The consensus on high-growth, innovative firms as a key engine for economic growth has led to a rush among governments to invest in tools to help ignite it.
However, there are several unanswered questions on what policies actually yield positive results in this field. Many programs and incentives are designed based on assumptions about entrepreneurial dynamics, and little practical evaluation is conducted on the policy approaches adopted.
As a result, we often find that the same types of policies are being replicated across ecosystems as nations race to become the next “startup nation”.
Via the Innovation Growth Lab (IGL) initiative, Nesta has led the way in facilitating a more experimental approach to policymaking which has the potential to unleash a new wave of uncommon approaches that can unlock the grid of stagnant rates of new firm formation and perhaps even boost scale-up rates.
Examples of uncommon, experimental policies are the new models of redistribution to compensate those that lose out in the process of innovation, such as Finland’s basic income trial, and incentives for building talent such as Singapore’s SkillsFuture Credit.
But what exactly is meant by policy experimentation? As Alberto Bravo-Biosca, head of IGL emphasized at the second IGL Global Conference last June, experimentation is about endeavoring to try new ways to achieve policy objectives in entrepreneurship and committing to measure results.
Policy experimentation is more than a commitment to a post-facto evaluation. The underlying principles behind experimentation in entrepreneurship policymaking are:
- Not assuming we already know the answers to difficult policy questions.
- Openness to trying out new, uncommon ideas.
- Testing at a small scale first, to find out what works best.
- Openness to the possibility of ‘failing’.
- Openness to ‘pivoting’ the policy intervention based on trial outcomes.
- Good policy requires good data.
These may seem common sense, yet implementing them inside the public sector is not as simple, so the Innovation Growth Lab (IGL) offers guidance on methods for finding out whether a new attempt do work or failed. Via published resources, along with in-person capacity-building workshops like those at the IGL Conference, more entrepreneurship ecosystem builders now have guidance on methods and real-life case studies showing how to run experiments, such as randomized controlled trials (RCTs).
The IGL Conference in Barcelona last month proved being experimental in policymaking is much more than an intellectual or theoretical exercise. It can have real impact if results become a compass for improving policies.
Policymakers and practitioners from innovation agencies around the world, from Australia to Chile, presented their experiment analyses, covering both small or ‘rapid-fire trials’, as well as larger RCT experiments. These have led to changes in program design, such as making comments from Startup Chile’s selection committee known to accepted applicants, based on trials showing that has proven impact on startup success rates.
The experience shared by stakeholders at the IGL Conference showed that the most powerful tool for successful policy experimentation is trials. Trials help policy leaders more effectively address stakeholder skepticism by comparing two groups that should be identical in all but the reception of the ‘treatment’ or policy intervention.
Yet not all policy levers can be elements for trials, in which case other methods should be adopted to prove effectiveness. This is an important amount of IGL’s efforts are devoted to helping policymakers and practitioners differentiate ‘whether’ and ‘when’ in the policy process they can make use of trials.
As policymakers face growing pressures to containing the lag time between entrepreneurial innovation and policy interventions to support them, experimentation methods open avenues for governments to take calculated risks in their investments in building entrepreneurial economies.