The Effect of Accelerators on the Regional Entrepreneurial Ecosystem: Financing, Economic Development and Cluster Formation

Project Outcomes Statement

Recent years have seen the emergence of a new institutional form in the entrepreneurial ecosystem: the seed accelerator. These fixed-term, cohort-based, "boot camps" for startups offer educational and mentorship programs for startup founders, exposing them to wide variety of mentors, including former entrepreneurs, venture capitalists, angel investors, and corporate executives; and culminate in a public pitch event, or "demo day," during which the graduating cohort of startup companies pitch their businesses to a large group of potential investors. The work completed under this NSF grant explored the role of accelerators in facilitating the emergence of an entrepreneurial ecosystem in a local region. Our first completed study explored how accelerators produce spillover effects, galvanizing latent entrepreneurial interest and contributing to the launch and financing of innovation-driven startups outside of the accelerator?s own activities. We find that the launch of an accelerator program in a region is associated with a significant increase in the volume of seed and early stage venture deals external to the accelerator cohorts. This increase is driven both by outside investor groups and the emergence of new local early-stage investors, and supports the notion that an accelerator can lead to peer effects and provision of role models in the ecosystem that encourage additional local entrepreneurial spillover activity. The findings suggest that the introduction of such programs can have a general effect on the equilibrium of the regions in which they locate, rather than merely an effect of treatment on the treated. Our second study explored the significant variation in organizational design and operation of accelerator programs, documenting associations between these design elements and the performance of the startups that attend the programs. Out third study links the first two, tying the variation in design features and sponsors to the ecosystem spillover effects that these programs produce regionally. The first study was published as a synopsis in Science, and the full working paper is available online. The second study was published in Research Policy. The third study is forthcoming in an edited volume produced by EWC-KDI to be published by Edward Elgar or KDI press. In addition to the research studies, our work under the grant produced both a list of accelerators in the United States current as of 2019, as well as a machine-learning-based classification tool that can be used to classify entrepreneurial support organizations and identify whether they provide specific resources for entrepreneurs, such as working space or financing. The ultimate goal for our software-based tool is to allow researchers to gather data and better identify accelerators and other entrepreneurial support programs on an ongoing basis. We hope make this data available to other researchers.

While the limited research on accelerators to date has primarily focused on the outcomes for "accelerated" startups, our work under this grant primarily focused on the overall regional effects of such initiatives. Many studies of entrepreneurial policies and programs focus on firm-level dependent variables. Existing research suggests, however, that policies which seem "effective" at the individual firm level can have indeterminate or even negative impacts on the regional economy. Our research thus attempts to bridge programmatic evaluation of accelerators to a broader literature on the regional context of economic growth through innovation and entrepreneurship. Studying the effects of entrepreneurship-related initiatives on a region overall is particularly useful for policy makers, who often wish to pinpoint the mechanisms which underlie the development and success of productive entrepreneurial regions. To the best of our knowledge, our proposed studies are the first to examine the local impacts of accelerator programs.

Our studies were designed to provide important insights for regional policy makers, who are increasingly looking to accelerators and other new entrepreneurial institutions such as incubators to stimulate startup activity in their regions. By understanding what fosters both growth in or reallocation of entrepreneurial firms and investment dollars across different regions, we can begin to build a stronger understanding of what policies make a difference to startup founders and investors, and as a result to regional economic activity more generally. Our projects specifically address outcomes with clear societal interest: startup activity, including venture capital funding and support for new ventures; STEM employment; and regional economic development. These outcomes are all considered critical to the increased economic competitiveness of the United States of over the long term. A secondary societal benefit results in the production of the data and classification tools used in these studies, which will enable future research by others.