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THE BOTTOM LINE

Has America lost its entrepreneurial edge?

Washington

GLOBALISATION strikes again. The latest target is entrepreneurship.

For decades, promoting startup firms through venture capital and other methods of business investment seemed a peculiarly American strength. It has nurtured countless tech firms, including titans such as Facebook, Google and Apple. Americans have been duly proud. It reinforced a sense of national exceptionalism, because other countries couldn't easily duplicate it, if at all.

No more.

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A new study shows that America's capacity to foster high-tech firms is increasingly emulated abroad. The US monopoly on entrepreneurship has been broken and almost certainly can't be restored. American venture capitalists are investing in foreign startups, and foreign investors are pouring money into US startups.

This adds a new layer to globalisation. The know-how of creating new companies is spreading abroad. Earlier, manufacturing was globalised, as firms adopted worldwide supply chains. Portfolio investment - the buying and selling of stocks and bonds - was also globalised, as instant communication and new laws made it possible to shift funds rapidly between domestic and foreign stocks and bonds.

"The issue now is the competition for global talent," says Ian Hathaway of the Center for American Entrepreneurship, a small advocacy group that sponsored the report.

"For years, the US had a huge transfer of wealth from foreigners who came here to start new firms. Now, people don't have to do that anymore. They have VC markets in their own countries."

The report confirms this.

In the early 1990s, the United States represented about 95 per cent of worldwide venture-capital investment. Between 2005 and 2017, the US share was only "a little more than half", according to the study. It counts the number and value of more than 100,000 venture-capital deals in about 300 cities worldwide from 2005 to 2017.

It's not that US venture-capital investing has lagged. Actually, it has rebounded fairly strongly from a collapse after the dot-com boom of the late 1990s.

In 2017, American venture-capital spending totalled US$91 billion, according to Mr Hathaway, who authored the study with Richard Florida, a well-known scholar on urban policy. But foreign spending grew faster, raising its share of the total.

The report shows that venture-capital spending remains highly concentrated. The top 10 global cities represent almost two-thirds of total venture-capital spending. But the dominance of Silicon Valley (San Francisco and San Jose) and the United States is fading, with China the major challenger.

The United States needs to protect its position as the world's most attractive location for startups, the report argues, by - among other things - creating a special visa for immigrants who will commit to working on startups. Whether this is possible or practical in today's toxic political climate involving immigration issues is unclear.

But the main message is unmistakable. "The notion that successful startups must launch and scale in Silicon Valley or another leading American city no longer holds true. Increasingly, the world's high-tech entrepreneurs are choosing to stay in their home city or nation," the report says. THE WASHINGTON POST WRITERS GROUP