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Evidence for Disintermediation

Production Side

OR that has led to granularity and disintermediation is more of a bottom- up process rather than a top-down shedding of corporate divisions. Evidence for this process, discussed below, is provided by the smaller size of new and young firms - startups - which are able to innovate and respond to the drivers of the digital economy. Connectivity has increased information flows to both investors and entrepreneurs so that the information and coordination costs that were a barrier to the flow of early-stage funding have been mitigated. Entrepreneurship is now being viewed as experimentation, which “allows individuals and societies to evaluate businesses and technologies in domains with greater uncertainty than otherwise possible, unlocking deep growth opportunities” [35]. Business dynamism is defined by Hathaway and Litan as “the inherently disruptive, yet productivity-enhancing process of firm and worker churn that reallocates capital and labor to more productive uses” [28]. Business dynamism and entrepreneurship, which were on a secular two-decade decline and attributed to a shortage of capital, have shown renewed vigor as business startup activity has increased [36, 37].

 
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