Last week, the DC-based Hamilton Project released a number of studies looking at the state of entrepreneurship and business dynamism in the US. The core analysis took a deep dive into why US business dynamism is declining. Startup rates and firm survival rates are down, and job growth from new firms is also declining. The researchers point to decreased competition as a core causal factor: industry consolidation (especially in formerly small business intensive sectors like retail) and a growth in occupational licensing are among the many factors that make it harder for new firms to start and to gain market traction. The study also offers a number of small scale recommendations related to occupational licensing as possible means to address these market barriers. The project also suggests a bigger idea as well—A federal Main Street Fund that could make as much as $5 billion available for state investments in entrepreneurs and small businesses. The fund would be managed by the US Economic Development Administration, with funds provided to states based on population, demographics, and economic activity. It would also include penalties for states that created major new incentive programs–it is designed to generate new funding tools that support home-grown businesses and prevent inter-state battles for corporate relocations.
As a long time advocate for home grown business development and a critic of many tax incentive programs, I’m pleased to see ideas such as the Main Street Fund get some public attention. While I question the political feasibility of this idea, I like the concept of a data-driven fund that helps fund innovations in entrepreneurial support programs while also discouraging “the war between the states” for corporate headquarters and other facilities. This is a debate worth having!