A License to Grow: Ending State, Local, and Some Federal Barriers to Innovation and Growth in Key Sectors of the U.S. Economy

Abstract:     
This white paper outlines some of the remaining state barriers and a few federal ones and how they prevent disruptive innovations by entrepreneurs and established firms alike that potentially could bring new and more efficient business models to the market. In the case of the legal sector, the barriers we identify not only adversely affect legal innovation, but also impede innovation in other sectors of the economy. Similarly, in health care, pharmaceuticals, K-12 education, the financing of growth businesses, and many consumer services, legal obstructions hinder innovation and the provision of efficient, affordable, high-quality services and products.

We conclude by surveying the main options for reducing or eliminating these impediments, proposing, in effect, ways to provide a “license to grow.” Although most of the ideas we list are relevant only to state and local governments, we do not recommend, however tempting it may be, federal preemption as the means to their abolition. Apart from the political difficulty of gaining consensus on a sensible preemption approach in a time of deep partisanship with the Congress, it is not necessary for citizens to look to Washington to solve all problems.

This white paper is an extension of the Startup Act in which the Kauffman Foundation outlined ways the federal government can stimulate new company formation and growth, encouraging economic growth across the economy. In a companion to this report, the Foundation also will publish a separate template for state and local “Startup Acts” - in reality, both executive and legislative measures - that would reinforce and amplify the impact of startup-friendly policies at the federal level. This particular white paper focuses primarily on removing state and local impediments to entrepreneurial growth and thus, we hope, will make an important contribution to the public policy debate in its own right.

Many of the ideas outlined here also will be included in a summary fashion in the companion Kauffman report on a broader startup agenda for state and local governments. As prior Kauffman research has made clear, new firm formation and growth are critical to job creation and economic growth in general. The persistently high rates of unemployment since the financial crisis of 2007-2008 and the decline in formation rate of new employer firms in recent years make a startup agenda at all levels of government more urgent than ever.

Written by the Kauffman Foundation Task Force on Entrepreneurial Growth.

Number of Pages in PDF File: 16

Keywords: state, policy, barrier, economic growth

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