Entrepreneurs in the Capitol: Are Entrepreneurs in Politics Pro-Entrepreneurship?

• In Event: Policymaking Across the American States

Abstract

Entrepreneurship plays a central role in economic growth, yet the policy environment that shapes entrepreneurial activity is largely determined by elected officials whose backgrounds may influence how they approach policymaking. While prior research has focused on how firms influence policy from the outside, such as through lobbying or political connections, less attention has been paid to how individuals with business experience shape policy from within government. In particular, entrepreneurs, who face distinct constraints when starting and growing their businesses, may bring unique perspectives to the legislative process.

This paper asks whether entrepreneurs in political office behave differently from other legislators and, more specifically, whether they promote policies that support entrepreneurship. We distinguish entrepreneurial experience from broader business experience and examine how these backgrounds influence legislative behavior and priorities. The core question is whether entrepreneurs act as general representatives of business interests or whether they selectively advance policies that lower barriers to entry for new firms.

To address this question, we construct a novel dataset linking the business affiliations of state legislators to their legislative activities across 26 U.S. states from 2009 to 2023. We identify entrepreneurs using detailed personal financial disclosures and define them as legislators who both own and actively manage businesses. These data are merged with comprehensive legislative records, including the full text of bills and information on primary sponsors. We then use a large language model to classify bills into pro-business and pro-entry categories to measure whether legislators’ policy agenda supports entrepreneurship. Our empirical strategy focuses on legislator-year variation, incorporating fixed effects and rich controls to isolate the relationship between entrepreneurial background and legislative behavior.

We find that entrepreneurs do not sponsor more legislation overall than their peers. However, they are more likely to initiate legislation, as evidenced by a higher likelihood of serving as the first or sole primary sponsor. Importantly, entrepreneurs do not act as broad champions of business interests: they are no more likely than other legislators to introduce general pro-business legislation. Instead, their policy focus is selective. Entrepreneurs are significantly more likely to sponsor pro-entry legislation that reduces barriers for new firms, particularly in areas such as deregulation and innovation. Additional analyses suggest that these patterns are robust across alternative specifications and samples, and that the presence of entrepreneurs in legislatures is associated with increases in lower-barrier forms of entrepreneurial activity, such as unincorporated self-employment.

These findings highlight a previously underexplored channel through which the private sector shapes the policy environment: the direct participation of entrepreneurs in elected office. Rather than simply advancing general business interests, entrepreneur-legislators appear to apply an experience-based and problem-oriented approach, targeting specific institutional frictions that hinder entry. This has important implications for understanding how the composition of political institutions affects economic outcomes. More broadly, the results suggest that who holds office, not just which interests are represented, can meaningfully influence the design of policies that shape entrepreneurship and economic conditions.

Author

• Heqiao Ma, Duke University
  Presenting Author