Reviving Entrepreneurship Lerner Sahlman
poliCy
PhotogrAPh Topical Press Agency/Stringer/
Getty Images: orville Wright lands a glider, 1911
reviving entrepreneursHip poliCy deCisions in areas Could nurture—or Cripple—ameriCa’s greatest asset. by JosH lerner and William saHlman 116 Harvard Business Review March 2012
merica’s economic culture has traditionally been distinguished by a willingness to pursue opportunities; a parallel willingness to adopt new products and services; social, legal, and economic tolerance for failure; and the ability to efficiently redeploy people and money. All this has led to a highly evolved system for allocating human and financial capital to entrepreneurial ventures, which has brought the U.S. enormous advantage.
But this entrepreneurial engine is showing serious signs of weakness. Considerably fewer new businesses are formed in the United States today than in the past,
creating fewer new jobs. Venture capital funding has contracted in both amount and breadth, and initial public offerings of small-cap companies have sharply declined.
In other markets, including China and Brazil, those indicators are moving in the opposite direction. As U.S. policy makers wake up to the need to reinvigorate entrepreneurial ventures, they must recognize entrepreneurship as a process, not an act. Their decisions change the climate for new enterprises at each stage of that process, sometimes dramatically—whether or not those decisions are made with entrepreneurship in mind.
HBR.oRG
spot an opportunity basiC and translational sCienCe
Quality and supply oF Human Capital
U.S. government funding of basic research has paid off handsomely in the past. Private capital has been able to leverage federally supported discoveries, allowing them to be translated into valuable commercial applications.
But the level and nature of government research funding are problematic today. As resources tighten up, decisions about what to fund grow ever more conservative. Labs have difficulty obtaining
PhotogrAPh Topical Press Agency/Stringer/
Getty Images: orville Wright lands a glider, 1911
reviving entrepreneursHip poliCy deCisions in areas Could nurture—or Cripple—ameriCa’s greatest asset. by JosH lerner and William saHlman 116 Harvard Business Review March 2012
merica’s economic culture has traditionally been distinguished by a willingness to pursue opportunities; a parallel willingness to adopt new products and services; social, legal, and economic tolerance for failure; and the ability to efficiently redeploy people and money. All this has led to a highly evolved system for allocating human and financial capital to entrepreneurial ventures, which has brought the U.S. enormous advantage.
But this entrepreneurial engine is showing serious signs of weakness. Considerably fewer new businesses are formed in the United States today than in the past,
creating fewer new jobs. Venture capital funding has contracted in both amount and breadth, and initial public offerings of small-cap companies have sharply declined.
In other markets, including China and Brazil, those indicators are moving in the opposite direction. As U.S. policy makers wake up to the need to reinvigorate entrepreneurial ventures, they must recognize entrepreneurship as a process, not an act. Their decisions change the climate for new enterprises at each stage of that process, sometimes dramatically—whether or not those decisions are made with entrepreneurship in mind.
HBR.oRG
spot an opportunity basiC and translational sCienCe
Quality and supply oF Human Capital
U.S. government funding of basic research has paid off handsomely in the past. Private capital has been able to leverage federally supported discoveries, allowing them to be translated into valuable commercial applications.
But the level and nature of government research funding are problematic today. As resources tighten up, decisions about what to fund grow ever more conservative. Labs have difficulty obtaining
Links: and Venture Capital Have Failed—and What to Do about It (Princeton, 2009) Business Ventures and the Entrepreneur (McGraw-Hill/Irwin, 2006)