The comparative impact of solar policies on entrepreneurship in the U.S. solar photovoltaic installation industry

Abstract

The relationship between energy policies and entrepreneurship has long been a keen interest of researchers and policymakers. This study seeks to understand whether and how public policies affect—promote or hinder—the founding of new firms by examining the impact of solar regulatory and financial incentive policies on two types of new firm formation (i.e., start-ups and new subsidiaries) in the U.S. solar photovoltaic (PV) installation industry. This study finds that favorable regulatory policies are associated with an increased number of 2.8 start-ups and 1.6 new subsidiaries, and restrictive regulations (i.e., licensing policies) are associated with 2 fewer start-ups and 0.5 fewer new subsidiaries in a state. This study also finds that third-party ownership policy seems to have no impact on new firm formation. Furthermore, the relationship between financial incentives and new firm formation is not robust. This study suggests that policies that create a favorable business environment (or increase the barriers to business entry) may benefit (or hinder) different types of firms to varying degrees, as firms may have different levels of motivations, incentives, resources, and capacity to leverage these policies. Therefore, the distributional implications of policies should be taken into account in policy designs.