Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed

Innovation and Economic Growth

Article Snapshot


Josh Lerner


Princeton University Press, Princeton, 2009


This book examines and proposes best practices for public intervention in venture capital markets.

Policy Relevance

Under certain conditions, governments can take actions that help industries develop quickly. However, successful implementation of policies can often do more harm than good.

Main Points


  • The history of government interventions to help fledgling industries, or to start industries from scratch, contains many failures but some striking successes. Many examples are given; for example:



    • Early government investment was crucial to the development of Silicon Valley.
    • Malaysia’s government opened a huge biotech facility that was never used.
    • Dubai’s government developed the city’s infrastructure successfully for decades, but squandered its gains on frivolous investments in the 2000s.
  • Venture capital (VC), money provided to risky startup firms in exchange for stock in the firm, is an important source of economic growth; the government may be able to provide support for startups.
  • Governments can take many types of steps to promote entrepreneurship and VC activity; they might:



    • Provide educational and professional environments to connect schools and businesses;
    • Deliver tax policies and legal environments that allow startups to operate efficiently;
    • Assure foreign investors of fair courts and well-defined property rights;
    • Provide VC directly.
  • Governments also make many mistakes when attempting to promote entrepreneurship, such as:


    • Retreating from projects at the first sign of failure, or alternatively neglecting to monitor progress and management;
    • Providing no incentives for success, so entrepreneurs are richly compensated regardless of how their projects perform;
    • Ignoring market conditions, for example promoting goods for which there will be no demand;
    • Neglecting to consider international components to business.

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