Evaluating entrepreneurial support programs – 27 Sept 2019

About the seminar

Given the investment of public resources for supporting entrepreneurial growth, it is important to know whether such programs truly benefit businesses and if so, how to best maximize their effectiveness. While prior research has indicated some benefits for business outcomes, given the differences in program features and analytical methods, there is no clear consensus about the conditions for program effectiveness.

This is especially true for innovative firms. We analyze data from the Small Business Development Center (SBDC), a government-sponsored program in the United States. Using a potential outcomes framework to investigate of over 1,700 ventures that enrolled the SBDC advisory services from 2011 to 2016, we observe that treated businesses achieve more growth milestones after comparing pre- and post-treatment performance net of selection biases. We are able to differentiate treatment (receiving advice) from selection, and formal selection criteria with informal ones (e.g. innovativeness) in our setting.

Notably, we demonstrate that the effectiveness of the support programs occurs through a learning mechanism rather than legitimacy mechanism. Picking winners with formal selection criteria is not enough to guarantee effectiveness. These businesses grow only if they learn adequately and have sufficient time to implement the treatment advice.    

This seminar was held in collaboration with the Stockholm School of Entrepreneurship.