Declining entrepreneurial activity impacts economic growth

Note to Self… Entrepreneurial Activity Shapes Our World.

by Elaine Schwartz    •    Jun 24, 2014    •    2705 Views

Asked about how much market research he did for the iPad, Steve Jobs said, “None. It’s not the consumer’s job to know that they want.”

Art Fry could have said the same thing. His story is a good one…

But first, where are we going with this? Through an unexpected example of an entrepreneur, we can illustrate two basics about innovation:

  • Because entrepreneurs make an invention a practical reality, they accelerate economic growth.
  • Whether looking at a country or a firm, the institutional environment and the “payoff” shape the extent and character of entrepreneurial activity.

And now the story…

During the late 1960s, when a chemist at 3M tried to develop a better adhesive, he came up with a seemingly impractical result. His new adhesive was not permanent. Yes, it would stick something to something else, but also you could unstick the items just as easily. No one knew where it could be used.

Fast forward to 1974. Art Fry, also a 3M employee, needed a better bookmark. The pieces of paper he placed in his choir book after practice at church on Wednesday nights always fell out by Sunday when he needed them. Having heard about the adhesive with the “removability characteristic,” he says one day he had a “eureka moment.” Soon Fry not only had a new kind of bookmark but also, he and his chemist associate started circulating office messages on notes with the new adhesive.

The rest of the story is history. 3M produces in the neighborhood of 50 billion Post-It Notes a year.

Usually, when we think of an entrepreneur, the Steve Jobs of the world come to mind because they started their own firms. However, using a broader definition that relates to any individual whose innovation destroys the status quo, we can include the “business innovators” who work for large firms like 3M.

Our bottom line? Whether looking at Steve Jobs or Art Fry, we can see the crucial role of the entrepreneur. For that reason, when I saw that the Kauffman Foundation’s annual look at entrepreneurial activity indicated a decline, I wanted to share some of their data with you.

The decline of entrepreneurial activity

From: Kauffman Foundation

It is also interesting to see how states vary.

State by state entrepreneurial activity

From: Kauffman Foundation

Thinking of the institutional environment, does your home country, state or town encourage entrepreneurial activity? Please let us know in a comment.

Sources and more...For information about entrepreneurial activity, I recommend and used papers from Kauffman and Brookings. In addition, a H/T to CNN for their article on Art Fry and the NY Times for the Steve Jobs quote. However, my most fascinating source was The Invention of Enterprise, a 541-page history of global entrepreneurship from Ancient Mesopotamia to the year 2000. And finally, because of creative destruction, we should conclude with a brief Joseph Schumpeter (1883-1950) bio.

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