Governors say they’re pro-entrepreneurship. Prove it.

Most rules entrepreneurs encounter, from licensing to zoning to workforce training, are written not in Washington, but in state capitols.

In an era of controversial federal politics and constrained city budgets, US states are increasingly where economic dynamism is shaped. For founders navigating compliance, hiring pipelines, tax structures and regulatory approvals, the most consequential actors may not be members of Congress but governors.

“There is a national imperative to make sure that the United States is the innovation leader for the globe,” Delaware Gov. Matt Meyer told me. Each governor, he said, should be thinking: “We actually can create a dream environment for innovators and entrepreneurs.”

“There is a national imperative to make sure that the United States is the innovation leader for the globe.”

Delaware Gov. Matt Meyer

Meyer, a Democrat, recently spent time with Oklahoma Gov. Kevin Stitt, a Republican, to underscore bipartisan support for entrepreneurship-led economic development. Stitt is the current chair of the National Governors Association, which has prioritized entrepreneurship. His role there this week thrust Stitt into a skirmish with President Trump for inviting both Democrat and Republican governors to a White House event.

“Governor Stitt and I disagree on a lot of things,” Meyer said, “but we both understand” the importance of economic growth. 

Entrepreneurial ecosystems develop on longer time cycles than legislative terms. In his well-liked 2020 book “The Startup Community Way,” Techstars cofounder and investor Brad Feld urged regions to take a 20-year view when building startup communities. Yet traditional economic development still defaults to chasing large employers with short-term wins that photograph well. 

The evidence runs the other direction: Nearly all net new jobs come from young firms, and long-run prosperity tracks startup formation more than corporate retention deals. 

Americans know this instinctively. We celebrate builders. We mythologize founders. In a polarized moment, entrepreneurship may be one of the last economic ideas that still carries bipartisan cultural weight. The question is whether state policy will reflect that belief — or merely applaud it.

US states are not minor actors

If California were a country, it would rank among the largest economies in the world. Texas, New York and Florida would also land in the global top 20 by GDP. Even tiny Delaware’s annual economic output is larger than a handful of members of OECD, a club of rich countries. 

A governor is a state’s chief executive, and state governments oversee workforce systems that train nurses, engineers and technicians. They regulate occupational licensing regimes that determine who can legally operate. They shape corporate filing systems, procurement rules, economic development incentives and tax codes. They influence land use, energy markets and broadband expansion. 

Last fall, the Nasdaq Entrepreneurial Center released a new framing that argues state government is operating infrastructure for entrepreneurship. 

But leaders need to get the nuance: Pro-business is not necessarily pro-entrepreneurship.

For decades, state economic development has leaned heavily on recruiting and retaining large employers. Subsidy packages dominate headlines. Incentive deals offer measurable wins within a term. But academic research suggests that long-term growth correlates more strongly with new-firm dynamism than incumbent preservation.

The late, great economist William Baumol famously distinguished between productive entrepreneurship — experimentation that creates new value — and unproductive entrepreneurship that captures value through regulatory advantage. Economists David Audretsch and Zoltan Acs found that regional economic performance improves when startup activity rises, not when markets consolidate.

Research from MIT has shown that nearly all net new job creation in the US comes from young firms. Yet firm entry rates declined for decades before the pandemic surge, and industry concentration increased steadily. Calling a state “business-friendly” is not the same thing as designing systems that encourage new firm formation. Small business and new business are not the same thing. 

Meyer is unusually clear about the difference.

“A lot of people in my business don’t seem to totally get, to be frank, the difference between entrepreneurship and innovation and small business,” the Delaware governor said. 

“If you’re in the laundromat business and your great-grandparent started a laundromat, the problems and issues you’re dealing with are completely different than someone who’s got some idea of ‘I know how to do science,’ or ‘I know maybe how to use AI’ — [but] I have no idea how to do accounting.”

Both matter. They require different policy tools.

What state action looks like

As entrepreneurship ecosystem building and traditional economic development blend, some governors are beginning to treat business creation as a primary strategy that can be addressed with policy.

In Oklahoma, a recent executive order created a state chief entrepreneurial officer, launched a centralized portal to streamline licensing and compliance, and directed agencies to identify regulatory barriers. The order also proposed cutting new business filing fees to $1 — a symbolic but concrete signal about lowering friction.

At the national level, the National Governors Association has elevated entrepreneurship through its “Reigniting the American Dream” initiative, encouraging governors to modernize regulatory systems and align workforce development with startup growth.

Much traditional economic development is plodding and fed on by incumbents. Meyer said he and other state leaders have to get back to dynamism, not entrenched interests.

“My job as governor is to make sure whatever policies, regulations, tax structures we put in place don’t inhibit that innovation,” Meyer said. “In fact, they enable it.”

Around the country, entrepreneur-first strategies blossomed in the 2010s, often led by grassroots and volunteer organizing. Institutional power (and budgets) should accelerate what’s worked, Meyer notes, including efforts to increase opportunity, not pick winners.

“I don’t really know which of those is going to thrive and turn into the next big product service for the world,” he said. “Our goal is to create a playing field, an environment where anyone who comes with an idea can have a platform to access capital, access resources.”

Workforce as leverage

For small states especially, workforce becomes the central competitive lever.

“Companies and in fact investment dollars want to be where the talent is,” Meyer said. “We’re working very hard to make sure that we have a pipeline of workforce.”

He argues Delaware’s regional density offsets its size: “We are at the epicenter of the Mid-Atlantic,” splitting the coveted northeastern Amtrak corridor between DC and New York, with Philadelphia, Baltimore and Newark along the way.

Worldwide, economic leaders are spooked by artificial intelligence. Diffusion of knowledge has tended to be more economically effective than ensuring a few big winners. State governments have opportunity to act on these lessons.

“Entrepreneurs know,” Meyer said. “We should judge by what gets done.”

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