News Column

Entrepreneurship Largely Beyond Influence of Public Policy

February 12, 2014

By Mara Lee, The Hartford Courant



Feb. 12--The Kauffman Foundation, a charity/think tank that focuses largely on entrepreneurial activity, job growth and education, says a lot of what people think matters in creating an entrepreneurial ecosystem doesn't do a thing.

Having strong research universities? Nope. Having a lot of innovation, as measured by patents, in the region? Nope. Winning more NIH funding or Small Business Innovation Research Grants? Not significant. How much venture capital investment comes to your region? Irrelevant. In fact, the paper says explicitly, "Policymakers should not rush to create public venture funds in the hope of creating more startups or a startup culture."

Connecticut recently pledged to dedicate $125 million over five years to its public venture fund precisely with that goal, though Connecticut Innovations has not been spending that fast.

How can this be? Well, for one, Kauffman makes a distinction between the frequency of the creation of new firms, and the concentration of new tech startups. (Tech being defined as aerospace, pharmaceutical, engineering services, scientific research, information technology and communications). There are regions that look good in tech entrepreneurship -- think Boston and Silicon Valley -- that still don't do well on overall entrepreneurship.

The paper does acknowledge that doing better in high-tech areas tends to correlate with fast-growing firms.

Basically, the factors that have the highest correlation with dynamic business creation, the authors found, were:

College education. Connecticut does very well on this. Very few states have a higher proportion of college graduates.

A higher-than-normal concentration of 25 to 34 year olds. Connecticut doesn't do well by this measure.

And how big your city is. Generally, the bigger the better. And if it's growing fast, even better. "Larger metropolitan areas tend to have higher entrepreneurial rates, possibly from the diversity and resilience of their economies," the authors write.

Again, Connecticut fails. We have nearly no population growth, and a culture that's anti-development.

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Source: Hartford Courant (CT)


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