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Report: Young Tech Firms’ Sluggish Growth is a Problem for US Economy

Young technology firms’ sluggish growth rate is a troubling sign for the US economy, according to a newly-released white paper from the Kauffman Foundation, a nonprofit organization that studies entrepreneurship and provides grants to award educational achievement and entrepreneurial success. The high-tech sector has traditionally sparked economic growth in recent decades. However, the Kauffman report finds the number of technology firms five years old and younger—which typically drive job creation—has fallen from a high of 113,000 in 2001 to about 80,000 now, as it was in the mid-1990s. One factor that may have skewed the number is the acquisition of young firms by established technology companies. The report also finds that technology firms’ job reallocation rate—which basically subtracts the rate at which jobs are lost from the rate at which they are created—has fallen to the lowest rate since the late 1970s “Because young high-tech firms are so disproportionately important for innovation and job creation, a slowdown in this sector calls for a new approach to fostering a stronger entrepreneurial economy,” said Dane Stangler, the Kauffman Foundation’s vice president of research and policy. (Reuters)(Ewing Marion Kauffman Foundation)

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