Changes

A [http://www.kauffman.org/~/media/kauffman_org/research%20reports%20and%20covers/2014/02/declining_business_dynamism_in_us_high_tech_sector.pdf%20Kauffman study] from the Kauffman Foundation reported sustained declines in entrepreneurship and business dynamism across the U.S. economy. Though the Wall Street Journal and many Americans [http://blogs.wsj.com/washwire/2014/05/06/snowden-effect-americans-still-like-tech-industry-but-not-telecom/ still view] the high-tech sector as the pinnacle of entrepreneurship and innovation, the Kauffman Foundation [http://www.kauffman.org/~/media/kauffman_org/research%20reports%20and%20covers/2014/02/declining_business_dynamism_in_us_high_tech_sector.pdf%20Kauffman found] the decline in business dynamism that occurred broadly across the U.S. economy over the past two decades also dragged on the high-tech sector in the post-2000 period. The high-tech sector, or the group of industries with very high shares of workers in the STEM occupations of science, technology, engineering, and math has been found to be in decline, which begs the question: what happened in the American economy to cause the decline of business dynamism in high technology sectors?

Why the decline? The primary challenge start-ups in general face is access to capital. According to [http://newsroom.bankofamerica.com/sites/bankofamerica.newshq.businesswire.com/files/press_kit/additional/Fall_2014_Bank_of_America_Small_Business_Owner_Report.pdf Bank of America], 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. Millennials also have less access to personal capital in that they often take on significant student debt when attending 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 as [https://www.pwc.com/gx/en/managing-tomorrows-people/future-of-work/assets/reshaping-the-workplace.pdf noted] by PricewaterhouseCoopers, in which millennials compose a majority of the workforce and are more comfortable making advances in technology older members of the workforce do not.