Entrepreneurial Activity in the United States. Why are the United State Outperformed by New Emerging Countries in Business Creation?
Essay 2020 5 Seiten
This essay analyses and presents how the rest of the world now influences the United States as its entrepreneurial activity rises and decreased. The result of the analysis shows that United States is still dominated by emerging country in entrepreneurial activity. This is a result is weak in cultural support, software industry, and high-growth market. However, start-up skills, competitiveness, and emerging technology, the United States remained strong. Taxes in United States decreased in 2018 compared to 2017. This may be the consequence of the reduction of the number of new business and entrepreneurial activity.
Paul (2007) recognized the importance of new startups in job creation, productivity enhancements, innovation, as well as a route for social mobility. He added that United States contributed in entrepreneurship by increasing investments in R&D and higher education.
Jim (2015) made an analysis of the entrepreneurial situation in America. According to him, America ranked at 12th regarding business startup activity. Some countries like Hungary, Denmark, Finland, New Zealand, Sweden, Israel and Italy had higher startup rates than America did. The report of World bank (2019) on doing business ranked United States at 8 th position after New Zealand (1), Singapore (2), Denmark (3), Hong Kong SAR, Denmark, China (4), and Korea Republic (5), Georgia (6), Norway (7). According to Jim (2015) compared to the past 35 years, the number of business closures is greater than the number of business births since 2010. According to him, since 1977 until 2018, per year, startups outpaced business failures by about 100,000. Jim (2015) criticized a misunderstanding of the concept of entrepreneurship. He indicated that the leadership believes that the answer to economic growth and ultimately job creation was more innovation, and they continued to invest billions in it. Nevertheless, an innovation was worthless until an entrepreneur creates a business model for it and turns that innovative idea in something customers will buy. According to Jim (2015) it seems that there inappropriate strategies. Leaders did not think about different strategies, and continued marching down the path of national decline, believing innovation will save us. Jim (2015) is afraid of the situation of the business deaths. He said that when small and medium-sized businesses died America dies with it.
The question that one may ask is why United State is outperformed by new emerging countries in new business creation. Zoltan and Laszlo (2010) indicated that even though the United States seems to be among the top entrepreneurial economies, it performance is based on the sub-index of expectations, but remain slightly on the sub-indexes of attitudes and operation. Regarding start-up skills, competitiveness, and emerging technology, the United States remained strong, but weak in cultural support, software industry, and high-growth market. On institutional variables, U.S. output tends to be better than on individual variables.
A country cannot be strong without a strong economy especially the private sector. All countries are living by its population via the payment of taxes (tax on company income, tax on salaries and wages, value added tax, tax on dividend, etc.). Government redistributes this under different payments (paying its employees, supporting poor via subsidiaries, payment for health insurance, payment for military expenses, investing in public asset, etc.). It is clear that taxes are the main sources of revenue for government. When people are rich, their make their government rich also through their contribution. They may be a positive correlation between the amount collected by government and the number of employed people, number of companies, etc.
The main consequences of the degradation of entrepreneurial activity is the increase in unemployment, reduction of the government assistance to poor, increase in vulnerable population, increase in government budget deficit. The following table gives idea how the United Stated were affected in terms of tax reduction. The tax reduction will have negative impact on the other sector of economy in the United Stated.
Table 1: Analysis of United States revenue 2017-2018
Abbildung in dieser Leseprobe nicht enthalten
Source: Author’s computation based on data from OECD.Stat: https://stats.oecd.org/Index.aspx?DataSetCode=REVUSA
The Table 1 shows that all types of revenue for United States decreased in 2018. Corporate income tax federal decreased dramatically compared to other revenue (-47%). Tax on income, profit and capital gains of corporates came at second position in decreasing with -35.5%. This may be the consequences of the increased in number of business death than new businesses. The situation may continue to be worse as COVID-19 will last. United States should think about new way of increasing the number of new business by dealing with the identified weaknesses. The consequences of the decrease in entrepreneurial activity are being seen and may be increased by the pandemic. Many companies are having difficult time and many of them closed. Many employees lost their jobs as economic activities reduced combined with the lockdown.