The High Expectations for High Tech

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The Obama administration is trying to get America’s job engine humming again by spurring more start-ups in one of the highest-profile sectors of the economy: high tech. But is this a good idea?

Scott Shane doesn’t think so. “A close look at the data . . . shows that these tech start-ups don’t actually produce many jobs,” the Case Western Reserve University economist wrote this week in a piece in The Wall Street Journal. To make his point, he cited a National Science Foundation study, which found that only 13% of the private-sector labor force worked in technology-intensive industries as of 2006, and even fewer—a mere 4%—worked in small high-tech businesses.

[EXPAND More]Peter Drucker wouldn’t have been surprised. As we’ve discussed, Drucker pointed out that high-tech industries don’t have a great track record when it comes to generating a large number of jobs. “Of the 40 million-plus jobs created since 1965 in the economy, high technology did not contribute more than 5 or 6 million,” Drucker wrote in his 1985 book, Innovation and Entrepreneurship.

This is one reason that Drucker believed every sector—not just technology—must constantly innovate. “It may be innovation in design, in products, in marketing techniques,” Drucker wrote in his 1954 landmark, The Practice of Management. “It may be innovation in price or in service to the customer. It may be innovation in management organization or in management methods.” What’s more, Drucker noted, innovation “is as important to a bank, an insurance company, or a store as it is to a manufacturing or engineering business.” And it is as crucial to a well-established enterprise as it is to a new venture.

Yet Drucker wasn’t totally dismissive of high tech, either. “There is no doubt that high tech, whether in the form of computers or telecommunication, robots on the factory floor or office automation, biogenetics or bioengineering, is of immeasurable qualitative importance,” Drucker asserted. “High tech provides the excitement and the headlines. It creates the vision for entrepreneurship and innovation in the community, and receptivity for them.”

What do you think: Do we pay too much attention to high tech? Or is it deserving of its star status? [/EXPAND]