Declining Business Dynamism among Our Best Opportunities: The Role of the Burden of Knowledge

Abstract

We document that since 1997, the rate of startup formation has precipitously declined for firms operated by U.S. PhD recipients in science and engineering. These are supposedly the source of some of our best new technological and business opportunities. We link this to an increasing burden of knowledge by documenting a long-term earnings decline by founders, especially less experienced founders, greater work complexity in R&D, and more administrative work. The results suggest that established firms are better positioned to cope with the increasing burden of knowledge, in particular through the design of knowledge hierarchies, explaining why new firm entry has declined for high-tech, high-opportunity startups.

Late industrialisation and global value chains under platform capitalism

“…The fourth reason for justifying diminished expectations of the 4IR is that whereas in earlier industrial revolutions, new business formation played a role in introducing and commercialising new technologies and, in effect driving structural transformation (Gries & Naudé, 2010), the "burden of knowledge" of participating in the digital economy and leveraging the network economies inherent in multisided platforms and their underlying hardware, may reduce new start-ups and new venture creation in the high-tech manufacturing industry-in other words, the burden of knowledge effect can reduce the role of new ventures to push structural transformation through creative destruction (Astebro et al, 2020).…”

Coming to Grips With the Tsunami of New Scientific Information

“…Medicine is a perfect example: “It is estimated that the doubling time of medical knowledge in 1950 was 50 years; in 1980, seven years; and in 2010, 3.5 years ... What we learned in the first three years of medical school will be just 6% of what is known at the end of the decade from 2010 to 2020,” they explained. (See Astebro et al, 2020; Densen, 2011. )…”