State-level determinants of entrepreneurship and a preliminary measure of entrepreneurial climate

State and local governments increasingly look to entrepreneurship as a mean s of stimulating economic growth. However can the public sector play a role in promoting entrepreneurial activity-and if so, what should that role be ? The authors investigate independent effects of financial and human entrep reneurial capital and ideas on entrepreneurial activity in the 50 states. F inancial entrepreneurial capital has an inverse U-shaped relationship with entrepreneurial activity, suggesting there are limits to using increasing a mounts of financial capital to stimulate entrepreneurship, all else being e qual. The authors rank each stare in terms of predicted and actual entrepre neurial activity scores and propose a preliminary measure of the entreprene urial "climate " of each state. Although most states are ranked near where casual analysis might place them, the authors find that others have predict ed values that differ significantly from actual values. This suggests that climate may be an important factor in stimulating entrepreneurial activity.