Innovation Blog

Why Supporting Entrepreneurship Is Your City’s Best Approach to Economic Recovery and Growth 


There is no question that Mayors and Governors are on the frontlines of the COVID-19 pandemic and are forced to make incredibly difficult decisions every day. These decisions, like closing all non-essential businesses, significantly impact each constituent’s life, but also our local and regional economies.

Leaders are needing to continue with safety regulation and frontline wellbeing, but also find ways to guide their cities and states through an economic recession. To counter this drastic change in business dynamism, multiple targeted efforts are needed to revitalize the local economy now.


In times of high unemployment, new businesses emerge at a faster rate. Compared to 2006, the rate of new business formation peaked in 2009 at 17% higher. Throughout U.S. metropolitan areas, the higher the local unemployment rate, the higher rate of entrepreneurship, which leads to the creation of new businesses.

In the Great Recession, we witnessed the emergence of giants such as Airbnb, Venmo, Uber, and Dropbox. In addition to these now huge brands, there were also hundreds of thousands of other new businesses formed which led to creating new jobs at a faster rate.

Municipalities that saw the recession as an opportunity to engage and build support structures around new businesses found a path to accelerated recovery. In the US, competition to be a leader in economic development is increasing as the domestic economic race has narrowed its growth frontrunners in times of crises. Cities like Boston, Austin, San Francisco, and New York responded to the 2008 recession by forming large innovation ecosystems to support these emerging startups, bringing together essential stakeholders (government, academic institutions, industry leaders, and venture capital) to make it as easy as possible for other entrepreneurs to launch new businesses, creating new jobs and solutions for the market.

Countries who invested in entrepreneurship fared better than their peers in terms of recovery and growth. Germany, the fastest country to rebound from the Great Recession, invested in fostering innovation and R&D, with special measures for green technologies targeted at the automobile sector. Similarly, Korea focused on building new engines of growth including sustainable energy and information technologies. Finland had its own Finnish Innovation Strategy that supported education, research, and training.


The relationship between Corporations and Startups has changed dramatically since 2008. From competitors to collaborators, new channels of investment and innovation have opened in advanced ecosystems that include a high level of public sector engagement.

In fact, the number of corporate investments in startups tripled from 980 in 2013 to 2,795 in 2018, with their total value growing from $19 billion to $180 billion. More and more, industry-leading organizations are partnering with startups to advance their businesses.

While there’s no silver bullet for innovation and collaboration, governments and municipalities should look to expanding their role in supporting and connecting entrepreneurs to opportunities. Seeking to grow the infrastructure that facilitates this can, especially right now, seem daunting, but there are organizations that do exactly that.


The MassChallenge model centers on building community and delivering impact. As an organization that was born out of the last economic recession, we know first-hand the critical role startups play in economic recovery. By removing barriers and connecting entrepreneurs to a coordinated network of resources, we accelerate their growth, help cities and states attract and retain top talent and gain an economic competitive advantage.

Since 2009, we have facilitated the growth of 2,450 startups who have created over 26K direct jobs and generated $3B+ in revenue. In Massachusetts alone, MassChallenge has supported over 1,245 companies who have created 10,900+ direct jobs for the Commonwealth.


Simply the existence of MassChallenge over the past 10 years is a significant nod towards the success of collaborative rebuilding. The first dollar MassChallenge ever received came from the Commonwealth of Massachusetts, a commitment to spurring entrepreneurial growth and pushing the state forward during the Great Recession. And this initiative has produced a local and global impact.

The Opportunity that lies ahead

At time of writing, more than 36 million Americans have filed for unemployment since the pandemic began. We are all witnessing the series of corporate layoffs and the overall immense struggle for small businesses. Aggressive action and investment must be taken in order to recover faster and prime for growth.

As we continue to tread the waters of an economic recession, we know that increasing collaboration across the public and private sectors is the best path forward.

Mayors and Governors can be at the forefront of innovation by investing in and strengthening local innovation ecosystems to create new businesses, jobs, and foster economic sustainability. Leaders need to look toward collaboration across industries, regionally, and also across regions. The collective impact municipalities can have by aligning their support initiatives can create a sum bigger than all the parts.

By engaging with these emerging entrepreneurs and new businesses as a core strategy, cities and states can fuel the job creation engine and emerge not only as a frontrunner of innovation but also a leader in economic growth.


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