Author: Colin Mason, Emeritus Professor of Entrepreneurship and Honorary Senior Research Fellow, Adam Smith Business School, University of Glasgow

A common government strategy to increase prosperity in economically lagging regions is to provide financial assistance to technology-based businesses. This intervention is designed to address market failures that cause financial scarcity in such places. The objectives of these interventions are to enhance innovation, create high value jobs and grow the tax base. But because of the high failure rate of entrepreneurial businesses — even among companies raising finance from business angels and venture capital funds — this strategy has higher risks than other forms of assistance. When government-supported businesses fail, they often attract criticism from both political opponents and the…