Ed Morrison · Comments on “The Start-Ups We Don’t Need”

January 7th, 2009

Some academics invite controversy.

Locally, we have Scott Shane, a professor of entrepreneurship at Case Western Reserve, who argues that we don’t need to be promoting all those start-ups. Here’s an article that is making the rounds this week: The Start-Ups We Don’t Need

Shane recently gave similar advice to the Fund for Our Economic Future. Here’s a BFD post, when his report surfaced.

Shane has a point, of course. Not all small businesses are the same.

There is nothing much new in this conclusion.

Shane goes off the rails, though, by making broad policy pronouncements without much to support them. (The major problem in my view: Regression analysis — Shane’s tool of choice — is too narrow to support his conclusions. The same failing undercuts the work of Richard Florida.)

Business development initiatives should be and can be strategic. In 1985, I wrote an article pointing out that two key business dimensions — market reach and value added per employee — are good predictors of the value of small businesses to an economy. (They define, I think, what Shane means by “attractive” entrepreneurial activity, a vague concept used in his Fund analysis.)

Policy makers can evaluate these factors quickly ex ante — that is, before incentive investments are made. In sum, we can be strategic in how we make investments to support entrepreneurs, and we don’t need too much more research to start.

You can read the article here.

Last 5 posts by Ed Morrison

You might also like:

Category: BFD
3 Comments »

3 Responses to “Comments on “The Start-Ups We Don’t Need””

  1. Mark Batson Says:
    January 8th, 2009 at 6:02 am

    I don’t see why anyone in this region would want to discourage start-up businesses. The evolution of American business has always been pioneering individuals willing to take risks in challenging environments. The frontiersman, the pioneers the 49ers, the sooners, the carpetbaggers, the industrialists, the auto manufacturers, the entertainment industry, the technologists, just to name a few have contributed greatly to the economic develop of their regions by going it alone and “starting businesses in mass”. Ironically, now booms can happen anywhere because business can be performed in this technologically advanced, globally connected world from anywhere. What we are lacking here in this region is the will, capital, and spirit to join in the global and technological boom “in mass” to create “boomtown” right here, and we are a prime location for it

  2. Rick Bohan Says:
    January 8th, 2009 at 7:42 am

    Regarding Scott Shane’s paper, it’s like telling us it can be shown that established, experienced MLB ballplayers are better than are new draftees.

    Well, duh.

    If someone were then to argue that the Indians should only sign free agents and not bother with drafting high potential youngsters (most of whom will, by anyone’s admission, be failures), knoweldgable folks would correctly assume that the someone didn’t know much about baseball.

  3. John Ettorre Says:
    January 8th, 2009 at 8:55 am

    Whenever I think about Scott Shane and his research, I’m reminded of why the Kaufmann Foundation, the world’s leading supporter of all things entrepreneurial, insists on directing any money it gives to higher education not to the business school, but to the Arts & Sciences side of the institution (as they recently did with six schools in this region). Why? They know what anyone who has worked at a university knows, that business schools don’t know much and probably care even less about entrepreurship. Sometimes, they can even be downright hostile to the idea.