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New, Old Companies Can Partner to Create Jobs

By Stephenie Overman  5/10/2012
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Startup businesses are critical to job creation, a panel of experts agreed during a May 1, 2012, session at the HRO Today Forum, held near Washington, D.C.

“But for startups there would be no net growth” in jobs, said Brink Lindsey, senior scholar in research and policy at the Kansas City, Mo.-based Kauffman Foundation, which studies entrepreneurship, during the session “Where Do Jobs Come From: The Birds & Bees of Labor Flows & Job Creation.”

Fortunately, the United States traditionally has had the highest startup rate in the world, according to John Haltiwanger, an economics professor at the University of Maryland. Unfortunately, he added, “there is a downward trend in business startups.”

Many young people coming into the workforce are not interested in taking jobs with startup companies because they are uncomfortable with risk taking and uncertainty, said Scott Case, CEO of Startup America. Plus, “Parents say, ‘Get a real job.’ These are real jobs.”

Startup America provides resources and connections to help young companies grow and supports “regional startup ecosystems” throughout the United States. Case said corporations can help high-growth startups and themselves.

“Your greatest opportunity is to become startup friendly,” he told the HR professionals representing large companies who were in attendance. “How do you [operate] in your enterprise in a way that allows a startup to knock and get an answer? Startups identify problems they think they can solve, but there has to be somebody on the other side of that door. Focus on how you interact with startups. Engage with them early” to work on new ideas that meet customers’ needs, he said.

HR professionals in large companies can help change workers’ attitudes, Case continued. “Encourage people to make leaps” by making it easier for them to return to the company after working for a startup.

“I’d rather have someone who went off and failed somewhere and came back” than someone who does not take risks and does not learn new skills, he said.

“There are awesome startups all across country that have pride and commitment,” he said. “We can’t rely on Boston, New York and the Bay Area to be our innovation centers.  [Startup America] has champions in 20 places. We have to connect startups and raise visibility. If we’re going to compete, we’ve got to focus on this.”

Housing Is a Barrier

Lindsey noted other barriers to job creation, such as impediments to population migration and increased regulatory activity. For example, he said people naturally move from areas of low job opportunity to areas where there are more opportunities. But “what we have now is internal population movements away” from high job growth areas because workers can't find housing. In many places, the housing shortage is driven by NIMBY [not in my back yard] land-use regulations, he said.

“It affects the pattern of job creation.”

An audience member asked if startup companies have been hurt by the Sarbanes-Oxley Act, which was designed to improve the accuracy and reliability of corporate disclosures relating to securities laws.

“There are sound reasons for thinking Sarbanes-Oxley has restrained startups,” said Lindsey. “It has reduced the final payout when going public. Sarbanes-Oxley has made going public harder.”

The conference was held April 30-May 2, 2012.

Stephenie Overman is a freelance writer based in Arlington, Va.

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