The Impact and Effectiveness of Entrepreneurship Policy

Entrepreneurial ability is widely regarded as key factor for success in business and consequently innovation policy has been placing greater focus upon the entrepreneur, his skills and values, a development that has been termed by some the entrepreneurial turn.
This report examines publicly supported policies for entrepreneurship development. Entrepreneurship policies are directed to encouraging socially and economically productive activities by individuals acting independently in business. Their principal objective is to increase a level of entrepreneurial activity which is considered to be below the social optimum. Policies may be implemented directly to address entrepreneurs' needs e.g. business advice programmes or through broadcast methods such as education policy.
Entrepreneurship policy and SME policy both aim at causing two different kinds of effects in the economy. Both seek to improve the performance of economic actors (entrepreneurship policy is focused on the key actors in the business, the entrepreneur, while SME policy seeks to increase the competitiveness of the firm) and both seek to increase the number of economic actors, (entrepreneurship hoping to increase the level of supply of entrepreneurs, while SME policy hopes to increase the number of competitive firms).
In regard then to these two areas for entrepreneurship policy, we have attempted to locate and focus on evaluations that reported on additionality / net effect or that use methods of causal inference to determine the effectiveness and impacts of policy. Such studies tended to be found in the academic literature rather than amongst the reports on the performance of government schemes (that are publicly available).
We have examined the literature and it covers schemes that have been evaluated around a decade ago. Generally we find that recent policy initiatives in this area have not been evaluated. The policies and programmes that have emerged very recently have yet to be examined in detail.
In regard to policies and programmes seeking to effect cultural and behavioural impacts, we believe that the literature can teach a number of lessons. Programmes that seek to increase awareness of entrepreneurship as a career choice can be seen within the area of education policy. However the growing interest in entrepreneurial education has not been matched by sound evaluation evidence. Thus not only have the evaluations undertaken varied greatly, the majority of these studies appear limited in that they fail to include a pre-test post-test method, and few employ control groups or have a longitudinal dimension.
The studies we have uncovered have attempted to address one or more of these concerns and to understand whether or not entrepreneurship education causes individuals to change their intentions to become an entrepreneur. The effect of these schemes appears to be different at different points in of the education system: at school level, there is a negative and significant effect; at the college level the effect is low; at the university level, the effect is positive.
The evaluations noted an important effect on intentions, what we call a sorting effect, by which those who may be unsure about whether they wish to follow an entrepreneurial path will have their minds made up for them, often resulting in a decision not to become an entrepreneur. It almost goes without saying that these schemes which are aimed at cultural and behavioural change are not designed in the short term to impact upon production or efficiency of economic enterprises.
Schemes to provide information and advice of a standardized form are closest in form to those which are addressed at the firm, rather than the entrepreneur. We note within our review two different forms of support. There is a form of support providing advice and information to early stage firms, and a form of support to nascent firms or pre-firms (pre start-up) where the recipient is the entrepreneur or would-be entrepreneur. Schemes of the former type are assessed by reference to the conventional economic impact categories, sales, employment and firm survival. Schemes of the latter type are assessed by reference to the outcomes for the recipient of the support, usually employment status (unemployed, employed (as an entrepreneur)) and income.
Schemes of the former type of scheme are more homogenous in what they provide, while the latter kind is quite diverse and examples are difficult to compare one against another. The former type of scheme, of which the Business Link scheme and the Swedish Innovation Centre are examples, show mixed results. Overall, some schemes find positive impacts in terms of sales, employment and survival while in others impacts were statistically insignificant. The schemes offering support to pre start-up entrepreneurs again varied in outcome. In the short term, all schemes increased employment; however, in the longer term, the US scheme, GATE for example, does not show persistence of employment effects at 5 years.
More specific and situational advice schemes provision is a further sub-category of schemes that seek to address the market failure for advice. The vast majority of programmes of this kind are targeted at those who have elected to run their own business. However, we have found examples of schemes (Active Labour Market Policy Schemes) that target the unemployed - what could be called reluctant entrepreneurs. This scheme is really a combined scheme in that it provides both general training and more specific advice for the "would be" entrepreneur. Such schemes combine both general and specific help to the unemployed. Some minor impacts are noted but the outcomes that have been observed are not a strong endorsement for this kind of scheme.
Coaching schemes are difficult to assess for impact. Those schemes providing assistance to new entrepreneurs running their own business are popular with those who receive the coaching but there is a lack of studies that consider the counterfactual case. It is our belief that as more of these schemes are put into operation, and there is an expectation that they will be, more evaluation will take place. This may reveal the factors that affect success. Incubators also are problematic to assess as the evaluations of them deal with a great variety of schemes few of which are comparable.
While we have found a trend towards entrepreneurial support, we have found no studies that follow up explicitly on the contrast between specific help and more general or operational support, in effect a comparison of two different forms of government assistance. It is a moot point therefore whether these schemes that do have different objectives should be subject to comparison.
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