Startup Act for the States
24 Pages Posted: 10 Aug 2012
Date Written: January 2012
Research carried out or supported by the Ewing Marion Kauffman Foundation confirms that new and young firms generate a disproportionately large share of net job creation in the U.S. economy. However, even before the recession and since, the job-creating engine of startups (those less than five years old) has been slowing down. This not only is unhelpful on the job front, but, because major technological advances are disproportionately commercialized by new firms, it portends slower growth in living standards in the future if startup trends are not reversed.
In July 2011, the Kauffman Foundation published the “Startup Act,” a menu of federal policy ideas aimed at promoting the formation and growth of new businesses in the United States. In addition to federal policy - which is preeminent on a number of issues - new businesses also navigate state-level laws and regulations. This document is designed to provide state policymakers with a similar menu of initiatives at the state level to reinforce any policies that promote entrepreneurial growth at the federal level. The fundamental premise behind these ideas, as well as this entire document, is that states and their citizens are better off encouraging the formation and growth of new companies, rather than pursuing the timeworn and cost-ineffective approach of competing for the headquarters and/or expansions of existing firms (sometimes referred to as “smokestack chasing”).
The menu provided in this essay is not offered as a “one-size-fits-all” prescription, but rather as simply a list of ideas from which state policymakers can choose and adapt to suit the needs of their particular states. Where possible and available, we note the empirical evidence relating to these proposals. But, for the most part, the proposals are new or sufficiently recent not to have a strong empirical base. They reflect, therefore, our collective judgment of what is most likely to work in terms of supporting new firm formation. States should thus adopt or adapt them in a spirit of experimentation, being ready, as entrepreneurs themselves would be, to refine them as they gain more experience, or even to jettison some ideas in favor of others. In the same vein, states and their citizens must become comfortable with the inherent messiness and turbulence of entrepreneurial growth: It is part of the process that some new firms will grow, while others will die or shrink.
On balance, however, the evidence is clear: Entrepreneurial growth is key to the growth of net new jobs and of major advances in living standards. We have organized the proposals by stage of the entrepreneurial process: encouraging and training entrepreneurs to take the often-audacious step of launching a business, measures to facilitate the actual launch of new ventures, and nurturing the growth of these new firms.
Keywords: job creation, policy, startup, business, growth, entrepreneurship, state
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