Do Entrepreneurship Policies Work? Evidence From 460 Start-Up Program Competitions Across the Globe
YEAR:
Author(s): G. Barrows

Summary

“Many organizations around the world implement programs designed to encourage entrepreneurship, including grant prize awards, accelerator programs, incubators, etc. The goal of these programs is to supply entrepreneurs with early-stage support and visibility to help develop ideas and attract capital; but, if capital markets are efficient, good business ideas should find funding anyways. In this paper, I present evidence from the first global- scale, quasi-experimental study of whether entrepreneurship programs improve outcomes for start-up firms. I employ a regression discontinuity design to test whether winners of start- up program competitions perform better ex-post than losers, where the threshold rank for winning the competition provides exogenous variation in program participation. With 460 competitions across 113 countries and over 20,000 competing firms, I find that winning a competitions increases the probability of firm survival by 64%, the total amount of follow-on financing by $260,000 USD, and total employment by 47%, as well as other web-based metrics of firm success. Impacts are driven by medium-size prize competitions, and are precisely estimated both in countries where the costs of starting a business are low and where these costs are high. These results suggest that capital market frictions indeed prohibit start-up growth in many parts of the world.”