Should Governments Promote Entrepreneurship?

As an entrepreneur, I once thought that any and all efforts to promote my craft should be supported.  Of course, the real answer to the question in the title is a lot more nuanced.  Harvard Professor Josh Lerner wrote a great book on the subject called Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed – and What to Do about It.

Professor Lerner analyzes the underlying assumptions of those who believe that governments should be involved:

  1. Innovation promotes economic growth (economics didn’t always believe this but now most do)
  2. Entrepreneurship and venture capital support innovation (there’s lots of evidence to support this)
  3. Governments can be effective in promoting entrepreneurship (a tough one, which Professor Lerner spends much of the book exploring)

A main takeaway is that government intervention can play a critical role in promoting entrepreneurship especially when the startup ecosystem is young.  The government actually played a key part in catapulting Silicon Valley  to the center of the tech startup universe during its early days.  However, many government-run programs are poorly run, which at best wastes taxpayer money and at worst hinders development of a healthy entrepreneurial ecosystem.  Success of public sector programs depends on paying attention to the history of other efforts and avoiding the major pitfalls.  

Today I happen to be writing from the 160 Varick Street Incubator, partially funded by the government of New York City.  Hopefully those who designed this program took into account Professor Lerner’s advice.  Any government-sponsored programs around entrepreneurship would be wise to consider his analysis.  Should Governments Promote Entrepreneurship?  In many cases, yes!  But they need to pay attention to the details.  Execution matters here as much as in any startup. 

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