Innovation and entrepreneurship have been recognized as fundamental pillars for socioeconomic development. Many governments and philanthropists have built enthusiastically on this premise. However, because there is very little scientific evidence about the causal mechanisms that foster innovation, these enthusiasts have had to build upon intuition and common sense.

Although intuition and common sense can be very useful tools in an array of circumstances, evidence abounds about the way in which these tools can lead to errors in judgment. For example, the original policy of business incubators (as opposed to business accelerators) were policies based on the intuition that technology-based entrepreneurs needed a place that was “safe” and “protected”; from the hostility of the market (hence the term “incubator”). This intuition, albeit consistent with common sense, led to undesirable results. This policy tended to attract the types of individual entrepreneurs who did not realize they could gain free access to the same services offered by the incubators at a cost, simply by interacting entrepreneurially with the market. In other words, incubators tended to attract and protect the types of individuals who did not have the innate skills to be successful entrepreneurs, and neither did this policy help these individuals develop the entrepreneurial capital required to succeed.

The problem of developing innovation policies based on intuition is that these intuitions frequently are misleading. This, in turn, leads to ineffective use of limited resources and loss of valuable time for developing societies.

One of the golden standards to infer a causal relation between a given policy and an intended outcome is the experimental method. For example, in 2017 a team of Italian researchers conducted a randomized control trial to determine whether the policy of teaching entrepreneurs to think like scientists had a performance enhancing effect on their startups. The results indicate that stating hypotheses about the business opportunity and designing experiments to test them is particularly useful for new venture performance. With this evidence in hand, policy-makers can know for sure that this approach to developing entrepreneurial capital can be particularly effective.

Because one of the keys of achieving socioeconomic development is the compounding of returns on public investment, the development of scientific evidence to support innovation policy decisions is an urgent and global endeavor. Examples of research questions in this line of thought include:

  • Does entrepreneurial capital (like financial and managerial capital) help to increase new venture performance? If so, what are the key mechanisms of entrepreneurial capital that can be manipulated to correct market failures associated to a lack thereof?
  • Is the entrepreneurial mindset a value-creating skill that extends beyond new firm creation? Would a society benefit as a whole if its citizens were more entrepreneurially minded?
  • What role does physical wellbeing have on innovative behaviors? Can policies be devised to promote a healthier workforce to accelerate socioeconomic development?
  • What is the market friction of early-stage investment market? Rather than limiting the downside of potential investors, should policies instead focus on fostering opportunities for investment-returns?have had to build upon intuition and common sense.