An unrelenting entrepreneur disrupting an entire industry; two community hardware stores running promotions to attract customers; a growing business trying to enter a new market. These are pictures of economic competition in America.
Thriving competition drives new innovation, incentivizes product quality, and unlocks new opportunities. But when competition wanes and barriers to market entry increase, entrepreneurship is a first casualty. Consumer harm and a loss of economic productivity will follow.
Today, numerous economic indicators are flashing warning lights that competition is diminished. New firm formation has struggled to recover to pre-recession levels, as firm deaths are as likely as firm births. The most profitable American firms are earning an increasingly greater share of industry profits and are more likely to perpetuate that level of profit-making. Industries that used to be represented by tens of firms have shrunk to a mere handful. A dearth of firm activity and shortsighted policy choices have weakened true competition with deleterious effect. This hurts entrepreneurs and weakens our nation's economic potential.
Reinvigorating economic competition means the full benefits of entrepreneurship – from new job creation to innovation to lower prices — will flood the economy, bringing increased opportunities and prosperity to Americans. Policy must protect equality of opportunity and not preserve a firm's market power or subsidize under-performing firms in the name of "competition".
The question is, how to restore competition? Here are three areas where more competition can benefit entrepreneurs.
Protect Competition, not Concentration
There is reason to believe that antitrust enforcers have given too much deference to claims of cost-savings and consumer benefits in mergers and not enough to preserving competition that would be lost by a merger. Adjusting that enforcement approach, especially in industries where intellectual property plays an important role, can have positive consequences for young companies trying to compete with established firms and discourage efforts by established firms to buy their competition.
Preserve Entrepreneurial Entry
Don't Favor Big over Small or Old over New
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Can Social Insurance Unlock Entrepreneurial Opportunities?
Entrepreneurial Growth Webinar