The impact of local government economic development programs on city-level entrepreneurial activity: evidence from Southern California

Abstract

PurposeThis paper examines the relationship between government economic development programming and entrepreneurial activity, by examining evidence in Southern California cities. While numerous studies explore this relationship between government institutions and entrepreneurship at the level of countries and states, significant questions remain at the level of city government, and the influence of local government economic development programs on city-level entrepreneurial activity.Design/methodology/approachThis paper uses regression analysis of data from all 215 Southern California cities to decompose the complex relationships between economic development programming and different types of entrepreneurial activity.FindingsResults suggest startups are attracted to cities with higher crime rates, more diversity, and older populations, yet not those with higher levels of economic development programming. There is evidence that some types of economic development programming may influence entrepreneurship, especially for the level of minority-owned businesses.Originality/valueThe paper makes three important contributions to the literature. First, it is among the first to use local (city-level) entrepreneurship as an outcome variable to measure the effect of government economic development programming. Many scholars have instead chosen to look at outcomes relating to general economic growth (e.g. new jobs) rather than outcomes specific to local entrepreneurship. Second, it explores city-wide entrepreneurial activity with respect to numerous measures, such as start-ups, minority and female ownership, and self-employment. Third, it examines the potential influence of economic development programming, both on aggregate and decomposed into economic development program clusters.