Sunday, September 18, 2005

Media Sector More Entrepreneurial than Other Industries

My research assistant, Sangho, and I have been measuring entrepreneurship across various industry sectors using census data. Seems that several media sectors are more entrepreneurial than almost all non-media sectors. The graph at right shows rates of industry turbulence, the degree of entry and exit in an industry. Turbulence has been linked to economic growth. This metric is particularly relevant to the study of media industries given the dramatic changes wrought by technological innovation. In theory, greater industry turbulence is associated with greater innovation. In media, the analogy is the marketplace of ideas concept -- media innovations (diverse voices, new technologies) compete in the marketplace to determine which products and services are superior (determine “truth”). Even when firms fail (exit), they have made a contribution to that marketplace simply by competing.

In 1990, the media sector experienced an average degree of turbulence in comparison to all U.S. industry sectors (24%). By 2001, it was a great deal more turbulent than average (35% vs. 22%). In fact, when the media sector was compared to all other major industry sectors (not shown), it was the most consistently turbulent industry sector over the entire 11 year period.