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  • 2022
  • Chapter
  • The Role of Innovation and Entrepreneurship in Economic Growth

The Servicification of the U.S. Economy: The Role of Startups versus Incumbent Firms

By: Mercedes Delgado, J. Daniel Kim and Karen G. Mills
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Abstract

Over the last few decades, the U.S. economy has exhibited a significant shift from manufacturing towards services. This transition has been particularly prominent in an important subcategory of services industries that drives innovation and employs many high-wage workers: Supply Chain Traded Services (Delgado and Mills, 2020). These industries provide specialized service inputs to organizations and are characterized by high upstreamness, which allow innovations to cascade down to other buyer industries. In this chapter, we explore the role of startups versus incumbent firms in driving the transition from manufacturing to Supply Chain Traded Services between 1998 and 2015. Using the Longitudinal Business Database of the U.S. Census Bureau, we find that startups experienced a large decline in Supply Chain Traded Services, both in terms of entry of new firms and growth of young firms. Instead, job growth in this sector has been led by established firms: the transformation of incumbent manufacturing firms towards services (e.g., Intel), and the growth of incumbent Supply Chain Traded Service firms (e.g., Microsoft). To complement our empirical findings, we discuss potential barriers for entrepreneurial firms, and illustrate the servicification efforts of several established firms. We conclude by offering broad policy implications.

Keywords

Servicification; Supply Chain Industries; STEM Labor; Innovation; Growth; Entrepreneurship; Innovation and Invention; Economic Growth; Policy; Service Industry; United States

Citation

Delgado, Mercedes, J. Daniel Kim, and Karen G. Mills. "The Servicification of the U.S. Economy: The Role of Startups versus Incumbent Firms." In The Role of Innovation and Entrepreneurship in Economic Growth, edited by Michael J. Andrews, Aaron Chatterji, Josh Lerner, and Scott Stern. Chicago: University of Chicago Press, 2022.
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About The Author

Karen Mills

General Management
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  • Pittsburgh: A Successful City? By: Karen Mills, Caroline Elkins, Vikram Gandhi, Gabriella Elanbeck and Zeke Gillman
  • Creating 'Smart' Policy to Promote Entrepreneurship and Innovation By: Karen G. Mills and Annie Dang
  • A Note on Contextual Intelligence By: Caroline M. Elkins, Tarun Khanna, Vikram S. Gandhi, Karen G. Mills and Leonard A. Schlesinger
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