The health and vigor of the Wisconsin economy, now and in the future, is clearly crucial to the state’s quality of life. It determines the resources Wisconsin’s citizens have to meet the current needs of their families and how much they can save for their retirements and their children’s educations. It affects how much revenue governments at the state and local levels have to provide services. The rate of growth of the state’s economy determines what kind of job opportunities Wisconsin’s citizens have now and, perhaps most importantly, what kind of career opportunities their children and grandchildren will have in the future.
This paper provides a brief review of Wisconsin’s overall economic strengths and weaknesses and then focuses on policies Wisconsin can pursue to enhance the environment for growth companies in the state. It argues that:
- Wisconsin’s overall economic performance is in the middle of the pack among the fifty states. While there are a number of bright spots in the state’s economic performance, there is clearly room for improvement.
- Many different factors affect a state’s overall economic performance. New business growth, including the rate of business formation and capital investment, is a critical determinant of a state’s long-term economic success. It is important for a state to have a healthy presence of “growth companies” to be economically healthy over the long term. (“Growth companies” are defined as companies whose sales grow at a rate of 20% per year or more for at least four years, meaning companies that roughly double in size every four years.)
- Wisconsin ranks well in some areas that are important to a state’s economic performance but does not rank well in the rate of formation of new companies that will grow rapidly and generate significant new jobs and income growth in the future. The relatively small presence of growth companies in the state is a major gap in Wisconsin’s performance. Hence, looking to the future, there are reasons for concern about the state’s long-term economic prospects.
- There has been significant progress in recent years in improving the environment for growth companies in Wisconsin as a result of a number of public and private initiatives. However, more work needs to be done to create a dynamic environment for growth companies in Wisconsin.
In order to move up the economic ladder, Wisconsin needs to intensify its efforts to create an environment where growth companies can flourish. To come up with ideas for doing that, a broad-based group of individuals with knowledge about the Wisconsin economy and familiarity with growth companies was interviewed to assess why Wisconsin lags in the growth company area and to discuss measures to improve the state’s performance.
Based on these discussions, two areas were identified as most in need of improvement in Wisconsin: generating additional capital investment in early-stage companies, and increasing the presence of entrepreneurs who can successfully manage growth companies. This paper suggests several initiatives to address these issues, notably a complete capital gains exemption for gains invested in Wisconsin growth companies, and additional efforts to actively involve Wisconsin residents and people with ties to Wisconsin in supporting entrepreneurial activities in the state.
The presence of growth companies helps define the nature and quality of a state’s economy. A strong presence of growth companies stamps a state’s economy as dynamic and its future prospects as bright. While Wisconsin lags other states in the presence of growth companies now, that is eminently changeable. Given the strengths Wisconsin has, further initiatives to improve the environment for growth companies could significantly improve the state’s long-term growth trajectory.