Guidelines for Local and State Governments to Promote Entrepreneurship

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This paper provides recommendations for how cities and states can promote entrepreneurship and begin to see results.

Promoting entrepreneurship has been a part of many city and state economic development strategies for at least two decades. These strategies have been largely informed by academic writing and, more recently, by the experience of successful entrepreneurs. With so much attention paid to entrepreneurship, one might expect entrepreneurship to be booming. Unfortunately, the opposite is largely true.

In the late 1970s, about 15 percent of all businesses in the United States were new; in 2011, that number hovered around 8 percent. Even the high-powered technology industry has succumbed to this trend. Not only are there fewer new firms today than in the past, but those startups that do exist are creating fewer jobs. This decline in startup activity has occurred across the country. Firm entry rates were lower between 2009 and 2011 than they were between 1978 and 1980 in every state and Metropolitan Statistical Area except one.

This all begs a question: if so much attention has been paid to promoting entrepreneurship, why is it trending downward?

The answer to that question is complex and certainly involves many factors, some of which are out of the control of state and local governments. But one area that deserves scrutiny is popular and widely tried economic development strategies to promote entrepreneurship.

While much has been written about entrepreneurship in the context of economic development, academic research has not kept pace with emerging practices. And, while many studies discuss what was done in the past, few say little about what has worked or why it has worked. This guideline is written to address those gaps and communicate lessons learned at the Kauffman Foundation through our experience running entrepreneurship support programs, doing interviews, and interacting with experts across many fields. The paper, which is the first in a series, synthesizes more than eighty peer-reviewed academic articles, books, practitioners’ papers, and conference papers.