10 Pages

Economic Development: Subsidizing High-Growth Firms

WithTerry F. Buss

Emerging high-growth firms account for much of the growth in employment in the United States. As they are job-generating machines, a recurring, intensive debate concerns whether there could be even more job growth if more capital could be channeled to potential high-growth firms which are perceived as floundering from lack of investment. Public subsidies are for many the answer, because government has the funding and is willing to accept the risk in funding these risky ventures. Research reviewed here shows that capital gaps do not generally exist. Funding is available. Where funding fails to flow to emerging high-growth firms, it is either because they have a poor business strategy, lack viable markets for goods and services, or are operated by people with poor management skills. Even public subsidies that target entrepreneurs do not invest tax dollars in these risky ventures.