

(KANSAS CITY, Mo.), July 13, 2016 Entrepreneurship is an early casualty when business competition withers and barriers to market entry increase. What follows is harm to consumers, diminished innovation and loss of economic productivity.

Numerous economic indicators point to declining overall U.S. competition, according to the Kauffman Foundation’s latest Entrepreneurship Policy Digest:

  • New firm formation has yet to return to pre-recession levels.
  • Workers, reluctant to change jobs, are staying in their existing positions, tamping down fluid labor markets in which entrepreneurs start companies.
  • Non-compete agreements restrict labor mobility by forbidding would-be-entrepreneurs from founding a business that competes with their employer.
  • Older businesses increasingly dominate the U.S. economy. Firms established before 1980 represent 17 percent of all firms, but employ 57 percent of American workers.
  • The most profitable American firms capture an increasingly greater share of industry profits – a trend that is likely to continue.

“The good news is that the right policies can revive economic competition,” said Jason Wiens, policy director at the Kauffman Foundation. “If we take steps to turn the tide, we can expect greater product variety and quality, new job opportunities and – ultimately – increased prosperity.”

The Policy Digest offers policy recommendations that can reinvigorate competition.

The Kauffman Foundation’s Policy Digests consist of summaries of findings around relevant policy issues that will inform and educate policymakers. To sign up to receive subsequent Digests, go to www.kauffman.org/policydigest