Same Sex Marriage and Venture Capital


Same sex marraige and venture capitalI heard on the radio the other day that California became only the second state (after Massachusetts) to permit same sex marriage. And that got me thinking about bad entrepreneurship research.

While it might be strange that my mind goes from same sex marriage to entrepreneurship research (and I won’t deny that such a leap is strange), there’s a logic to my thinking.

Much research about entrepreneurship looks at the correlations between two things and infers a causal relationship. For instance, the fact that people who are more educated are more likely to start businesses leads many observers to explain that education causes people to start businesses.

But a correlation between two things doesn’t necessarily mean that they are causally related. This is what leads me to same sex marriage and venture capital.

California and Massachusetts, the two states that permit same sex marriage, had $17.3 billion in venture capital investment in 2007. The rest of the country had $13 billion. Therefore, states that allow same sex marriage have more venture capital than those that don’t (although we don’t quite get a statistically significant difference if the variance in the two groups of states is different because only two states allow same sex marriage).

Maybe I’m missing something, but it’s difficult to see a causal relationship between same sex marriage and venture capital. It seems like the relationship is just an artifact of something else.

But back in 2002, Richard Florida published a book called The Creative Class in which he argued that places that have a higher proportion of gay people have more technological innovation. He explained that this statistical relationship exists because places with more gay people are more diverse, and diversity encourages innovation.

Could Professor Florida be right? Could states more tolerant of gay marriage have more venture capital because they are more supportive of diversity and, thus, efforts to encourage innovation?

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About the Author: Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of eight books, including Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By; Finding Fertile Ground: Identifying Extraordinary Opportunities for New Ventures; Technology Strategy for Managers and Entrepreneurs; and From Ice Cream to the Internet: Using Franchising to Drive the Growth and Profits of Your Company.



Scott Shane Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool's Gold: The Truth Behind Angel Investing in America ; Illusions of Entrepreneurship: and The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By.