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State-Level Determinants of Entrepreneurship and a Preliminary Measure of Entrepreneurial Climate

Author

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  • Stephan J. Goetz

    (Pennsylvania State University)

  • David Freshwater

    (University of Kentucky)

Abstract

State and local governments increasingly look to entrepreneurship as a means of stimulating economic growth. However, can the public sector play a role in promoting entrepreneurial activity—and if so, what should that role be? The authors investigate independent effects of financial and human entrepreneurial capital and ideas on entrepreneurial activity in the 50 states. Financial entrepreneurial capital has an inverse U-shaped relationship with entrepreneurial activity, suggesting there are limits to using increasing amounts of financial capital to stimulate entrepreneurship, all else being equal. The authors rank each state in terms of predicted and actual entrepreneurial activity scores and propose a preliminary measure of the entrepreneurial “climate†of each state. Although most states are ranked near where casual analysis might place them, the authors find that others have predicted values that differ significantly from actual values. This suggests that climate may be an important factor in stimulating entrepreneurial activity.

Suggested Citation

  • Stephan J. Goetz & David Freshwater, 2001. "State-Level Determinants of Entrepreneurship and a Preliminary Measure of Entrepreneurial Climate," Economic Development Quarterly, , vol. 15(1), pages 58-70, February.
    • Handle: RePEc:sae:ecdequ:v:15:y:2001:i:1:p:58-70
    DOI: 10.1177/089124240101500105
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    References listed on IDEAS

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