How Entrepreneurship is Part of Economic Development

I've spent enough time around economic development professionals to notice a pattern. Most of them are focused on attracting existing businesses to relocate to their region. They build elaborate incentive packages, court large employers, and measure success by jobs added when a company moves in. That kind of work has its place. But it's not the highest-leverage form of economic development available to most communities. The highest-leverage work is helping new businesses get started in the first place.

I've watched this dynamic play out in communities in classrooms, conference rooms, and family game nights, where I've worked with educators trying to seed entrepreneurial activity in their schools. The communities that take entrepreneurship seriously as an economic development strategy compound differently over time than the ones that focus only on attracting existing businesses.

Why Entrepreneurship Drives Long-Term Growth

Research from the Kauffman Foundation has consistently shown that the majority of net new jobs in the U.S. economy come from new and young firms — businesses less than five years old. Established large companies, on average, are roughly net-zero job creators or net job destroyers. The dynamism in the labor market comes from new ventures starting up and growing. This is one of the most important and most counterintuitive findings in economic research over the past few decades, and it's reshaped how serious economic development thinkers approach the field.

The implication is significant. A community that wants to grow its job base over the long term should invest much more heavily in entrepreneurship development than the typical economic development budget reflects. The ROI on supporting new business formation is, on average, much higher than the ROI on attracting existing businesses to relocate. But the timeline is longer, and the results are harder to attribute to a specific intervention. Politically, that makes entrepreneurship development a harder sell than ribbon-cutting on a new corporate campus.

This is the same pattern I've written about in how to create an entrepreneurship ecosystem and our guide to entrepreneurship development — the work compounds over decades, and the communities that have the patience to invest accordingly produce outsized results.

What Communities Should Actually Do

If economic development professionals took the entrepreneurship-as-growth-driver finding seriously, what would they actually do differently? In my experience, the high-leverage moves are surprisingly inexpensive.

The first move is investing in entrepreneurship education at the K-12 and college levels. The pipeline of future founders gets built decades before they actually start companies. Communities that take this seriously — through programs like Junior Achievement and through homegrown school-based programs — produce more entrepreneurial citizens over time. Products: The Card Game is something I built specifically to give schools a reliable way to bring entrepreneurial practice into the classroom without requiring expensive curriculum design. My pieces on how to teach entrepreneurship education and a full curriculum for high school entrepreneurship class go deeper into this layer.

The second move is supporting the recurring events that build local founder communities. Pitch nights, hackathons, monthly meetups, quarterly competitions. These events are inexpensive to fund but produce outsized returns in terms of the relationships and community fabric they create. Strong founder communities produce more founders, faster, than weak ones. This is well-documented in the ecosystem research, and I've watched it play out in communities I've worked with directly.

The third move is connecting local entrepreneurship infrastructure to the broader regional ecosystem. Most communities have access to larger entrepreneurial hubs nearby. Building strong relationships with those hubs — through visits, exchanges, joint events — accelerates local development much more than trying to build everything from scratch.

The fourth move is being patient. Entrepreneurship-driven economic development is a multi-decade project. The communities that produce strong founder cultures usually have leaders who committed to the work fifteen or twenty years before the results became visible. Quick-win-oriented economic development almost never produces durable entrepreneurial growth. Slow, patient investment does.

If you're an economic development professional or an elected official thinking about how to allocate development resources, the honest case for entrepreneurship investment is that it produces more durable economic growth per dollar spent than almost any other available intervention — but it takes longer to see and is harder to credit politically. That's the trade-off. Communities that accept it tend to look fundamentally different from communities that don't, ten or twenty years out.

I've watched this play out in real time, in real communities. The patient ones win. The impatient ones build the same set of underused incentive programs again and again and wonder why their economies keep stagnating. The pattern is consistent enough that I'd organize any serious economic development strategy around it. The work isn't complicated. It just requires a longer time horizon than most political cycles allow for.