Creating the next Silicon Valley, Research Triangle or any of the other successful entrepreneurial business clusters around the country calls for economic development policies aimed at fostering entrepreneurially driven growth. That is according to a new report issued today by the Ewing Marion Kauffman Foundation, which advises local, state and regional policy officials to eliminate regulatory hurdles to forming new businesses, among other recommendations.

"Policy-makers at local and state levels increasingly recognize that entrepreneurship is the key to building and sustaining their economies' growth," said Robert Litan, vice president of Research and Policy at the Kauffman Foundation. "Although this is a seemingly obvious proposition, it represents something of a departure from past thinking about how local, state or regional economies grow."

"Local entrepreneurship depends, in part, on attracting entrepreneurial people, and this requires quality-of-life policies that attract these people," said Ed Glaeser, Glimp professor and director of the Taubman Center for State and Local Government, John F. Kennedy School of Government, Harvard University, and a co-author of the report.

Policies such as investing in local schools, limiting the enforcement of non-compete clauses in business contracts, and developing citywide Wi-Fi centers are among the programs economic development officials should consider when seeking to create high-tech entrepreneurship business clusters, according to the report. City officials also should consider quality-of-life policies, like congestion pricing, that can make their areas more attractive to potential entrepreneurs.

The policy guide examines the most effective ways to promote new economic growth and innovation, as well as how to lower barriers for individuals to form and sustain businesses that drive growth. The report addresses seven areas of government policy that affect entrepreneurial activity including: education, local policies toward crime and amenities, physical infrastructure spending, legal infrastructure, general and targeted aspects of the tax code and targeted spending on entrepreneurial activities.

Interventions that are also important, but that need cost-benefit analyses, include local entrepreneurship encouragement and mentoring programs, and improvements to schools, local amenities and transportation infrastructure. The least attractive options involve policies that target spending either on research programs or on particular industries or particular firms. Localities rarely have the requisite expertise required to make good decisions in this area, the report says.

Chuck D'Aprix, March 1, 2008

This reports is fascinating, I finished reading it last evening. It is obvious, as I have been advocating for years, along with other urban economic development "mavericks", that we have our urban econonomic spending priorities skewed in the wrong direction. States are still spending inordinate amounts on "business attraction," what I call the "luring" model(which is a zero sum game in the final analysis). Rather, states and cities should be spending money to develop new, lean, entrepreneurial businesses. This report underscores that point wonderfully. It is well researched, easy to read and unearths some interesting information about the age of urban entrepreneurs--they are significantly older than many thought--many are well into their 40's and 50's--in fact the 25-34 cohort is relatively small. However the salient point is we need to be driving entrepreneurship in our City Centers, not creating more ineffective business "attraction programs." I urge everyone to get a copy of this report and read it--your city will benefit!

Link: http://www.economicvisions.com

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