The Kauffman Foundation held a forum last week on Business Incentives: What Do They Mean for Entrepreneurship? Darrene Hackler and Ellen Harpel were pleased to join the panel of experts talking about different aspects of business incentives and entrepreneurship for economic development.
The first panel reviewed what we know about the effects of business incentives on regional economies, especially for entrepreneurship. Most business incentives are not designed specifically for entrepreneurs. Researchers pointed out that funds spent on incentives could be redirected to other investments or services with potentially higher returns. Further, some incentives for large businesses appear to have a crowding out effect that negatively affects firm entry and entrepreneurship. Other research suggests that state R&D tax credits may positively affect entrepreneurship growth and quality, but the effects may not be seen for several years after implementation.
The second panel discussed what works for entrepreneur-led economic development. Speakers addressed workforce development and the value of incentivizing younger workers and businesses to build talent pipelines through work experience programs and training support. Ellen reviewed Smart Incentives’ research findings on state incentives for entrepreneurship, including the small scale and therefore limited impact of most programs. She also offered ideas for improving program design and implementation methods to become more effective at achieving expected objectives. This panel also considered the ways incentives need to be well-targeted, place-based, and robust enough to make a difference. In practice, this often means incorporating incentives into broader ecosystem or policy initiatives for supporting entrepreneurs.
The final panel was a roundtable discussion on policy priorities, entrepreneurship support, and what’s next for incentives. Finding new ways to address regional differences and tackle economic inequities was a key theme. Darrene shared findings from the Smart Incentives paper on Reflecting Community Priorities in Economic Development Practices on implementing programs that are equitable and inclusive by prioritizing community engagement so that economic development activities address resident needs, including those seeking to start new businesses.