Tracing entrepreneurial spillovers: Evidence from the U.S. State Small Business Credit initiative and Kickstarter

This paper delves into the multi-faceted relationship between large-scale institutional programs designed to alleviate financial constraints for small businesses and their extended impact on surrounding entrepreneurial ecosystems. We explore if and how entrepreneurial spillovers may occur through different channels which collectively stimulate market competition, promote latent ideas, and influence resource allocation for early-stage entrepreneurial activity. We contribute to the measurement of entrepreneurial spillovers by tracing the often-overlooked aspect of failed entrepreneurial outcomes, while also tracing successes. In addition, we unpack how, where, and when such spillovers occur. By leveraging the staggered entry of the US State Small Business Credit Initiative, we estimate the differential effect of program entry on Kickstarter activity at the US county level. We report positive and economically meaningful spillovers across the range of successful and failed outcomes. Moreover, we find that increasing the scope of disbursement from the large-scale institutional program (i.e., disbursement of smaller funding rations to more small business recipients) rather than scale (i.e., disbursement of larger funding rations to fewer small business recipients) accelerates entrepreneurial spillovers; we identify a complementary effect for counties with greater resource endowments; and we identify various lags of impact (i.e., a two-year lag for failed outcomes and three-year lag for successful outcomes) attesting to dynamic trends in timing of the spillover return. This study contributes to the literature on spillovers from large-scale institutional programs and offers implications for practice and policy.