The Intersection Between Government and Entrepreneurship at the State Level

Thinking about starting your own business as you look ahead to the new year? If so, you might be wondering where you are most likely to succeed. Should you stay in your home state or move somewhere else?

Answering these questions as a potential entrepreneur requires data and market intelligence as well as a leap of faith. If you are a public official assessing your state’s business environment you might turn to any number of rankings of entrepreneurship or measures of states’ business climates.

So, what can elected officials do to support entrepreneurs, who are an integral segment of the workforce?

At the state level, governors can help their states improve their economic competitiveness by fostering a business climate that encourages and supports entrepreneurship. National surveys of entrepreneurs indicate that there are at least five critical factors that state government can influence:

1. Diversity in sources of capital;
2. An enabling culture;
3. Strong local networks;
4. Supportive infrastructure; and
5. Entrepreneur-friendly government.

In addition to serving as the chief executives in their states, governors also play the role of spokesperson, touting their state’s natural resources and amenities. They are also their states’ key contact for promoting exports and attracting foreign investment.

Governors can promote the growth of small businesses by helping to improve access to capital through revolving loans and seed capital funds, as well as by providing technical assistance services that help small businesses connect to scientific expertise and business development centers at universities.

The National Governors Association Center for Best Practices is currently working with the Kauffman Foundation to help governors’ economic advisors leverage research and resources regarding entrepreneurs. As governors’ economic advisors gathered to learn from each other earlier this year, they focused on strategies to reverse the decline in new business creation and other topics.

Tracking Entrepreneurship in States

Governors and their advisors can tap into a range of tools to track their states’ economic climate. These tools include the Kauffman Index of Entrepreneurship series — in-depth measures of the people and businesses that contribute to America’s overall economic dynamism.

The series consists of reports and accompanying interactive data visualizations presenting entrepreneurial trends nationally, at the state level and for the 40 largest metropolitan areas within the categories of entrepreneurship growth, start-up activity and Main Street entrepreneurship.

Business Employment Dynamics data from the Bureau of Labor Statistics on age of business establishment tracks cohorts of new business establishments “born” in the same year and reports on their associated employment. The number of new business establishments (establishments that are less than one year old in any given year) tends to rise and fall with the business cycle of the overall economy.

In addition, The U.S. Bureau of the Census conducts an annual Survey of Entrepreneurs that provides information on selected economic and demographic characteristics for businesses and business owners by gender, ethnicity, race and veteran status.

In addition to these sources, numerous other entities rank states’ business environments (e.g., Opportunity Index from Opportunity Nation, WalletHub and the U.S. News and World Report Best States for Business Environment rankings).

12 Actions for Government Officials

There are at least 12 key actions governors and states can take to bolster state economies by helping the private sector grow and thrive as it creates new job opportunities for their citizens, including:

1. Create a competitive tax and regulatory environment.
2. Put entrepreneurial activity at the top of the state’s economic agenda.
3. Distinguish among different kinds of entrepreneurs and businesses — and target policies and resources accordingly.
4. Cast a wide net to find entrepreneurs.
5. Teach entrepreneurship skills and attitudes at all education levels.
6. Build a start-up environment and culture.
7. Find potential high-growth companies and help them grow.
8. Encourage entrepreneurs to give back.
9. Help companies open doors to new customers globally and locally.
10. Reward strong ties among universities, companies and entrepreneurs.
11. Work with entrepreneurs and companies, small and large, to build innovation clusters.
12. Build ecosystems rather than programs.

The current economic climate throughout the United States provides a strong foundation for governors to fine-tune the entrepreneurial ecosystems in their states. Gross job gains exceeded gross job losses in 44 states and the District of Columbia in the first quarter of 2017. This climate of job growth provides an opportunity for governors to maintain momentum through support for entrepreneurs.

Global Focus on Entrepreneurs

States, counties and cities find themselves in good company as they explore how to support entrepreneurs in their jurisdictions. In fact, innovators and job creators were celebrated by more than 15,000 partnership organizations in more than 170 countries during Global Entrepreneurship Week in November.

As we continue to absorb the information gleaned from Global Entrepreneurship Week 2017, governors and states remain at the forefront of the 55 laboratories of democracy and their efforts to foster economic growth.