From cheap Chinese apples to jewelry at Wal-Mart, small-business faces competitors earlier generations could never have imagined.

Is America’s entrepreneurial spirit eroding? Over the years, the question has been raised at conferences of would-be entrepreneurs, in B-school entrepreneurship classes, and by the business media. It came up for me again a few weeks ago when a Cypriot newspaper interviewed me about the future of entrepreneurship in Europe. “Is there still potential for new products and market segments to be exploited?” the reporter inquired. “It seems that markets are saturated with products nowadays.”

Initially, I felt inclined to give my usual response: “As saturated as markets might seem, there is always opportunity for entrepreneurs with vision and innovative ideas.” And indeed, that has always been the case.

But this time I hesitated before responding. I hadn’t heard the question in a few years and, as I thought about it, I realized that perhaps my stock answer wasn’t applicable.

My hesitation stemmed most immediately from the January report issued by Global Entrepreneurship Monitor, a project sponsored by Babson College and the London School of Economics that assesses entrepreneurial activity around the world ( The report said that entrepreneurial activity in the U.S. declined slightly (on the order of 5%) from 2003 to 2004.

More striking, though, are indications that entrepreneurial activity in the U.S. remains off by about one-third from its peak in 2000, lagging behind such countries as Mexico, Venezuela, South Korea, and Thailand.

It’s easy to attribute the falloff to the economic slowdown that followed the Internet crash and September 11, but I wonder if that is too pat an explanation. In reality, several global trends have emerged to suggest that, quite possibly, the climate for entrepreneurs has turned negative in important ways.

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