This is a great read from the March 12 issue of the Economist.
For all its current economic woes, America remains a beacon of entrepreneurialism. Between 1996 and 2004 it created an average of 550,000 small businesses every month.
America was the first country, in the late 1970s, to ditch managerial capitalism for the entrepreneurial variety. After the second world war J.K. Galbraith was still convinced that the modern corporation had replaced “the entrepreneur as the directing force of the enterprise with management”. Big business and big labour worked with big government to deliver predictable economic growth. But as that growth turned into stagflation, an army of innovators, particularly in the computer and finance industries, exposed the shortcomings of the old industrial corporation and launched a wave of entrepreneurship.
America has found the transition to a more entrepreneurial economy easier than its competitors because entrepreneurialism is so deeply rooted in its history. It was founded and then settled by innovators and risk-takers who were willing to sacrifice old certainties for new opportunities.
American companies have an unusual freedom to hire and fire workers, and American citizens have an unusual belief that, for all their recent travails, their fate still lies in their own hands. They are comfortable with the risk-taking that is at the heart of entrepreneurialism.
The article lists four American economic advantages: a mature venture-capital industry, a close relationship between universities and industry, a historically open immigration policy, and “venturesome consumers.
Americans are unusually willing to try new products of all sorts, even if it means teaching themselves new skills and eating into their savings; they are also unusually willing to pester manufacturers to improve their products. Apple sold half a million iPhones in its first weekend.
The Economist suggests several items that threaten America’s “entrepreneurial ecology”: “patent trolls” and a burdensome legal system, a complicated tax system, and a rising xenophobia “making the coutnry less open to immigrants.” It contrasts these threats with what has already happened with “Old Europe.”
Europeans have less to gain from taking business risks, thanks to higher tax rates, and more to lose, thanks to more punitive attitudes to bankruptcy (German law, for example, prevents anyone who has ever been bankrupt from becoming a CEO). When Denis Payre was thinking about leaving a safe job in Oracle to start a company in the late 1980s, his French friends gave him ten reasons to stay put whereas his American friends gave him ten reasons to get on his bike. In January last year Mr Payre’s start-up, Business Objects, was sold to Germany’s SAP for €4.8 billion.
European egalitarianism, too, militates against entrepreneurialism….The Europeans’ appetite for time off does not help….Europeans are also much more suspicious of business…entrepreneurs have to grapple with a patchwork of legal codes and an expensive and time-consuming patent system. In many countries the tax system and the labour laws discourage companies from growing above a certain size. A depressing number of European universities remain suspicious of industry, subsisting on declining state subsidies but still unwilling to embrace the private sector. The European venture-capital industry, too, is less developed than the American one.
The article goes on to discuss how Europe is changing toward an entrepreneurial mind-set and to briefly address “Slowcoach Japan.” You can read the full article at the Economist online: A special report on entrepreneurship: The United States of Entrepreneurs