The Dos and Don'ts of Local Entrepreneurship Promotion

Summary of Study

Bottom Line: The principal sources of innovation and job creation are new, young, and growing companies, responsible for nearly all of the net new job creation in the U.S. economy. Research suggests that policymakers seeking to promote entrepreneurship in their city or state turn from past strategies and embrace a new approach that puts entrepreneurs at the center.

  1. Avoid traditional Investments & Incubators -- Research has demonstrated that these strategies often are ineffective at promoting entrepreneurship because the tactics are not suited to the experiential and collaborative process that characterizes entrepreneurship.
    1. Shy Away from Public Venture Funds -- Public venture funds often lack the expertise to evaluate and support entrepreneurs on their own.

     

  2. "If you build it, they will come" is not necessarily true when it comes to entrepreneurship -- Studies show there is no evidence that incubator firms -- that offer startups office space and cover basic overhead costs -- perform better than non-incubator firms.

     

  • Implement a New Plan
    1. Cultivate Networks & Support Across Entrepreneurial Stages -- To be successful, entrepreneurs need connections to potential mentors, networks for learning, and emotional support from peers at all stages of the entrepreneurial process.

     

  • Reinvent Investments & Incubators -- If a public venture fund already exists, distribute many smaller prizes rather than one big one, so a group of entrepreneurs can benefit and become a cohort to face the entrepreneurial journey together. If incubators already exist, reorganize them as more than offices but a way to connect entrepreneurs and enhance peer-learning.

     

  • Let Entrepreneurs In
    1. Reexamine Professional & Occupational Licensing -- Nearly one-third of American workers are required to have a government-issued license to do their job, acting as a barrier to entrepreneurship. 

     

  • Welcome Immigrants -- Immigrants are more than twice as likely as native-born Americans to start businesses, so create a welcome atmosphere for all immigrants and embrace ethnic diversity.

     

  • Let Entrepreneurs Compete
    1. Simplify Tax Codes and Payment Systems -- Taxes matter, but what entrepreneurs are most concerned about is tax complexity.

     

  • Rethink Non-Compete Agreements -- Most entrepreneurs have prior industry experience that they leverage to create a new company. Employee non-compete agreements disrupt entrepreneurship by erecting barriers to the free movement of individuals.

     

  • Measure Progress
    1. Collect Data to Track Progress & Inform Policymaking -- Beyond cataloging the number of firms and jobs created or the amount of capital raised, keep tabs on other entrepreneurial measures, such as successful exits and the mentorship network. Use the metrics to gauge progress and adjust efforts accordingly.

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Feature Charticle

The Dos and Don'ts of Local Entrepreneurship Promotion

Findings:

  • Research suggests that policymakers seeking to promote entrepreneurship in their city or state turn from past strategies and embrace a new approach that puts entrepreneurs at the center.

  • Investments & incubators often are ineffective at promoting entrepreneurship because the tactics are not suited to the experiential and collaborative process that characterizes entrepreneurship.

  • A new approach cultivates networks & support across entrepreneurial stages so that entrepreneurs access connections to potential mentors, networks for learning, and emotional support from peers at all stages of the entrepreneurial process.