Entrepreneurship and Public Policy Lecture 9: Effectiveness of Programs Designed to Support and Encourage Entrepreneurship

EPP – Lecture 9 -2 Spring 2009 The Objective of This Lecture Examine the role of programs that are designed to educate entrepreneurs and encourage entrepreneurship Explore theoretical perspectives and empirical evidence on –The role of the educational system in ensuring an entrepreneurial workforce –The success of educational programs designed to “teach” entrepreneurship We will not examine the general role of education in improving labor market, economic or social outcomes

EPP – Lecture 9 -3 Spring 2009 Lecture Overview Role of education system in ensuring an entrepreneurial workforce Examples of entrepreneurship programs in schools Programs designed to “teach” entrepreneurship beyond schools Discussion

EPP – Lecture 9 -4 Spring 2009 Education May Contribute to Entrepreneurship in Several Ways Provide basic skills essential in any work environment –Broad education (math, reading, history) –Specific skills (science, technology) Enhance and nurture intangible skills that are particularly useful for entrepreneurship –Prudent risk taking –Creative thinking –Social skills Provide incentives to concentrate on measurable skills –Educational system may emphasize progress in skills that are easy to measure –Schools may choose to teach to the tests

EPP – Lecture 9 -5 Spring 2009 Research on the Role of Education in Entrepreneurship Focus on General Education Theoretical predictions about the effects of education on selection into entrepreneurship are ambiguous –Education may improve managerial ability thus increasing self-employment –Increase outside options Empirical research reveals differences between U.S. and –In Europe, there is effect of education on business entry –In U.S., there is a large effect of education on business entry, and especially on business success

EPP – Lecture 9 -6 Spring 2009 Education May Affect Selection Into Entrepreneurship And Entrepreneurial Performance Higher levels of education may increase entrepreneurial skills and increase the likelihood of becoming an entrepreneur –Potential selection biases Returns to entrepreneurship are not significantly higher than paid employment –Suggest there are other significant benefits Most people are over-confident about abilities and probability of entrepreneurial success

EPP – Lecture 9 -7 Spring 2009 Education Appears to Have Some Influence on Entrepreneurial Performance Theoretically, education should be associated with higher performance among entrepreneurs –Education improves productivity (Mincer) –Education signals about quality (Spence) In the US, empirical evidence reveals that the returns to education are somewhat higher among entrepreneurs than among employees

EPP – Lecture 9 -8 Spring 2009 There Is Much Potential for Research on Effects of Education on Entrepreneurship Most existing research results are potentially biased –Reflect correlation, not causation –Future analysis could borrow sophisticated empirical methods from the literature on returns to schooling No consistent measures of entrepreneurship outcomes –Typical measure used is becoming self-employed No consistency in measuring those dimensions of educational system that may be important for entrepreneurship –Independent variable is typically “years of schooling”

EPP – Lecture 9 -9 Spring 2009 Lecture Overview Role of education system in ensuring an entrepreneurial workforce? Examples of entrepreneurship programs in schools Programs designed to “teach” entrepreneurship beyond schools Discussion

EPP – Lecture Spring 2009 The Educational System May Encourage Entrepreneurship Outside the Classroom Schools may create environment for direct involvement of students in entrepreneurial activities –Builds interest in and capacity for entrepreneurship Encourage extracurricular entrepreneurial activities –Project Echo’s high school business plan competition Provide interactions with real entrepreneurs

EPP – Lecture Spring 2009 Current Research Does not Answer Many Policy Questions on the Role of Schools What are the different roles an educational system may play in educating an entrepreneur? How to balance between exact science and methods that foster creativity and an entrepreneurial mindset in school curricula? –Will NCLB have negative implications for entrepreneurship? What approaches and methods could schools use to promote learning and creativity? Do more entrepreneurial (competitive) school environments make better schools? –Does competition in the schools system increase entrepreneurship? –Incentives for teachers –More choices for students and parents –More entrepreneurial schools

EPP – Lecture Spring 2009 Colleges and Universities Have Increased Their Entrepreneurship Education Increases in the number of schools that provide entrepreneurship education Increase in the number of endowed positions Increase number of entrepreneurship courses Kauffman foundation campus initiatives

EPP – Lecture Spring 2009 We Know Relatively Little About the Effectiveness of Entrepreneurship Education Does entrepreneurship education affect outcomes? –Note unobserved heterogeneity problems –Which outcomes are important? What classes/methods/approaches are effective? What is the balance between theory and practice? What is the balance between classes and extracurricular activities? Who are the best teachers for new entrepreneurs? When should entrepreneurship education occur?

EPP – Lecture Spring 2009 Lecture Overview Role of education system in ensuring an entrepreneurial workforce? Examples of entrepreneurship programs in schools Programs designed to “teach” entrepreneurship beyond schools Discussion

EPP – Lecture Spring 2009 Entrepreneurship Education Goes Beyond Colleges and Business Schools Programs vary dramatically on many dimensions –Target population: high school students, military veterans, unemployed workers, under-represented populations, individuals with a demonstrated interest in starting a business –Sponsor/payor: government, individuals, private sector –Duration –Content or supports provided –Objectives Examples –Department of Labor programs for unemployed –Programs to retrain workers after massive lay offs –Programs for entrepreneurs who seek funds to start their business or raise funds for existing businesses –Training and assistance for veterans who want to create their own business

EPP – Lecture Spring 2009 Major Components of “Growing America Through Entrepreneurship” Program Assessment –Evaluate possible success of the project Training –General courses on how to start a businesses (the business plan, marketing, cash flow, legal structure and financial management) –Classes on specialized topics (child care businesses, e- commerce) Technical assistance –One-on-one help with business issues (refinement of business idea, business plan writing and development, marketing) Assistance in applying for business loan

EPP – Lecture Spring 2009 Components of the Veteran Entrepreneurship Support Programs The Veterans Business Outreach Program provides entrepreneurial development services such as –Business training –Counseling –Mentoring to eligible veterans owning or considering starting a small business Veterans Business Outreach Centers provide –Pre-business plan workshops –Concept assessments –Business plan preparations –Comprehensive feasibility analysis –Entrepreneurial training and counseling –Mentorship and other business developmental related services

EPP – Lecture Spring 2009 Entrepreneurship Education Programs are Rarely Evaluated What is the short-term effect on the outcomes of entrepreneurs? –Do they actually start a business? What is the long-term effect on entrepreneurs? –Is the business successful? Against what objectives should the programs be evaluated? –For example a program that discourages people with bad ideas from becoming entrepreneurs may be viewed as a failure by some metrics What combinations of interventions work? Can these interventions be scaled up?

EPP – Lecture Spring 2009 Lecture Overview Role of education system in ensuring an entrepreneurial workforce? Examples of entrepreneurship programs in schools Programs designed to “teach” entrepreneurship beyond schools Student Presentations

EPP – Lecture Spring 2009 Student Presentation Benus, Jacob, Sheena McConnell, Jeanne Bellotti, Theodore Shen, Kenneth Fortson and Daver Kahvecioglu. May Growing America Through Entrepreneruship: Findings from the Evaluation of Project GATE. Available on-line at the Department of Labor website at: esultDetails&pub_id=2337&mp=y Karlan, Dean S. and Valdivia, Martin, "Teaching Entrepreneurship: Impact of Business Training on Microfinance Clients and Institutions" (July 2006). Yale University Economic Growth Center Discussion Paper No. 941 Available at SSRN: