Creating ‘Smart’ Policy to Promote Entrepreneurship and Innovation

Entrepreneurship is a key to unlocking innovation and fostering regional and national economic productivity. Extensive studies demonstrate that small and young firms contribute to innovation and employment growth. But which of the many types of small firms are responsible? Of the over 30 million U.S. small businesses, most are sole proprietorships or local Main Street shops, and only a small number are high-growth businesses. The heterogeneity of America’s small businesses has led to some confusion and missteps in policy circles regarding the best strategies to promote entrepreneurship and innovation. We describe three policy areas: improving access to capital, delivering entrepreneurship advice and education, and creating entrepreneurial ecosystems, and show how policy solutions that drive innovation differ from support for Main Street small businesses.