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How Can Governments Help Entrepreneurs?

Mark Marich

Are governments wasting their time and money with all of their efforts to promote entrepreneurial growth in their communities and countries? Not quite, but they could certainly be spending their resources more wisely.

A new report from the Kauffman Foundation argues “despite billions of dollars in government research expenditures, the presence of research universities and patents are not associated with higher rates of entrepreneurship” and “the public sector can affect few significant factors to encourage entrepreneurship.”

One specific example is a relatively recent rush to create state venture funds. The paper, "Beyond Metropolitan Startup Rates: Regional Factors Associated with Startup Growth," shows that regions that enjoy substantial venture capital and other financial investments do not necessarily generate a higher ratio of startups. Consequently, creating public venture funds holds little promise of generating more startups or establishing a startup culture.

The news isn’t all negative, however. Thiel Fellowship be damned, improving education appears to be the most significant role for the public sector.

Metropolitan areas with more college graduates will produce more startups. The same can be said for high schools -- a higher high school completion rate will further increase the area's startup rate.


Other findings include:


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