Entrepreneurship and Openness

Entrepreneurship and Openness

Theory and Evidence

Industrial Dynamics, Entrepreneurship and Innovation series

Edited by David B. Audretsch, Robert E. Litan and Robert Strom

A growing body of evidence has documented the critical role that entrepreneurs play in fostering economic growth. But entrepreneurs can only be expected to take risks in ‘open settings’, where individuals and firms are free to contract with one another. In this important book, leading economists explain and document the role of open markets, within and across national boundaries, in facilitating entrepreneurship, innovation and economic growth. The main message of this book is especially timely given growing concerns in developed countries in particular about off-shoring and openness to trade.

Chapter 3: Offshoring: Why Venture Capital-backed Businesses Stay at Home

Edited by David B. Audretsch, Robert E. Litan and Robert Strom

Subjects: business and management, entrepreneurship, economics and finance, economics of innovation, innovation and technology, economics of innovation


3. Offshoring: why venture capitalbacked businesses stay at home* Amar Bhidé INTRODUCTION Colonial powers once went to war to secure overseas markets, but today, export opportunities, or the lack thereof, do not have a significant place in the popular consciousness. Rather, offshoring – which leads to the import of goods and services – dominates the discourse on trade. And some pundits and politicians seem particularly agitated by venture capital-backed businesses, whose innovative activity is supposed to offset the offshoring of lowwage jobs, joining the exodus and relocating their own development activity to low-wage locations overseas. In this chapter, I will not analyze whether offshoring by VC-backed businesses helps or hurts their home countries. Rather, I discuss the extent of offshoring by the venture capital-backed businesses that I studied and what encouraged or discouraged them from going offshore.1 The findings are part of a broader research effort involving interviews with 106 CEOs of venture-backed companies which covered two other facets of the globalization of their companies, namely their efforts to serve international markets and the role of immigrants (as founders and employees). The broader effort is expected to culminate in a book, and in this chapter I will make some references to findings covered in more detail in that work. In my interviews I found that offshoring was indeed of great consequence to some companies, whose entire development staff was located abroad. All they had in the US were their headquarters, sales and marketing staff. Others, like CiDRA’s founder and CEO, had become...

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