Why encouraging more people to become entrepreneurs is bad public policy

By Scott A. Shane. 2009

1,534 citations recorded by the source corpus.

Policy makers often think that creating more start-up companies will transform depressed economic regions, generate innovation, and create jobs. This belief is flawed because the typical start-up is not innovative, creates few jobs, and generates little wealth. Getting economic growth and jobs creation from entrepreneurs is not a numbers game. It is about encouraging the formation of high quality, high growth companies. Policy makers should stop subsidizing the formation of the typical start-up and focus on the subset of businesses with growth potential. While government officials will not be able to “pick winners,” they can identify start-ups with a low probability of generating jobs and enhancing economic growth. By eliminating incentives to create these low probability companies, policy makers can improve the average performance of new businesses.

Subfields: Economics and Econometrics, Management of Technology and Innovation

View Paper: https://www.semanticscholar.org/paper/1eca7185e17fe3572159a445253c43ac1913e2e1

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Citations in the corpus

Institutions, Latent Entrepreneurship, and Self–Employment: An International Comparison (2012, background): “Fölster notes that certain types of selfemployment may be more entrepreneurial, and Shane (2009) argues that policy makers should focus on those start-ups that are more likely to increase growth.”
Supporting rural entrepreneurship: a review of conceptual developments from research to practice (2014, neutral): “See Shane (2009) for an inverse approach.”
Firm Dynamics, Productivity Growth, and Job Creation in Developing Countries: The Role of Micro- and Small Enterprises (2015, positive): “The coexistence of mice and gazelles within the universe of firms cast doubts on the idea that startups are the main source of economic dynamism because startups could belong in either of these groups (Shane 2009).”
Start-up rates and innovation: A cross-country examination (2012, methodology): “We integrate recent insights from the entrepreneurship literature (Shane, 2009) with mainstream economics thinking (e.”
Institutions, entrepreneurship, and economic growth in Europe (2018, background): “At the same time, the empirical literature to date is often based on measures that are too broad—including all kinds of necessity and replicative entrepreneurship (Santarelli and Vivarelli 2007; Shane 2009)—or too narrow—excluding entrepreneurial behavior within organizations (Stam 2013; Foss and Ly”
The Schumpeterian entrepreneur: a review of the empirical evidence on the antecedents, behaviour and consequences of innovative entrepreneurship (2017, neutral): “Only when employing stricter measures of (more successful) entrepreneurship, like incorporated entrepreneurs (Levine and Rubinstein 2013), innovative and high growth entrepreneurs (Shane 2009), or venture capital (VC) backed (e.”
The impact of government financial support on the performance of new firms: the role of competitive advantage as an intermediate outcome (2014, background): “Some researchers have argued that encouraging more people to become entrepreneurs is a bad public policy and that the solution might be encouraging only in high potential new firms (e.g. Shane 2009).”
Picking the winner? Empirical evidence on the targeting of R&D subsidies to start-ups (2012, background): “In order to minimize these distortions, subsidies should be targeted at truly “good” firms (Shane, 2009).”
The role of affect in entrepreneurial orientation (2018, background): “Encouraging everyone to become an entrepreneur is not our message; only high-growth-potential enterprises are beneficial for the economy (Shane 2009).”
What turns knowledge into innovative products? The role of entrepreneurship and knowledge spillovers (2009, positive): “However, the concept of innovation has many different facets and dimensions 12See also Shane (2009), who discusses at length why simply encouraging more people to become entrepreneurs is a bad public policy.”
Necessity or Opportunity? The Effects of State Fragility and Economic Development on Entrepreneurial Efforts (2019, background): “For example, high rates of self-employment may result from the low availability of jobs and not from entrepreneurship-supportive conditions (Reynolds et al., 2005; Shane, 2009).”
ENTREPRENEURIAL ECOSYSTEMS AND GROWTH ORIENTED ENTREPRENEURSHIP (2014, background): “Indeed, some academics have described a blanket policy focus on new start-ups as ‘bad public policy’ (Shane, 2009).”