Professor Colin Mason portrait image

Public funding for a business venture even if it fails, plays a positive role in seeding the local entrepreneurial ecosystem, finds a new academic study.  

Using the example of Consilient Technologies, a once-promising tech company in Canada, the study highlights the long-term benefits of government backed ventures including those that fail - challenging the narrative that government funding for a failed business is a ‘waste of taxpayers’ money.

The work was carried out by Professor Colin Mason from University of Glasgow Adam Smith Business School alongside Dr Jaqueline Bartlett and Dr Blair Winsor from Memorial University of Newfoundland.

Findings show that the company which received substantial government funding:

  • Recruited talent who would have left the province to find jobs
  • Attracted employees back to the province
  • Provided its workforce with opportunities to gain new skills, experience and knowledge along with entrepreneurial learning.

Following Consilient Technologies closure, the study identified its employees either started their own business or moved to other technology firms in the local emerging entrepreneurial ecosystem. Because of employees’ experience, know-how and skills other tech start-ups in the area were keen to hire them.

The study demonstrates the importance of innovative public policies that create value beyond short-term financial gains.

The company had a major impact on the development of its nascent ecosystem and the financial support it has received from government has not been wasted but helped to see the ecosystem.

Professor Colin Mason said: “Public funding plays a crucial role in innovation, especially in high-risk sectors. Whilst not all ventures succeed, the ripple effect of such investments – for example – fostering talent, seeding ecosystems and stimulating regional development – prove they have an enduring value.”

The broader implication is that evaluations of government assistance to innovative start-ups – which have typically focused on survival rates and performance rates – is too narrow and requires to be broadened to consider the extent to which firms that receive government financial support create value for the entrepreneurial ecosystems in which they are located.

First published: 30 January 2025

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Failure’s virtues: the seeding of an emerging entrepreneurial ecosystem in a peripheral region