What is the history of entrepreneurship in America?
Entrepreneurship is the vehicle for creating new jobs, generating revenue, advancing innovation, enhancing productivity, and improving business models and processes. Despite the challenges, entrepreneurship has never before been more vital to our economy than it is today. It is our best offense for economic progress and our finest defense against the status quo. Promoting entrepreneurship is in everyone’s best interest.
Entrepreneurs embody the American dream. Powered with ideas, they have been the engine to our economic growth and subsequently have set our economy apart from all other nations.
Understanding The History Of Entrepreneurship In America
Entrepreneurship is deeply woven into the fabric of America’s history, its economy, and its cultural beliefs. As Alexis de Tocqueville observed in his 1836 classic Democracy in America, “The Americans always display a free, original and inventive power of mind.”
Milton Friedman, a Nobel Laureate in economics, wrote this in his timeless classic Free to Choose: “Ever since the first settlement of Europeans in the New World, America has been a magnet for people seeking adventure, fleeing from tyranny, or simply trying to make a better life for themselves and their children.”
Fred Bollerer, from the Washington, D.C.-based Morino Institute, said, “Entrepreneurship has been going on in this country since its inception. In fact, you can say the country really started because of its political entrepreneurs.”
According to research from Babson College and the Kauffman Center for Entrepreneurship, anywhere from 10 percent to 17 percent of adults in the United States take an active role in start-ups. The Global Entrepreneurship Monitor reported that nearly one in ten working adults in the United States, or 18.3 million, were actively involved in the process of forming or leading early stage ventures.
As Federal Reserve chairman Alan Greenspan noted, “Competitive and open markets, the rule of law, fiscal discipline, and a culture of enterprise and entrepreneurship should continue to undergird rapid innovation and enhanced productivity that in turn should foster a sustained further rise in living standards.”
America’s Silent Army Moves West
Entrepreneurs are as American as the Statue of Liberty and the “winning of the west.” From its very beginning, America is a nation of opportunity seekers. As David Dary writes in Entrepreneurs of the Old West, early entrepreneurs were like Daniel Boone, who in 1798 at the age of sixty-five, settled along the Missouri River on about a thousand acres. Boone and thousands of others were America’s “Silent Army” that moved westward and laid the foundation to America’s entrepreneurial capitalism.
It was this Silent Army that took such gambles with their lives and put their bodies through such physical torment,” that moved even further west and opened up the Santa Fe Trail, a footpath that wandered through unsettled country for nearly 900 miles from Missouri to New Mexico.
This movement led to oxen-driven wagon trains and finally to the “iron horse,” the steam locomotive trains. “The bigness of the West—the vast distances that had to be overcome—was a major obstacle for the silent army. Hurdling that obstacle required greater Eastern influence, especially of capitalism with its developing corporations. It was capitalism that built the railroads, greatly reducing the West’s transportation problem.”
By the early 1860’s the major railroad ventures commenced; none were as famous as the Central Pacific Railroad, led by the “Big Four”—Charles Crocker, Mark Hopkins, Collis P. Huntington, and Leland Stanford, the latter also the founder of the California university that bears his name.
America’s Secret Economic Weapon
As Mark Heesen from the National Venture Capital Association shared with us, America’s small, entrepreneurial firms have been the catalyst to our economy’s growth in the past and will continue to be a key determinant of our future prosperity. According to Ernst and Young LLP, in the broadest sense of the term, there are over 40 million entrepreneurs conducting some form of business activity in the United States.
The U.S. Small Business Administration (SBA) estimates that there are about 25 million small businesses, defined as companies with fewer than 500 employees. According to the SBA records, there are about 180,000 companies that have between 100 and 500 employees, and about 5.7 million companies with fewer than 100 employees. The balance—the 12.8 million sole proprietorships and the 6.4 million limited partnerships or limited liability companies—have no employees.
In their landmark book Venture Capital at the Crossroads, William D. Bygrave and Jeffry A. Timmons refer to entrepreneurship as the American economy’s secret weapon. According to the U.S. Department of Commerce, small businesses account for nearly 60 percent of the gross national product, produce some 75 percent of new jobs, and are a major source of new technologies and innovation. It has been estimated that 18 percent of the financial assets held by U.S. households, or $2.4 trillion, is invested in private ventures.
At the turn of the century, in 1999, sole proprietorships in the United States had about $969 billion in revenues. Their combined economic power would rank them as the tenth largest economic power in the world—even larger than Canada, Mexico, or Russia.
Entrepreneurship Empowers All in America
Entrepreneurship is becoming more of a learned practice than business activity. Kim B. Clark, the dean of Harvard Business School, says, “The concepts of leadership that are going to be important in the future spring out of an understanding of entrepreneurship.” It is well researched that entrepreneurship empowers all, regardless of education, sex, color of skin, and nationality.
According to Amar Bhide, who studied the founders of successful ventures, about 80 percent had a college degree, 48 percent had a four-year degree, 15 percent had an MBA degree, 20 percent had some other advanced degree, and 11 percent were only high school graduates. As for their origins and backgrounds, 63 percent were from middle class, 26 percent described their backgrounds as working class, 5 percent were poor, and 6 percent came from affluent backgrounds.
An important but neglected area in the study of entrepreneurship is the role of women in the building of high-growth ventures. Historically women have tended toward low-risk, slower-growth ventures. But things are changing as women in senior levels of marketing and management are being exposed to raising money and managing new business ventures.
Minority-owned businesses grew explosively in the 1990’s. Nearly 25,000 had sales of more than $1 million. Information put together by U.S. Census Bureau’s “Survey of Minority Owned Business Enterprises” found that Blacks own more than 800,000 ventures, and that there were some 3 million minority entrepreneurs by the end of the 1990’s. Also, skilled immigrants are an increasingly important but largely unrecognized source of well-educated entrepreneurs. The Immigration Act of 1990 created significant new opportunities for foreign-born, highly educated professionals.