Is America losing its entrepreneurial edge? For decades, the country has debated this question in the halls of Washington, on the nightly news, and in corporate boardrooms. Pundits have looked abroad for signs—from the Soviets during the Cold War to the Japanese in the 1980s to the Asian Tigers in the early 2000s—that the US was losing its economic advantage. Pessimists point to startling statistics, such as the rise in the number of patents filed by foreign inventors or the growing corps of engineers graduating overseas. These statistics are indeed alarming. Yet despite the historical challenges, the US has remained the home of entrepreneurship.
Sustainability and Corporate Responsibility
Entrepreneurship is the magic that binds all these elements, yet we see an increasing risk aversion toward new ventures in the United States. Large US corporations, the innovators of the previous generation, seem most affected. Part but not all of this behavior results from uncertainty about public policy and regulation, but some of it reflects past successes and a failure to think in the long term. Many of America’s leading advanced industrial companies report returns on capital well above twenty to thirty percent or more—the result of decades of productivity and ingenuity but also of a depreciated existing asset base. Too often, decisions to finance and push into new product areas or to enter new geographical markets die because companies fear to dilute these high returns. Worse yet, to meet short-term earnings objectives, companies defer promising but risky plans.
Surveying the Economic Horizon
The rapid expansion of small, inventive companies that grow up to become large ones innovating at scale is one of the hallmarks of US entrepreneurship. The country should continue to encourage this model, and more executives of large companies should embrace it. Many of our largest, most successful industrial clients are far too wary of long-term investments, which they often measure with short-term financial-performance metrics. Executives must reshape Wall Street’s quarter-to-quarter mentality and help these companies make the same kinds of bold but prudent decisions that they made in the past.
We are confident that the United States of America can realize its innovation and growth potential. Its natural advantages are undeniable. But other countries are building up cutting-edge technology, demand, talent, and entrepreneurism, while the United States seems to be in retreat. The public and private sectors must work together to reverse that trend.
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