Skip to Main Content
Have library access? Log in through your library
Boulevard of Broken Dreams

Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed--and What to Do About It

Josh Lerner
  • Cite this Item
  • Book Info
    Boulevard of Broken Dreams
    Book Description:

    Silicon Valley, Singapore, Tel Aviv--the global hubs of entrepreneurial activity--all bear the marks of government investment. Yet, for every public intervention that spurs entrepreneurial activity, there are many failed efforts that waste untold billions in taxpayer dollars. When has governmental sponsorship succeeded in boosting growth, and when has it fallen terribly short? Should the government be involved in such undertakings at all?Boulevard of Broken Dreamsis the first extensive look at the ways governments have supported entrepreneurs and venture capitalists across decades and continents. Josh Lerner, one of the foremost experts in the field, provides valuable insights into why some public initiatives work while others are hobbled by pitfalls, and he offers suggestions for how public ventures should be implemented in the future.

    Discussing the complex history of Silicon Valley and other pioneering centers of venture capital, Lerner uncovers the extent of government influence in prompting growth. He examines the public strategies used to advance new ventures, points to the challenges of these endeavors, and reveals the common flaws undermining far too many programs--poor design, a lack of understanding for the entrepreneurial process, and implementation problems. Lerner explains why governments cannot dictate how venture markets evolve, and why they must balance their positions as catalysts with an awareness of their limited ability to stimulate the entrepreneurial sector.

    As governments worldwide seek to spur economic growth in ever more aggressive ways,Boulevard of Broken Dreamsoffers an important caution. The book argues for a careful approach to government support of entrepreneurial activities, so that the mistakes of earlier efforts are not repeated.

    eISBN: 978-1-4008-3163-0
    Subjects: Business, Political Science

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Preface and Acknowledgments
    (pp. vii-x)
  4. CHAPTER 1 Introduction
    (pp. 1-22)

    The financial crisis of 2008 opened the door to massive public interventions in the Western economies. In many nations, governments responded to the threats of illiquidity and insolvency by making huge investments in troubled firms, frequently taking large ownership stakes.

    The magnitude of these investments boggles the imagination. Consider, for instance, the over $150 billion invested by the U.S. government in AIG (American International Group) in September and November 2008 in exchange for 81 percent of the firm’s stock, without any assurances that the ailing insurer would not need more funds. Or the Swiss government’s infusion of $60 billion into...


    • CHAPTER 2 A Look Backwards
      (pp. 25-42)

      Before exploringhowgovernments can help entrepreneurs, it is important to understandifthey can be effective at all. In the next three chapters, we will explore the major justifications for public intervention to promote entrepreneurship and venture capital. We’ll begin by posing questions that doubtless will be in the back of many readers’ minds: most pressingly, how can we reasonably expect government officials to help freewheeling entrepreneurs and venture investors?

      In this chapter, we’ll seek to answer this question by exploring a few episodes from the history of entrepreneurship. By examining the history of pioneering entrepreneurial regions and venture...

    • CHAPTER 3 Why Should Policymakers Care?
      (pp. 43-64)

      At this point we are familiar with the argument that government has no role in promoting venture capital and entrepreneurship. In the last chapter, we looked at some historical evidence that planted seeds of doubt about this argument. Now we’ll turn to more systematic evidence, as articulated in recent research.

      The case that policymakers should indeed care about new ventures and venture capitalists—and do have a role to play in facilitating their activity—rests on three foundations. The bulk of this chapter reviews the first two critical rationales: that innovation is critical to growth, and that new ventures can...

    • CHAPTER 4 Things Get More Complicated
      (pp. 65-86)

      In the previous chapter, we highlighted the importance of innovation to economic growth, and the role that young firms, particularly those backed by venture investors, play in stimulating new ideas. When reviewing these propositions, we were able to point to a substantial body of academic research—and many less systematic (but perhaps more persuasive!) stories—suggesting that a strong relationship exists between new ventures and innovation.

      But as we noted in the previous chapter’s conclusion, these two facts alone are insufficient for us to come to a definitive conclusion. In particular, if government intervention in this arena is to make...


    • CHAPTER 5 The Neglected Art of Setting the Table
      (pp. 89-110)

      In recent years, many nations in Europe, Asia, and the Americas, as well as local and regional governments, have adopted initiatives to stimulate new ventures. While these programs’ precise structures have differed, the efforts have been predicated on the rationales delineated in the preceding chapters. While some of the programs have been dramatic successes, governments worldwide have also squandered many billions of dollars on ill-conceived efforts. In some cases, these programs have even left their entrepreneurial sectors in worse shape than before. In the next four chapters, we’ll seek to understand what works and what doesn’t.

      Government initiatives to simulate...

    • CHAPTER 6 How Governments Go Wrong: Bad Designs
      (pp. 111-136)

      The frequent failures among public programs to stimulate entrepreneurship and venture capital suggest that many pitfalls face these efforts. The stark truth is that many more initiatives have been unsuccessful than successful. One benefit that policymakers today have, however, is that they can learn from the mistakes made in earlier years, and adjust their programs accordingly.

      Readers may wonder how this book’s recommendations have been arrived at, given my cautions about the early stage of our knowledge. Indeed, not enough work has been done on how to structure entrepreneurship programs to ensure their greatest effectiveness and to avoid political distortions....

    • CHAPTER 7 How Governments Go Wrong: Bad Implementation
      (pp. 137-161)

      Even if a program to encourage entrepreneurship is well conceptualized, things can still go wrong once it is begun. The implementation of these programs requires many decisions. While decision making about programs may seem like an obscure, even arcane topic, it is incredibly important. As we’ll see from many examples in this chapter, program administrators can make seemingly reasonable decisions that turn out to be destructive.

      This chapter will consider three of the most common errors in implementation. Ignoring the need for well-directed incentives, not evaluating what is happening with the program, and failing to allow beneficial internationalization are all...

    • CHAPTER 8 The Special Challenges of Sovereign Funds
      (pp. 162-180)

      Perhaps the most dramatic setting where governments have struggled with the challenges of being venture capitalists has been sovereign wealth funds. These funds, owned by a state that invests in various financial assets, represent in some sense the ultimate challenge in governmental support of entrepreneurship. In addition to the obstacles that all public efforts to boost entrepreneurship face, the size, demands for visibility, and complex mission of sovereign wealth funds are daunting.

      This chapter will review the many issues these new investors encounter. After an overview of these complex institutions, we’ll discuss both the similarities to other public venture programs...

    • CHAPTER 9 Lessons and Pitfalls
      (pp. 181-192)

      The stories and studies discussed in earlier chapters have a variety of implications for those—whether government officials, local business leaders, or simply interested citizens—who seek to promote high-potential entrepreneurship and venture capital. While in many cases this evidence illustrates what not to do, it also offers many positive suggestions.

      In this final chapter, I highlight a number of implications that emerge from the earlier discussions. I also discuss frequently offered suggestions and programs to boost entrepreneurial and venture capital activity that are less consistent with the principles outlined in this book, and explain why they do not make...

  7. Notes
    (pp. 193-218)
  8. INDEX
    (pp. 219-229)