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Economic Development Through Entrepreneurship

Government, University and Business Linkages

Edited by Scott Shane

Despite a wealth of efforts that examine separately the role entrepreneurs and universities play in economic development, no systematic effort has been made to examine the role universities play in promoting economic development through entrepreneurship. This book fills that gap, focusing on policy aspects of government–university partnerships with a discussion both of best practices and problematic strategies. The book begins by tracing the history of American government–university–industry partnerships that have promoted economic development. In succeeding chapters, well-known scholars focus on linkages in different domains such as: technology transfer, innovation networks, brain drain, cluster-based planning, and manufacturing. Practitioner commentaries follow many of the chapters in order to present an evaluation of the arguments from the perspective of someone directly involved in the fostering of these relationships.
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Chapter 6: On SBA-Guaranteed Lending and Economic Growth

Ben Craig, William Jackson and James Thomson


Ben Craig, William Jackson and James Thomson1 INTRODUCTION The promotion of small businesses is a cornerstone of economic policy for a large number of industrialized countries. Right or wrong, there appears to be a widely held perception that the small business sector is the incubator of growth, the place where innovation takes place and new ideas become economically viable business enterprises. Moreover, despite the research findings of Davis et al. (2000) that the small business sector is not a net creator of jobs in the United States, policy makers routinely point to small businesses as important sources of employment growth. Therefore it is not surprising that there is widespread political support for government interventions aimed at promoting small business in the United States and increasingly around the world. A widely held view among economists is that, while markets are the best way to allocate scarce resources, sometimes government interventions can improve upon market outcomes. Credit market imperfections, particularly in the market for small enterprise credit, are among the usual suspects cited as rationale for government intervention. After all, there is reason to believe that the information-related problems that drive the credit rationing equilibrium of Stiglitz and Weiss (1981) may be particularly severe in the market for small-firm finance. To the extent that small firms are creditrationed, government interventions in the form of direct credit or Small Business Administration (SBA) loan guarantees may be justified because of the deadweight losses associated with not funding all the projects in the...

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