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Venture Capital Doesn't Need To Encourage Manufacturing To Stimulate Economic Growth

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Executive Summary

First, increasing manufacturing isn't a path to faster economic growth. A study of the differences in state economic growth going back to the 1930s showed that manufacturing's share of a state's industrial structure actually reduces per capita income. So states like California are better off economically if they reduce their reliance on manufacturing. Second, places with more venture capital have higher economic growth. Studies show that venture capital-backed companies are more innovative and have higher employment and sales growth than comparable companies not financed by venture capital. Therefore, California benefits from its large share of the U.S. venture capital industry.

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