Business acceleration program as city sowers: assessing public funding’s impact on new ventures in an emerging economy

Abstract

Purpose A debate on whether new ventures should be supported with public funding is taking place. Adopting a position on this discussion requires rigorous assessments of implemented programs. However, the few existing efforts have mostly focused on regional cases in developed countries. To fill this gap, this paper aims to measure the effects of a regional acceleration program in a developing country (Medellin, Colombia). Design/methodology/approach The economic notion of capabilities is used to frame the analysis of firm characteristics and productivity, which are hypothesized to be heterogeneous within the program. To test these relationships, propensity score matching is used in a sample of 60 treatment and 16,994 control firms. Findings This paper finds that treated firms had higher revenue than propensity score-matched controls on average, confirming a positive impact on growth measures. However, such financial growth is mostly observed in service firms rather than other economic sectors. Research limitations/implications Further evaluations, with a longer period and using more outcome variables, are suggested in the context of similar publicly funded programs in developing countries. Originality/value These findings tip the balance in favor of the literature suggesting supportive programs for high-growth firms as opposed to everyday entrepreneurship. This is an insight, especially under the context of an emerging economy, which has scarce funding to support entrepreneurship.