Small Business Assistance Programs in the United States

An Analysis of What They Are, How Well They Perform, and How We Can Learn More about Them

by Qian Gu, Lynn A. Karoly, Julie Zissimopoulos

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Small businesses play a significant role in economic development and growth in the United States and their vital importance in the American economy has prompted federal and state governments and private organizations to implement various programs to facilitate small business creation and expansion. Together, the small business assistance programs may exert significant impact on the entrepreneurial activities and profiles of small business owners in the United States. Yet our understanding is limited about the effects of these small business assistance programs, the features that make programs effective, and who benefits from the programs. This study documents the most important public and private programs designed to promote self-employment and small business creation, critically examines the existing research on the effect of those programs, and identifies new directions for future research on this topic. The authors find that business and self-employment assistance programs are heterogeneous in the sense that a multiplicity of programs serve a diverse clientele, are designed to meet varied needs, and are dispersed across geographic locations. Our understanding of the effects of business assistance programs is far from complete and the methodological challenges in identifying the effect of business assistance programs on business outcomes are, in part, a result of data limitations and the lack of experimental design in program evaluations. Thus few studies are able to identify a causal relationship between small business assistance programs and business creation and subsequent economic performance of assisted small firms. Moreover, the body of research has yet to identify the essential characteristics of effective small business assistance programs such as the optimal services to provide, what works best for whom or in what geographic locale, and how program effects relate to program costs. They identify several potential strategies that may be used with existing data to advance our understanding of program impacts. Combined with greater use of experimental methods, the evidence base can be extended to support sound policy decisions regarding the future of such programs.

The research in this report was conducted by the Kauffman-RAND Institute for Entrepreneurship Public Policy.

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