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Business Dynamism in High Tech (view source)
Revision as of 14:34, 24 February 2016
, 14:34, 24 February 2016→Article
Why the decline? The primary challenge start-ups in general face is access to capital. Only 29 percent of small business owners said they’ve applied for a business loan over the last two years. Millennials report turning to friends and family for loans, rather than taking out a traditional loan from a bank. [http://newsroom.bankofamerica.com/sites/bankofamerica.newshq.businesswire.com/files/press_kit/additional/Fall_2014_Bank_of_America_Small_Business_Owner_Report.pdf] Millennials also have less access to personal capital in that they take on significant student debt when they go to college. A [http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2417676 study] from Penn State University found "a significant and economically meaningful negative correlation between changes in student debt and net new businesses employing one to four employees, the firms most dependent on personal debt for financing." Personal debt and lack of access to capital are particularly problematic in the high tech sector, where millennials compose a majority of the workforce and are more comfortable making advances in technology older members of the workforce do not. [https://www.pwc.com/gx/en/managing-tomorrows-people/future-of-work/assets/reshaping-the-workplace.pdf]
The overwhelmingly large presence of millennials has contributed to the decline in business dynamism particularly in high-tech sectors at least partially because these members do not have the means or desire to finance a small business given that they are often saddled with debt from college.
===Impacts===
The Penn State study found that an increase of one standard deviation in student debt uses results in a decrease of 70 new small businesses per county, a decline of approximately 14.4%. While student debt is used to fund increases in human capital (education), the utilization of student debt reduces an individual's ability to access other forms of credit. As a result, the study's findings suggest a debt trade-off in which larger amounts of student debt lower an individual's ability to start a new business. [http://poseidon01.ssrn.com/delivery.php?ID=250070119116011113124099103112018099029051017051045044067089002120116105111114122091055102119102108111124001067027106101088127010005061051067105078103112127022029065052114071094113003125125064112116102099068082028078069030125114010072077114106025&EXT=pdf]
===Conclusion===
