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Venture Capital: Manufacturing Is Not the Path to Stimulate Economic Growth
Nov 18th
California has a high share of venture capital. But in a recent article, Where’s The Beef? Can Venture Capital Save California?, Gino DiCaro, Vice President of Communications for the California Manufacturers & Technology Association, makes an interesting point: point: All of California’s venture capital hasn’t created much growth in manufacturing. While California accounts for over 40 percent of all U.S. venture capital activity, DiCaro says, it is home to only “1.3 percent of the new or expanded manufacturing facilities in the last five years.”
DiCaro’s article raises an interesting question: Does it matter that California’s dominant position in venture capital fails to translate into growth in manufacturing in the state?
I think not for several reasons.
First, increasing manufacturing isn’t a path to faster economic growth. A study of the differences in state economic growth going back to the 1930s showed that manufacturing’s share of a state’s industrial structure actually reduces per capita income. So states like California are better off economically if they reduce their reliance on manufacturing.
Second, places with more venture capital have higher economic growth. Studies show that venture capital-backed companies are more innovative and have higher employment and sales growth than comparable companies not financed by venture capital. Therefore, California benefits from its large share of the U.S. venture capital industry.
A quick glance at California companies shows that new venture capital backed start-ups can enhance economic growth even if they don’t create any new manufacturing businesses. For instance, Google and Facebook don’t make anything, but are hiring workers and generating wealth at a rapid pace. If a state can create companies like these, does it matter if venture capitalists don’t back a lot of manufacturing businesses?
Third, recent research conducted by Larry Plummer of the University of Oklahoma indicates that efforts to increase start-up activity in manufacturing might hinder efforts to create more high tech companies. Plummer’s study shows that places with more high tech new businesses tend not to have more manufacturing start-ups and vice versa. Because venture capital is designed to enhance the growth of high tech companies, not manufacturing ones, there’s no reason to expect the size of a state’s venture capital industry to be related to manufacturing’s share of state economic activity.
In fact, Plummer’s study shows that the same factors that increase the rate at which manufacturing firms are created actually reduce the level of new business creation in high tech. For example, places with faster growing populations and a lesser share of the population that graduated from college have more manufacturing startups, but fewer high-tech ones. Although Plummer didn’t look at the effect of venture capital, it’s possible that places with high levels of venture capital have more high tech start-ups and fewer manufacturing ones.
In short, DiCaro’s article is an example of argument-by-spurious-association. He says that something is wrong in California because the state has high rates of venture capital activity but low rates of manufacturing firm growth. However, if manufacturing firm growth isn’t an objective of policy makers, this pattern doesn’t matter. Venture capital encourages the formation of high growth, high tech companies, which generate wealth and create jobs. As long as venture capital does this, we should be happy.
Editor’s Note: This article was previously published at OPENForum.com under the title: “Venture Capital Doesn’t Need to Encourage Manufacturing to Stimulate Economic Growth.” It is republished here with permission.
Venture Capital: Manufacturing Is Not the Path to Stimulate Economic Growth
View full post on Small Business News, Tips, Advice – Small Business Trends
Sony Stops Manufacturing the Walkman
Oct 25th
Image: Esa Sorjonen/Wikimedia
About a decade later than you’d think they would have, Sony finally stopped manufacturing the Walkman portable cassette player whose current incarnation is, arguably, the iPod Nano. Sony was still making the tape player in Japan, until this week. 220 million Walkmans were sold around the world before the 30-year-old tape player’s retirement. From CrunchGear:
The first Walkman was produced in 1979. The picture shows the TPS-L2, the world’s first portable (mass-produced) stereo, which went on sale in Japan on July 1 that year and was later exported to the US, Europe and other places. Sony says that they managed to sell over 400 million Walkmans worldwide until March 2010, and exactly 200,020,000 of those were cassette-based models.
What’s interesting is that the company will not stop manufacturing CD and MD-based Walkmans (needless to say, the same goes for their flash memory-based models). Chinese makers are expected to continue selling Sony-branded cassette Walkmans outside Japan, i.e. in Asia and the Middle East.
Sony pulled the plug on another 30-year old technology, floppy discs, in April this year.
According to CNET, Steve Jobs was inspired by the Walkman:
Count Steve Jobs among the most impressed…John Sculley, Apple’s former CEO, said recently in an excellent interview with Leander Kahney of the blog Cult of Mac.
“We used to go visit Akio Morita and he had really the same kind of high-end standards that Steve did and respect for beautiful products,” Sculley told Kahney. “I remember Akio Morita gave Steve and me each one of the first Sony Walkmans. None of us had ever seen anything like that before because there had never been a product like that. This is 25 years ago and Steve was fascinated by it. The first thing he did with his was take it apart and he looked at every single part. How the fit and finish was done, how it was built.”
So, the Walkman’s designers likely influenced the iPod. And what about the Walkman’s branding? After the music player became a hit, Sony tried to capitalize by releasing such products as Pressman, Watchman, Scoopman, and Discman. Now, think iPod, iPhone and iPad.
Thank Steve Jobs for taking portable audio to the next level, but thanks Sony for inventing it in the first place. R.I.P., Walkman, I had many good hours with you as a kid.
View full post on Business Pundit
Free Small Business Manufacturing Ideas – 3 Keys to Success
Nov 21st
Richard Blaine asked:
There are many free small business manufacturing ideas out there that can lead to big returns. No matter what you’re interested in manufacturing, there are several things to consider before getting started. Following are 3 keys to success.
1) Make a plan. Before starting any business venture, it’s important to make a business plan. Start by outlining your big goals. Then break down each one into manageable steps and create a time line. Make it reasonable and achievable. This plan will be your gospel as you’re starting your business so take it seriously.
2) Have reasonable expectations. A common pitfall when starting a small manufacturing business is having such high expectations that they can’t be met. Of course you want to challenge yourself but if you make your goals too lofty, you’ll be unable to reach them and will find yourself unmotivated and frustrated.
3) Get creative. You’re starting this business up for free, so you won’t have capital to invest in things like advertising and promotional materials. You’ll have to really put on your thinking cap and think of ways to market your products that will be both effective and free. There are many options out there, the best one for you will depend on your business plan and product.
When you’re looking into free small business manufacturing ideas, focus on making products that you’ll be able to easily market and will provide a quick turn around. Take advantage of these 3 keys to success and before you know it, you’ll be raking in the dough.
