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Declining Business Dynamism Among Our Best Opportunities: The Role of the Burden of Knowledge

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  • Astebro, Thomas B.

    (HEC Paris)

  • Braguinsky, Serguey

    (University of Maryland - Department of Management & Organization; National Bureau of Economic Research (NBER); Osaka University - Institute of Social and Economic Research)

  • Ding, Yuheng

    (University of Maryland - Robert H. Smith School of Business)

Abstract

Declining rates of new business formation in the U.S. have been documented in macroeconomic literature but we still know relatively little about its causes and how it might affect innovation. We use individual-level work data to examine trends in new firm formation by U.S. PhD recipients in science and engineering and its causes. Since 1997, the fraction of startup founders with PhDs in science and engineering among all business owners with the same PhDs has declined by 38 percent, and the share of PhDs in science and engineering who work for startups has declined by 30 percent. These trends are joined by a long-term earnings decline for startup founders, especially less experienced ones, and increasing number of R&D and administrative tasks performed by founders, indicating less attractiveness for doctorate recipients to found startups. We use abductive reasoning to examine a plausible explanation for these trends being driven at least in part by an increasing complexity of conducting innovation. Established firms have been able to handle this better than startups through greater division of labor, thereby attracting PhDs in greater numbers. Since economy-wide innovation largely depends on science- and technology-based startups, the development is of great concern.

Suggested Citation

  • Astebro, Thomas B. & Braguinsky, Serguey & Ding, Yuheng, 2020. "Declining Business Dynamism Among Our Best Opportunities: The Role of the Burden of Knowledge," HEC Research Papers Series 1397, HEC Paris.
    • Handle: RePEc:ebg:heccah:1397
    DOI: 10.2139/ssrn.3684945
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    Cited by:

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    3. Wim Naudé, 2023. "Late industrialisation and global value chains under platform capitalism," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 50(1), pages 91-119, March.
    4. Diane Coyle, 2021. "The idea of productivity," Working Papers 003, The Productivity Institute.

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    More about this item

    Keywords

    Business Dynamism; High-Tech Entrepreneurship; Startup Rates; Doctorate Degree Recipients; Burden of Knowledge;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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