Tuesday, July 01, 2008
Innovation and Advertising Spending Grinds to a Halt
For the first time in 30 years, there were no initial public offerings by companies backed by venture capital and a dwindling number of mergers and acquisitions, a worrying factoid that hit the wires earlier today.
IPOs and investment in the technology sector represent a growing importance to the U.S. economy. New "information age" jobs replace the outsourcing and offshoring, giving America a competitive advantage in idea creation, a notion laid out by Thomas Friedman in his book, The World is Flat.
The IPO drought represents a dangerous trend to that sector because the offerings are used to generate cash for continued investment and development -- which fuels nearly 18 percent of the nation's gross domestic product.
Of course, one dire quarter doesn't end the world; however, it's a fair warning sign that companies are hunkering down, preferring to wait out the current economic climate with whatever cash reserves they have while preparing to cash in once the numbers turn back around.
And not to compare apples-to-oranges (but I am going to), the advertising industry has seen a similar near-halt in spending growth.
So we're not pushing forward with investments nor encouraging people to buy new products.
By Brad at 11:05 AM | Comments (0)