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Why do people start businesses? To make money. So to create entrepreneurial behavior, you have to look at the "to make money" aspect. All means must end in helping people make money.
There are various ways to do this. One easy (in most cases) way is to simply cut taxes or offer rebates for new businesses. Many tax-collecting entities (states, municipalities, etc etc) will give huge tax breaks to businesses. One commonly used tactic is to create "Business-friendly zones" or the like. Basically, these are low (or sometimes no) tax regions of cities or states. This creates more of an incentive for businesses to start or move there.
Another relatively easy way is to lessen regulation and/or bureaucratic red tape involved in starting and maintaining a business. This can tie back into taxes. For instance, we all know business people that have had to figure out if it's cheaper to file as an individual or a corporation when doing their taxes. But back to regulation. Some regions make it very hard to start a new business. This could be due to zoning (residential versus commercial zones), the filing process (actually getting licensed to start a business), or environmental regulations. Lessening these regulations can really lower the barriers to starting businesses. One example of this is Alabama, where there are no residential or commercial zones.
Another way is to keep interest rates low. Most businesses, when they start, need capital (cash) in order to finance operations. Remember, most businesses report a loss the first year. If it is expensive to get a loan (due to a high interest rate ), many people will not try or not be approved to get those loans to start businesses. Government has few tools to keep interest rates low, but it is something to look into.
Local governments can take a very active role in creating businesses by meeting with prospective entrepreneurs or current businesses and creating programs or offering help. For instance, a lot of businesses will work together with local governments for parades, community service, or outreach. One example of this would be a government program that helps low-income people get jobs with local businesses who are looking for cheap, unskilled labor (which many prospective businesspeople would love to have).
Basically, you need to make it as easy as possible to open a new business, and make sure you never take away the incentive to make money.
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∙ 15y ago
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