A Portfolio Perspective on Entrepreneurship and Economic Development

Because the large majority of new ventures remain small, their economic contribution is questioned. Shane (Small Bus Econ 33(2):141-149, 2009) has argued that designing public policies which encourage more people to become entrepreneurs is counterproductive, and the exclusive focus should be high-growth ventures, or gazelles. As a counter to Shane’s position, four types of start-up ventures are considered, with each having differing needs and making unique contributions to the economic welfare of a nation, region, or locality. Based on this typology, seven counter-arguments to Shane’s position are presented, addressing issues related to the cost of entry and exit, rates of efficiency and failure, employment levels, sector differences, ecosystems, and venture emergence. Based on these counter-arguments, a portfolio perspective is advocated, where societal risks and a variety of returns are balanced across all four types of new ventures. An example of a portfolio approach to policy design is provided, and implications are drawn