Policy support for innovative entrepreneurship: an empirical evaluation

Entrepreneurship plays an increasingly prominent role in both academic and policy circles. It is regarded as the driving force behind structural change that links investments in knowledge with economic growth. The increased role of new and small enterprises has led to an increase in entrepreneurship policies aimed at encouraging more people to consider entrepreneurship as an option and act on a business idea. This thesis examines policy measures that are offered to nascent and young entrepreneurs along the founding process, especially public business assistance, financial support schemes and earmarked subsidies for R&D. Data for this study were collected by the Thuringian Founder Study (Thüringer Gründer Studie), an interdisciplinary project on the success and failure of innovative start-ups in the East German state of Thuringia. Standardized in-depth interviews allow conducting propensity score matching which is used to correct for selection bias between assisted and non-assisted start-ups. The thesis argues that having a clear-cut rationale for policy intervention is the only way precise policy targeting becomes possible. Precise policy targeting toward incidences of market failure will direct public funds where they are most needed and thus where they will be most effective and efficient. However, the thesis emphasizes the difficulties of policy targeting toward incidences of market failure (whose existence is controversial in itself). The rationale behind public policy intervention in R&D is the clearest of all those studied in this thesis. Consistently, the empirical analyses provide evidence of the effectiveness of R&D subsidies in inducing additional employment and patent activity