Rather than taking a shotgun approach and trying to jump-start any kind of new business, the incoming Obama administration should focus on the type of start-ups that really have a positive economic effect. That’s the argument put forth by Scott Shane, Professor of Entrepreneurial Studies at Case Western Reserve University and the author of “The Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investors and Policy Makers Live By” (Yale University Press) in a recent article in The American.
Using data from the National Venture Capital Association, Shane notes that venture capitalists have funded an average of 820 new companies per year. And these 820 startups—out of the more than two million companies started in this country every year—have enormous economic impact.
Another report by the website Venture Impact website shows that in 2003, companies backed by venture capitalists employed 10 million people, or 9.4 percent of the private sector labor force in the United States, and generated 9.6 percent of business sales in the country.
All entrepreneurship is not created equal, Shane says. And it would be wise for the incoming Obama administration to focus on the select few entrepreneurs who create businesses that take people out of poverty, encourage innovation, create jobs, reduce unemployment, make markets more competitive, and enhance economic growth.
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