"Hard for Startups to Succeed Amid Big Corporate Power"… Aging US Industry Sector

Analysis and Report by UK Economist
Among Top 500 US Companies, Only 52 Founded Since the 1990s
Large Corporations Lead Technology Based on Financial Strength

Analysis suggests that the industry in the United States is gradually aging as large corporations firmly establish their positions and do not yield leadership to startups. In a situation where digital technology development is rapidly progressing, large corporations with financial power are making investments and, rather than startups, are leading technology and enhancing market competitiveness.

The British current affairs magazine The Economist reported on the 21st (local time) that "it is becoming increasingly difficult for large U.S. corporations to fail," adding, "From Walmart to General Motors (GM), large corporations are fighting against disruptors (startups)."

[Image source=Reuters Yonhap News]

The Economist checked the founding years of this year's top 500 U.S. companies selected by the American weekly magazine Fortune and reported that a total of 52 companies were founded after 1990. This includes Alphabet, Amazon, and Meta Platforms. Among the 500 companies, only seven were established after 2007, when Apple, founded in 1976, first released the iPhone.

On the other hand, 280 companies were founded before 1941, the year the U.S. entered World War II. This means that many companies have long held their positions and maintained vested interests in the industry. The average age of the Fortune 500 companies was 75 years in 1990 but has now surpassed 90 years.

The Economist interpreted the reason for the aging of the U.S. industry as the fact that digital innovation has not occurred across all industries, and in some sectors, digital innovation has progressed slowly, giving large corporations time to adapt. Julian Birkinshaw, a professor at the London School of Economics, noted that digital innovation did not take place across all industries; while sectors such as communication, entertainment, and shopping showed interest, industries like energy did not.

In particular, the U.S. financial industry, represented by Wall Street, maintains market dominance by large corporations. The average corporate age of banks within the Fortune 500 was calculated to be 138 years. Although online-based banks have emerged and threaten Wall Street, large banks such as JP Morgan and Bank of America (BoA) still hold their positions. According to consulting firm Kearney, less than 10% of Americans changed their primary bank last year. The insurance industry showed a similar trend, The Economist reported.

Additionally, the retail sector, mostly dominated by Walmart and Amazon, and the electric vehicle market, where Ford and GM hold vested interests, are experiencing similar patterns.

The Economist also pointed out that another reason large corporations can compete with startup innovation is financial power. At this point, where technological innovation acts as a growth engine, only large corporations?not startups?can afford the enormous research and development (R&D) costs.

In fact, Alphabet, Amazon, Apple, Meta, and Microsoft (MS) collectively spent $200 billion (approximately 268.3 trillion KRW) on R&D last year. This amount accounts for 80% of their net profits and 30% of U.S. corporate R&D investment. Although there has been an AI boom this year, computing costs and others are enormous, making securing funds essential for technology development.

Given this situation, acquisitions of technology-equipped startups by large corporations have significantly increased compared to the past. According to global market research firm PitchBook, 74% of exits (investment recoveries) in the U.S. venture capital (VC) industry over the past decade were through such acquisitions by large corporations. The Economist described this as a "significant increase since the 1980s," adding that this behavior has even led to warnings of "killer acquisitions," where large corporations swallow potential future competitors.

There is also analysis suggesting that aging issues have influenced the aging of the U.S. industry. Between 1980 and 2020, the proportion of the U.S. population aged 20 to 35 decreased from 26% to 20%, and during the same period, the startup rate dropped from 12% to 8%, with these two figures considered related. John Van Reenen, a professor at the London School of Economics, evaluated that "young companies are usually created by young people."

This content was produced with the assistance of AI translation services.