FACTS AND MYTHS IN THE

GLOBALIZATION DEBATE

VIVEK

WADHWA

Visiting Scholar, UC-Berkeley

Director of Research, CERC Duke University

Senior Research Associate, Harvard Law School

Distinguished Visiting Scholar, Emory University

Faculty and Advisor, Singularity University

Columnist: Washington Post, BusinessWeek

1. We’re falling behind in graduating engineers (and scientists)

2. Companies are going where the skills are

3. Strong math and science education = Global Competitiveness

4. More investment in research = more innovation

5. Skilled immigrants fuel the economy: so more H1-B visas

6. Young college dropouts: typical Silicon Valley entrepreneurs

7. America world leader in workforce development

8. Clusters provide the magic formula for innovation

8 Myths In Global Competitiveness

UNIVERSITY RESEARCH

Untapped Goldmine

of knowledge and

Innovation

$48.8 billion invested every year in U.S. university research

with very few spinoffs and less than $2 billion in license revenue.

European university investment is much lower than the U.S.,

but generates 3 times as many startups and far fewer patents

• INCOMPLETE SYSTEM -- legal and finance in place, but corporate development, marketing,

and sales are missing

• CULTURAL ISSUES -- academics want to disseminate knowledge and publish papers rather

than inhibit it’s use.

• WHAT COMES FIRST -- students or commercialization? What about the conflicts of interest?

• UNIVERSITY TECHNOLOGY IS HALF-BAKED -- proof of concept not funded

COMMON PROBLEMS

Entrepreneurship

Research

BASED ON 3 PROJECTS:

• Survey of 652 CEO’s/CTO’s of 502 tech companies

• Interviews with 144 Immigrant tech company founders

• Detailed survey of 549+ founders of companies in 12 high-growth

industries

COMMON MYTHS:

• Tech entrepreneurs: unmarried, rich, college-dropouts obsessed with

making money

• Ivy-league education provides huge advantage

• Venture Capital prerequisite for economic growth

2.5%

10.5%

34.1%

37.5%

14.2%

1.2%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%

60 - 69

50 - 59

40 - 49

30 - 39

20 - 29

0 - 19

Percentage of all Respondents

Fou

nd

er

Age

US Tech Founder Age at the Time of Startup Establishment

Tech Entrepreneurs:

Not Young!

Married with Children

24.9%

69.9%

4.5%

0.7%

Single Married Divorced/Separated Widowed

40.3%

16.4%

28.0%

11.0%

3.4%

0.9%

0 1 2 3 4 5

Average Number of Children

Entrepreneurs: Not from

Rich Families

0.7%

36.9%

5.4%

21.8%

34.6%

0.6%

LOWER-LOWER CLASS LOWER-MIDDLE CLASS LOWER-UPPER CLASS UPPER-LOWER CLASS UPPER-MIDDLE CLASS UPPER-UPPER CLASS

Tech Entrepreneurs:

Not College Dropouts

High School Diploma or

Lower, 5.9%

Bachelors, 44.0%

Masters, 31.0%

PhD, 10.0%

Associates Degree,

Certification, Some

College, 2.3%

MD, 3.8%

JD, 3.5%

Highest Completed Degree

Applied Sciences*,

9.0%

Engineering 27.6%

Mathematics 1.5%

Computer Science,

Information Technology

9.0%

Business, Accounting,

Finance, 33.4%

Healthcare, 5.5%

Arts, Humanities and Social Sciences,

2.8%

Economics, 1.8%

Law, 4.2%

Other, 4.6%

Fields of Highest Degree

STEM Fields 46.5%

Education Counts, Not

necessarily Ivy League

0

10

20

30

40

50

$0

$1

$2

$3

$4

$5

$6

$7

$8

All Startups Startups w/ an Ivy-Leauge Founder Startups w/ a High School Founder

Ave

rage

20

05

To

tal E

mp

loye

es

Ave

rage

20

05

Sal

es

(Mill

ion

s o

f U

SD)

Average 2005 Sales Average 2005 Employment

What makes the difference is higher education: not the degree or school.

Entrepreneurs:

Highly Experienced

Approximately how many years did you work for another employer prior to starting your first business?

24.6%

27.6%

23.3%

14.3%

10.3%

0-5 years 6-10 years 11-15 years 16-20 years 20+ years

Approximately how many years did you work for another

employer prior to starting your first business?

Entrepreneurship wasn’t necessarily

in Genes or Pre-planned

Which Members of Your Family Started a Business

Before You Did?

51.9%

38.8%

6.9%

15.2%

I was the first inmy immediate

family to start abusiness

Father Mother Siblings

How interested were you in becoming an

entrepreneur while you were completing your

higher education?

7.2% 6.1%

34.7%

27.5%

24.5%

Not at allinterested

Not veryinterested

Didn't thinkabout it

Somewhatinterested

Extremelyinterested

Reasons for becoming

an Entrepreneur

1.2

2.9

3.2

1.7

3.1

1.4

3.0

3.1

2.1

Couldn't find traditional employment

Working for someone else didn't appeal

Wanted to build wealth

Co-founder encouraged to start company

Wanted to capitalize on a business idea

Developed a technology in lab

Startup company culture appealing

Always wanted own company

Entepreneurial friend or family role model

1= Not important factor, 5 = Extremely important factor

Bootstrapping is the Norm,

Not VC-Funding

10.0%

13.8%

70.0%

15.4%

10.8%

9.2%

14.6%

6.2%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0%

Other

Friends and family

Personal savings

Business partner(s)

Venture capital

Private/angel investor(s)

Bank loan(s)

Corporate investment

Success Factors

1.3

1.7

2.2

2.5

3.0

3.2

3.2

3.3

3.3

3.8

4.0

4.1

4.4

Assistance provided by the state/region

University/alumni contacts/networks

Advice/assistance provided by company investors

Location

Personal/social networks

Your university education

Availability of financing/capital

Professional/business networks

Good fortune

Company's management team

Lessons you learned from your previous failures

Lessons you learned from your previous successes

Your prior industry/work experience

What stops others from

becoming Entrepreneurs?

4.3

4.0

3.8

3.6

3.4

3.3

3.2

2.7

2.5

1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5

Willingness or lack of ability to take risks

Amount of time and effort required

Difficulties in raising capital/financing

Lack of business management skills

Knowledge about the industry and markets

Knowledge about how to start a business

Family or financial pressures to keep a traditional,steady job

Availability of health insurance/risk of losing existingcoverage

Difficulties in recruiting co-founders

Common formula for Regional Innovation

• Pick a hot industry

• Build a magnificent tech park next to a research university

• provide incentives for chosen businesses to locate there

• add some venture capital

• …And watch the magic happen

As prescribed by management consultants touting the "cluster theory" developed by Harvard

Business School's Michael E. Porter.

Every such experiment in the world has failed…

…or is on life-support, every single project!

What about Silicon Valley and RTP?

• Silicon Valley has reinvented itself many times since WWII

Govt. investments in aerospace and electronics research

• Raced ahead of Rt. 128 because of its high rates of

job-hopping, new company formation, and culture of

information exchange and risk-taking

• Silicon valley is one giant –diverse--network

• Research Triangle Park is a 50-year-old project

that achieved success decades ago but lost

momentum in the Internet era.

Babson Professor Daniel Isenberg:

Zebras are beautiful. They are powerful.

They exist in nature. But if someone told you

that you could paint a white jackass with

black stripes and call it a zebra, you would

send them packing.

Economic clusters are effective. They are

powerful. They exist in nature. So why do

most economic policy makers think they can

take some real estate, paint it with an anchor

tenant and a name, and call it a cluster?

Ideas for boosting regional entrepreneurship

• Remove bureaucracy/obstacles to entrepreneurship

• Remove stigma associated with failure. Teach experimentation/risk taking

paths to success, preceded by failures.

• Teach entrepreneurship to university students/experienced workers

• Encourage diversity/immigration

• Improve education. Focus on quality/freedom of thought/expression

• Create mentor networks. Successful entrepreneurs usually mentor

others/give back by providing advice and connections.

• Bring together entrepreneurs and connect with other networks.

• Provide global business connections for local entrepreneurs

• Facilitate seed financing. VC will follow innovation

Ideas for U.S.

Competitiveness

• Move workforce up the ladder rather than just graduate more

• Bring and keep the worlds best and brightest

• Make our investments in research more effective

• Foster entrepreneurship at its source – the workforce

• Understand globalization and create new business models

which leverage innovation abroad

• Compete on American strengths -- In other words, let’s do what

we do better

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