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Pair of Reports Outline Actions for States to Accelerate Entrepreneurship

The Kauffman Foundation, as mentioned in this article, is a partner with Startup Weekend, which CTC also sponsors.  Startup Weekends are intense 54-hour events which focus on building a web or mobile application which could form the basis of a credible business over the course of a weekend.  Startup Weekends’ next event is in Stamford, March 30-April 1, 2012.

By reducing legal and regulatory barriers to startups, states can harness the power to encourage the formation and growth of new companies, find two recent reports from the Kauffman Foundation. The reports were issued in conjunction with Kaufmann’s third annual State of the Entrepreneurship address and call for state level initiatives and policy recommendations that have shown preliminary success but have yet to be widely adopted.

In Startup Act for the States, several proposals are put forth to act as a “menu of initiatives” at the state level, which policymakers can evaluate and adapt according to their needs. Ideas are organized by stage of the entrepreneurial process, which include encouraging the launch of new businesses, measures to facilitate the launch of new ventures, and nurturing the growth of new businesses.

To help expand the supply of entrepreneurs, the report encourages state governments either directly or through their influence over state regents who oversee universities to improve the process of technology commercialization. States should encourage universities to adopt standardized license agreements for spinoff companies and experiment with the free agency model of licensing, according to the report. Other recommendations include promoting and encouraging experiential entrepreneurship education at all levels of higher education. Successful models have taken inspiration from for-profit startup accelerators like YCombinator and TechStars, the report finds.

Reducing the administrative burdens of starting and closing businesses and creating “one-stop-shops” is urged for states to facilitate business entry. Additionally, states can permit digital firm formation to bring down the cost of entrepreneurs’ interaction with the legal dimensions of business creation.

Other ideas for states include funding apprenticeship programs and creating a culture receptive to entrepreneurs by branding itself as immigrant-friendly.

The second report, A License to Grow: Ending State, Local, and Some Federal Barriers to Innovation and Growth in Key Sectors of the U.S. Economy, identifies barriers that prevent disruptive innovations by entrepreneurs and discusses approaches for overcoming some of the challenges. The report identifies several areas in which excess cost and barriers to innovation are created through regulation. These include legal services, health services, drug approval and liability, education, and finance. Such regulation can obstruct professional licensing and liability, which in turn, affects businesses and restricts innovation, the report finds.

Two alternative approaches to speed up the dismantling of state rules that limit entrepreneurial activity focused on the federal level are identified within the report. One idea is to enable manufacturers to choose between regulation and tort liability. For example, a manufacturer that bypasses the FDA approval process would be subject to state tort liability and required to disclose the lack of FDA approval to consumers, which the authors say could give innovative drugs an additional path to market. Federal chartering also is discussed as an approach to put competitive pressure on strict state regulation.

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