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How Many Billionaires Does It Take to Push Economic Recovery?

Posted by: Mark Marich on December 09, 2010 Source: Policy Dialogue on Entrepreneurship

How many new billion dollar firms would it take to permanently increase the U.S. GDP by one percentage point? A new Kauffman Foundation study estimates the answer is most likely between 30 and 60. According to Inventive Billion Dollar Firms: A Faster Way to Grow?, the collective impact from high-growth firms that are able to realize $1 billion in revenue could significantly accelerate the U.S. economic recovery, and over time increase income and wealth of the average American household.

According to Robert Litan, Kauffman Foundation’s vice president for research and policy and author of the study, the potential economic impacts demonstrate that if the economy grew at 4 percent annually rather than the average of 3 percent, GDP would double six years faster (18 versus 24 years). With compounding, this extra 1 percent would cumulate over a century to produce roughly three times the level of GDP than would otherwise exist.

“Whatever the ‘magic number’ of highly successful firms may be,” adds Carl Schramm, president and CEO of the Kauffman Foundation, “the bigger question is: How do we ensure the creation of those firms here in America?”

One answer, the Foundation believes, is in the creation of “entrepreneurial ecosystems.” Currently, research universities across the country are creating mentoring programs for faculty, alumni and student entrepreneurs. These commercial, private-sector “accelerators” use a competitive selection process to nurture new potential breakthrough companies in markets including medical devices and Web-based businesses.

Kauffman Laboratories for Enterprise Creation, launched last year, aims to recruit highly motivated individuals with commercial ideas that have the potential to produce billion-dollar-plus companies. Kauffman Labs surrounds the successful candidates, chosen in a highly competitive process, with entrepreneurial instruction and mentoring from some of the nation’s leading experts in the same industry or “vertical.” The first Labs program consisted of outstanding postdoctoral scientists who have developed promising technologies. The next program, which starts in early 2011, consists of potential entrepreneurs with innovative commercial ideas in the educational field. Future Labs programs will be centered on other verticals ripe for high-growth, innovative startups.

Category:  Growth & Poverty 

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