This is how entrepreneurship fights poverty by 100% in USA cities. This Entrepreneurship is frequently promoted as a cure for economic growth. The economic benefits are often well understood: each successful new endeavor is frequently seen to have a direct impact on the local economy, producing new employment inside the business and introducing new items and technology into the market (Acs and Storey, 2004; Fritsch, 2013; Fritsch and Noseleit, 2013).
A favorable influence drives other businesses to respond by adopting new procedures, introducing new goods, or closing. In the long run, this Schumpeterian (1934) process of creative destruction will result in economic development, job creation, and increased earnings. It also implies that the benefits of entrepreneurship extend beyond the individual entrepreneur: they have an impact on other city or country employees.
‘Entrepreneurship,’ on the other hand, is a broad phrase that refers to a variety of distinct activities (Fritsch and Storey, 2014; Lerner, 2009; Mason and Brown, 2013; Mayer et al., 2018; Nightingale and Coad, 2013; Storey, 1994). Politicians and the media tend to focus on start-ups in tradeable areas like digital technology and manufacturing. However, most entrepreneurs in low-productivity, non-tradeable areas like hospitality or retail are copying existing company concepts (Shane, 2009).
Firms in the first group are more likely to create new employment and increase incomes both directly and indirectly through local multipliers (Moretti, 2010). A new business in a non-tradeable area, on the other hand, may simply saturate existing markets: a restaurant may provide new jobs, but neighbouring eateries may saturate the market.
When it comes to supporting new entrepreneurship programs, policymakers frequently overlook the potential disadvantages of entrepreneurship and instead focus on its benefits. They often think that entrepreneurship will help disadvantaged people get out of poverty and earn more money. President Barack Obama of the United States established start-up ‘accelerators’ with the goal of boosting growth in underdeveloped areas. Donald Trump, his successor, has backed global entrepreneurship efforts, claiming that they will help’millions of people get out of poverty’ (White House, 2017: 1).
Entrepreneurship is a crucial and politically acceptable strategy for policymakers aiming to overcome persistent regional poverty and disadvantage. The literature on entrepreneurship, which generally shows a positive, but two-way, relationship with local economic performance (Fritsch and Noseleit, 2013; Fritsch and Schindele, 2011; Fritsch and Schindele, 2011; Fritsch and Schindele, 2011; Fritsch and Schindele, 2011; Fritsch and Schindele, 2011; Fritsch and Schindele, 2011; Fritsch and Schindele, 2011; Fritsch and Schindele, 2011; Fritsch and Schindel
In this study, we look at how entrepreneurship affects poverty in a sample of US metropolitan statistical areas (henceforth referred to as ‘cities’) from 2005 to 2015. Our main study topic is: (1) Does entrepreneurship in a city help non-entrepreneurs get out of poverty? We address a second research question: (2) does the distinction between entrepreneurship in tradeable and non-tradeable industries matter?
Theory suggests that new firm creation can vary depending on which share of entrepreneurship is in tradeable – which may lead to multiplier effects in local economies – versus non-tradeable sectors – which may saturate local markets and reduce incumbents’ incomes (see North, 1955; Tiebout, 1956). As far as we know, we are the first to investigate the impact of entrepreneurship on poverty in the United States.
We concentrate on cities for a variety of reasons. The first is that entrepreneurship is intrinsically geographical, and the location of an entrepreneur is generally consistent across time (Fotopoulos and Storey, 2017). Certain cities and areas, sometimes even at the neighborhood level, are seen to have created local cultures that encourage entrepreneurship (Huggins and Thompson, 2016). (Andersson and Larsson, 2016). Other locations, on the other hand, are said to have local or regional ‘ecosystems’ that are resistant to the formation of new businesses (Spigel, 2017; Stam, 2015).
The location of a potential entrepreneur’s home or where he or she decides to (re)locate his or her business is so critical in determining the chances of success. Second, entrepreneurship’s larger consequences are expected to be felt in urban labor markets (Fritsch and Noseleit, 2013; Kemeny and Osman, 2018; Moretti, 2018).
The findings imply that, in general, entrepreneurship is insufficient to alleviate poverty. Entrepreneurship in tradeable areas, on the other hand, appears to do so. Overall incomes are also boosted by tradeable entrepreneurship, with individuals working in tradeable industries and mid-skilled employees benefiting the most. In contrast, entrepreneurship in non-tradeable industries appears to have little effect on poverty reduction and just a minor effect on incomes, with the advantages concentrated among non-tradeable employees and often linked with high-skilled people. We use the proclivity for entrepreneurship to be passed on in an instrument that tackles potential causality issues.