In a study just published on the Brookings Institution’s Web site, Ian Hathaway and I found that the share of mature firms, or those at least 16 years old, rose 50 percentage points between 1992 and 2011, from 23% to 34% of all firms in the U.S. economy. Not surprisingly, the share of all private-sector workers employed in such mature firms rose over the same time, from 60% to 72%.
This is, of course, the opposite of what I would expect, given the stimulus to entrepreneurship provided by the Internet. I would like to see more discussion of this finding on other economics blogs.
As an unapologetic libertarian, and thus prone to look at that axis of politics, I think this suggests that government over-regulation is protecting incumbent firms against disruptive innovation. A progressive would probably say that this shows that large companies are defeating civil society and good government, and oppressing their would-be competitors. (I don’t think, though, that conservatives would be very likely to say that this shows older firms to be more civilized.)
In this instance the problem is not just government, but what local economies have asked their governments to do for them over the decades (Nimbyism). They won’t be convinced otherwise until they see something that works better elsewhere. Really substantial innovations (re services and flexible environment adaptations) are completely out of the question, in terms of how the marketplace is presently structured. Production reform will need to come from specific applied (experimental) environments with local investments for multiple resource use options. Otherwise too many previously standing product definitions are in the way, for new business formation to take off.
It is very time consuming to start a business. If I had a chance to do it over again I probably would not.