Diversity an “Ace In The Hole” for U.S Competitiveness

WASHINGTON—Workforce diversity is a major competitive asset for the United States in the global economy, according to a new report on entrepreneurship by the Council on Competitiveness. The report, Where America Stands: Entrepreneurship, also says entrepreneurship in the United States is burdened by high regulatory, legal and health care costs, as well as immigration barriers prompted by the terrorist attacks of September 11, 2001.

Immigrants and women play a critical role in U.S. entrepreneurship, according to the report. Businesses in the United States that are majority women-owned generate $1.1 trillion in annual sales, and about 20 percent of all majority women-owned businesses are owned by women of color. During the past 25 years, immigrants have started 25 percent of all U.S. public venture-backed companies, including, Intel, Sun Microsystems, eBay, Yahoo! and Google. Immigration restrictions, however, have made it increasingly difficult for foreign talent to enter the country.

“Entrepreneurship is essential to driving U.S. economic growth and maintaining America’s global competitiveness, according to the report,” said Deborah L. Wince-Smith, president of the Council on Competitiveness. “The United States will need to work to maintain its leadership position – focused on strengthening the fertile environment for innovation, sustaining strong public support for productive risk-taking and entrepreneurship, and reigning in the costs of regulation and health care.”

The report also cites several challenges, such as rising health care costs, that must be tackled to maintain and increase entrepreneurial activity. Health care costs are a major deterrent faced by small businesses. It costs small firms 45 percent more per employee to comply with federal regulations, in comparison to their larger counterparts. More than half of all firms with three to nine employees can’t offer health benefits; 98 percent of firms with at least 200 employees can.

The report makes three recommendations in order to foster and disperse entrepreneurship in the United States: expand angel investment networks, leverage knowledge assets and catalyze connectivity.

• Angel investor groups, often assisted by local economic development organizations, provide seed investments to promising local ventures. In 1996, there were only about 10 formal angel groups. Today, there are more than 200.
• Leveraging regional knowledge assets has a tremendous impact on regional economic development. While linkages between universities and industry can happen on a national or global level, the benefits often occur disproportionately at the regional level. Many universities have restructured their research capabilities to be more responsive to local industries.
• Catalyzing connectivity creates bridges that bring together entrepreneurs, academics, labor leaders and public sector leaders. The combustion behind innovation often emerges from close interactions among people, ideas and resources.

The Council is releasing the report as part of EntrepreneurshipWeek USA, which is helping to inspire and shape the next generation of American entrepreneurs. The centerpiece of this initiative is a national policy summit in Washington, D.C., on February 26, during which the Ewing Marion Kauffman Foundation will unveil a policy roadmap for an increasingly entrepreneurial economy. The policy summit is being co-chaired by Council on Competitiveness President and CEO Deborah L. Wince-Smith.

Building on the findings of its flagship Competitiveness Index, the Council on Competitiveness is releasing Where America Stands: Entrepreneurship as the first in a new series of reports on the high-impact drivers of U.S. innovation capacity and prosperity.