The Effects of State Innovation Programs on Entrepreneurial Firms: Three Essays.

Abstract

My dissertation provides new evidence regarding the effects of state innovation programs on the performance and behavior of entrepreneurial firms in the Great Lakes region. Specifically, I assemble novel databases and use multiple research methods to address the effects in three essays. The first essay examines the extent to which, if at all, competitive R&D awards from Michigan innovation programs enhance the performance of participating ventures relative to startups that seek but fail to receive an award. The results show compelling evidence that state R&D awards enhance the commercial viability of recipient firms. I also find that receipt of state funding enhances the subsequent financing for those new ventures with more onerous information challenges in entrepreneurial capital markets. My second essay broadens the scope to other states in the Great Lakes region and investigates whether state innovation programs alter the entrepreneurial founding environment and, in turn, shape the post-entry survival of new ventures. Based on state initiatives launched in the Great Lakes region from 1990 to 2009 and evidence from the life sciences industry, I find that new ventures formed when an innovation program is present have significantly higher survival rates than new ventures formed without the presence of such a program. This study also provides new evidence for the heterogeneous effects of state initiatives. In the third essay, I examine the baseline proclivity of innovation-oriented startups to leave their home states and the effects, if any, of state innovation programs on such outmigration in the life sciences and information technology industries. Based on evidence from the Great Lakes states during 1990 to 2010, I find that firms with greater resource requirements for commercialization are more likely to relocate. The results also show that, for young firms, the relocation hazard is significantly lower following the launch of a large innovation program. Moreover, in states that have launched innovation programs with specific industry targets, firms within the targeted sector are less likely to leave the state as they grow. Overall, this study provides the first systematic evidence that state initiatives can significantly alter the geographic movement among entrepreneurial firms.