Financing high-potential entrepreneurship

Abstract

ProsBecause a few, typically young firms grow rapidly and account for much of job creation, finding an effective way to support their growth is important.Predicting which will fail succeed virtually impossible, so policymakers are better off striving the more modest goal helping high-growth-potential firms.Policies that make it easier engage in trial-anderror experimentation than trying pick winners.An enabling environment entrepreneurs, banks, investors can weed out failures. RAMANA NANDA | Financing high-potential entrepreneurship MOTIVATIONA large proportion net creation productivity advanced economies comes from continuous process firm entry exit, as new, efficient displace incumbents what now commonly known "creative destruction" [2].Start-ups, most small, play key role this process.Because vital role, financing constraints among small businesses major policy concern countries.For example, US Small Business Administration provided business loan subsidies totaling $350 million 2012, addition grants through Innovation Research program.Similarly, EU program Competitiveness Enterprises Medium-sized has budget 2.3 billion.Financial intermediaries fundamental facilitating creative destruction by allocating capital promising firms.Government substantially influence effectiveness incentives creates financial intermediaries.