By: Bianca Buliga, Content Curator Intern, and Jenna Fitzgerald, Market Analysis Intern
Our Current State
This may come as a surprise to some of you but the sad truth is that competition, especially within the business world, is diminishing in America. The question of this century is… How can we eliminate barriers to reignite competition and innovation in today’s marketplace?
Recently, I came across an interesting article published by the Ewing Marion Kauffman Foundation titled “A Fair Fight: Entrepreneurship Competition Policy”. Based out of Kansas City, Missouri, the Kauffman Foundation is one of the largest private and nonpartisan foundations that aims to foster economic independence by advancing education achievement and entrepreneurial success.
SEED SPOT is one of several beneficiaries supported by the Kauffman Foundation, having been selected as one of eight best-in-class support organizations nationwide in October of 2015. To best support our local entrepreneurs, we strive to understand how competition spurs progress and innovation by injecting new ideas, products, and services into local industries. But above all, we strive to ensure a barrier-free marketplace where their businesses can thrive.
This article by Jason Wiens and Chris Jackson caught my attention by simply and articulately addressing how a lack of competition is hindering our nation’s economic potential, and what can be done to bolster the creation of new jobs and firms. Continue reading to delve into the article’s main takeaways!
Barriers to Entering the Labor Market
Oftentimes, a market with waning competitions sees firm births and deaths occurring at the same pace. This pattern indicates that new firms are struggling to form, and excessive barriers deter entrepreneurs from turning their ideas into business ventures. Jackson and Wiens identify three main barriers resulting in the decline of entrepreneurial competition arena: non-compete agreements, occupational licensing, and broad patents.
By definition, non-compete agreements block the formation of new businesses that may compete with their employers. Companies that utilize non-compete agreements are looking to keep themselves on top by controlling potential entrepreneurs and squashing any innovation before it begins. Doing this perpetuates a marketplace bureaucracy that protects established, larger businesses and deters entrepreneurs from introducing and implementing revolutionary new ideas.
In many industries, occupational licensing requires individuals “to take classes, pass tests, and pay fees” in order to legally own and operate their businesses. In this process, accomplished business professionals are able to limit the number of entrepreneurs entering the market to protect their own interests.
Most people want to avoid litigation issues at all costs – however, with an increasing amount of patents that are intentionally broad, the threat of a legal dispute becomes more real for aspiring entrepreneurs. When nonspecific intellectual property is introduced, entrepreneurs are discouraged from pursuing their business ventures because of the looming threat of litigation, as well as the burdensome financial costs associated with patent research.
Policies in Need of Pursuit
With the 2016 Rio Olympics around the corner, officials are working tirelessly to implement rules and regulations for the athletes in order to guarantee fair competition. How then can our government and business world work to do the same? We are in need of fair and universal policies, rather than those that simply aid already established companies and corporations.
Jackson and Wiens propose four different strategies to preserving the integrity and innovation of our business market.
Since when do Americans shy away from a little healthy competition? Competition is a GOOD thing! It propels us towards growth and innovation – two things that have consistently contributed to our forward-thinking business mindset. Why do we want to limit that? Antitrust enforcers should be reminded that mergers and acquisitions lead to a loss of competition.
Stimulate Entrepreneurial Entry
When it comes to non-compete agreements, Jackson and Wiens suggest we should “limit the scope, duration, geography, and eligibility of non-compete agreements” in order to maximize our economy’s economic potential. The authors also advocate that occupational licenses should provide the appropriate protection, just with minimal burdens on entrepreneurs. Licensing boards should remain open to diversity and new schools of thought.
Ensure Equal Opportunity
Rather than offering tax incentives strictly to large businesses, the federal government should strive to balance out the playing field by giving entrepreneurs and small businesses proportional advantages. By providing small business owners with equal access to resources, they become equipped with the skills necessary to jumpstart their ventures and impact existing laws and regulations with new products and services. Flexibility is key! As Winston Churchill once said, “To improve is to change; to be perfect is to change often.” Not only allow laws and regulations to change, be EXCITED about those changes! Change inspires innovation.
Say No to Rent-Seeking
What will happen to our free market if big businesses continue to get bigger while trampling on and ultimately extinguishing entrepreneurship? Incentivize government officials to stay accountable and not hand out special privileges for large businesses looking to increase their own wealth. By dismantling the monopolistic power of larger businesses, we empower entrepreneurs to stimulate the economy with innovative ideas.
Believing that great ideas oftentimes come from small voices, we need to give these voice the space to be heard. At SEED SPOT, we stand for the entrepreneurs, the change makers, and those unafraid to take their ideas to the marketplace.
SEED SPOT welcomes all dreamers to participate in our expansion.
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