Supporting Digital Entrepreneurship in Low- and Moderate-Income Communities: Evidence from the CDBG Program

Abstract

Digital technologies are reshaping the geography of entrepreneurship, expanding opportunities for business formation beyond traditional tech hubs. Yet, spatial gaps in digital entrepreneurship persist, particularly in low- and moderate-income communities. Using geolocated data on Community Development Block Grant (CDBG) investments and commercial domain registrations, this study examines how local use of flexible grant funds supports digital entrepreneurship in targeted ZIP codes. The analysis finds that CDBG investments in areas with robust broadband adoption are positively associated with digital entrepreneurial activity. The results further suggest that the type of investment matters, with varying associations for activities relating to infrastructure, public services, and business services. These findings contribute to research on place-based policies and inclusive economic development in the digital age.

Keywords

digital entrepreneurship place-based policy inclusive economic development

Get full access to this article

View all access options for this article.

References

Abadie

Athey

Imbens

G. W.

Wooldridge

J. M.

(2022). When should you adjust standard errors for clustering? The Quarterly Journal of Economics, 138(1), 1–35. https://doi.org/10.1093/qje/qjac038

Anderson

Burke

Gottlieb

(2021). Getting connected: How economic developers are expanding broadband access. International Economic Development Council. https://www.iedconline.org/edrp-reports/archive/getting-connected-how-economic-developers-are-expanding-broadband-access/

Angrist

J. D.

Pischke

J.-S.

(2009). Mostly harmless econometrics: An empiricist’s companion. Princeton University Press. https://play.google.com/store/books/details?id=YSAzEAAAQBAJ

Anthony

(2022). Housing affordability and economic growth. Housing Policy Debate, 33(5), 1–19. https://doi.org/10.1080/10511482.2022.2065328

Baker

A. C.

Larcker

D. F.

Wang

C. C. Y.

(2022). How much should we trust staggered difference-in-differences estimates? Journal of Financial Economics, 144(2), 370–395. https://doi.org/10.1016/j.jfineco.2022.01.004

Bartik

T. J.

(2020). Using place-based jobs policies to help distressed communities. The Journal of Economic Perspectives: A Journal of the American Economic Association, 34(3), 99–127. https://doi.org/10.1257/jep.34.3.99

Belitski

Guenther

Kritikos

A. S.

Thurik

(2021). Economic effects of the COVID-19 pandemic on entrepreneurship and small businesses. Small Business Economics, 58, 593–609. https://doi.org/10.1007/s11187-021-00544-y

Bellemare

M. F.

Wichman

C. J.

(2020). Elasticities and the inverse hyperbolic sine transformation. Oxford Bulletin of Economics and Statistics, 82(1), 50–61. https://doi.org/10.1111/obes.12325

Bengali

(2021). An Index for online microbusinesses. GoDaddy and UCLA Anderson Forecast. https://www.godaddy.com/ventureforward/wp-content/uploads/2021/09/GoDaddyUCLA_MicrobusinessIndex_July2021.pdf

10.

Bergholz

Füner

Lubczyk

Sternberg

Bersch

(2024). Infrastructure required, skill needed: Digital entrepreneurship in rural and urban areas. Journal of Business Venturing Insights, 22(e00488), e00488. https://doi.org/10.1016/j.jbvi.2024.e00488

11.

Bertrand

Duflo

Mullainathan

(2004). How much should we trust differences-in-differences estimates? The Quarterly Journal of Economics, 119(1), 249–275. https://doi.org/10.1162/003355304772839588

12.

Burbidge

J. B.

Magee

Robb

A. L.

(1988). Alternative transformations to handle extreme values of the dependent variable. Journal of the American Statistical Association, 83(401), 123–127. https://doi.org/10.2307/2288929

13.

Callaway

Goodman-Bacon

Sant’Anna

P. H.

(2024). Difference-in-differences with a continuous treatment (No. w32117). National Bureau of Economic Research. https://doi.org/10.3386/w32117

14.

Callaway

Sant’Anna

P. H. C.

(2021). Difference-in-Differences with multiple time periods. Journal of Econometrics, 225(2), 200–230. https://doi.org/10.1016/j.jeconom.2020.12.001

15.

Cameron

A. C.

Miller

D. L.

(2015). A practitioner’s guide to cluster-robust inference. The Journal of Human Resources, 50(2), 317–372. https://muse-jhu-edu.ezproxy1.lib.asu.edu/article/581178 https://doi.org/10.3368/jhr.50.2.317

16.

Capello

(2009). Spatial spillovers and regional growth: A cognitive approach. European Planning Studies, 17(5), 639–658. https://doi.org/10.1080/09654310902778045

17.

Chiu

Lan

Liu

(2025). Causal panel analysis under parallel trends: Lessons from a large reanalysis study. The American Political Science Review, 120(1), 1–22. https://doi.org/10.1017/s0003055425000243

18.

Cunningham

(2021). Causal inference: The mixtape. Yale University Press. https://play.google.com/store/books/details?id=PSEMEAAAQBAJ

19.

de Chaisemartin

D’Haultfœuille

(2020). Two-way fixed effects estimators with heterogeneous treatment effects. The American Economic Review, 110(9), 2964–2996. https://doi.org/10.1257/aer.20181169

20.

Fairlie

(2020). The impact of COVID-19 on small business owners: Evidence from the first 3 months after widespread social-distancing restrictions. Journal of Economics & Management Strategy, 29(4), 727–740. https://doi.org/10.1111/jems.12400

21.

Galster

Walker

Hayes

Boxall

Johnson

(2004). Measuring the impact of community development block grant spending on urban neighborhoods. Housing Policy Debate, 15(4), 903–934. https://doi.org/10.1080/10511482.2004.9521526

22.

Goodman-Bacon

(2021). Difference-in-differences with variation in treatment timing. Journal of Econometrics, 225(2), 254–277. https://doi.org/10.1016/j.jeconom.2021.03.014

23.

Helsper

(2021). The digital disconnect : The social causes and consequences of digital inequalities. 1–232. http://www.torrossa.com/gs/resourceProxy?an=5019480&publisher=FZ7200

24.

HUD. (2007). CDBG national objectives. https://www.hud.gov/sites/documents/DOC_16472.PDF

25.

HUD. (2023). Community development block grant grantee areas [Data set]. https://hudgis-hud.opendata.arcgis.com/datasets/02646919444d4fddbc477987ef0ec1e1

26.

Hui

Toyama

Pal

Dillahunt

(2018). Making a living my way: Necessity-driven entrepreneurship in resource-constrained communities. Proceedings of the ACM on Human Computer Interaction, 2(CSCW), 1–24. https://doi.org/10.1145/3274340

27.

Huntington-Klein

(2022). The effect: An introduction to research design and causality. Chapman and Hall. https://www.taylorfrancis.com/books/mono/10.1201/9781003226055/effect-nick-huntington-klein

28.

Imai

Kim

I. S.

(2021). On the use of two-way fixed effects regression models for causal inference with panel data. Political Analysis: An Annual Publication of the Methodology Section of the American Political Science Association, 29(3), 405–415. https://doi.org/10.1017/pan.2020.33

29.

Internet Corporation for Assigned Names and Numbers. (2012). Welcome to ICANN. https://www.icann.org/resources/pages/welcome-2012-02-25-en

30.

Jackson

Lee

Lin

Ratnatunga

(2018). Best-Performing cities 2018: Where America’s jobs are created. Milken Institue. https://milkeninstitute.org/report/best-performing-cities-2018-where-americas-jobs-are-created

31.

Kolko

(1999). The Death of Cities? The Death of Distance? Evidence from the Geography of Commercial Internet Usage. Cities in the Global Information Society Conference, Newcastle upon Tyne.

32.

Malanga

(2017, October 11). Let’s Kill the CDBG. City Journal. https://www.city-journal.org/article/lets-kill-the-cdbg/

33.

McCullough

(2024). Place-Based policy and neighborhood business density: Impacts of the community development block grant program. Urban Affairs Review, 61(1), 161–188. https://doi.org/10.1177/10780874241241255

34.

McCullough

(2025). Digital entrepreneurship and local economic development: Strategies for inclusive growth. Arizona State University.

35.

Moretti

(2012). The new geography of jobs. Houghton Mifflin Harcourt. https://play.google.com/store/books/details?id=br0S54w0u_sC

36.

Morris

M. H.

(2020). The liability of poorness: Why the playing field is not level for poverty entrepreneurs. Poverty & Public Policy, 12(3), 304–315. https://doi.org/10.1002/pop4.283

37.

Moss

M. L.

Townsend

(1997). Tracking the net: Using domain names to measure the growth of the internet in U.S. cities. Journal of Urban Technology, 4(3), 47–60. https://doi.org/10.1080/10630739708724566

38.

Mossberger

LaCombe

Tolbert

C. J.

(2022). A new measure of digital economic activity and its impact on local opportunity. Telecommunications Policy, 46(1), 102231. https://doi.org/10.1016/j.telpol.2021.102231

39.

Mossberger

Martini

N. F.

McCullough

Tolbert

C. J.

(2023). Digital economic activity and resilience for metros and small businesses during COVID-19. Small Business Economics, 60(4), 1699–1717. https://doi.org/10.1007/s11187-022-00674-x

40.

Mossberger

McCullough

Molina

Kim

(2021a). Policy brief: Digital entrepreneurship in communities of color. ASU Center on Technology, Data and Society. https://techdatasociety.asu.edu/content/policy-brief-digital-entrepreneurship-communities-color

41.

Mossberger

Tolbert

C. J.

LaCombe

S. J.

(2021b). Choosing the future: Technology and opportunity in communities. Oxford University Press.

42.

Nambisan

Wright

Feldman

(2019). The digital transformation of innovation and entrepreneurship: Progress, challenges and key themes. Research Policy, 48(8), 103773. https://doi.org/10.1016/j.respol.2019.03.018

43.

Neumark

Simpson

(2015). Place-Based policies. In Duranton

Henderson

J. V.

Strange

W. C.

(Eds.), Handbook of regional and urban economics (Vol. 5, pp. 1197–1287). Elsevier. https://doi.org/10.1016/B978-0-444-59531-7.00018-1

44.

Organisation for Economic Co-operation and Development. (2019). The missing entrepreneurs 2019: Policies for inclusive entrepreneurship. https://doi.org/10.1787/3ed84801-en

45.

Overton

Stokan

(2023). Rethinking development and redistribution policy: Testing the local expenditure assumption using the community development block grant program. Journal of Urban Affairs, 47(1), 1–21. https://doi.org/10.1080/07352166.2023.2171880

46.

Penghui

Xicang

Haili

(2022). Direct and indirect effects of health expenditure on economic growth in China. La Revue de Sante de La Mediterranee Orientale [Eastern Mediterranean Health Journal], 28(3), 204–212. https://doi.org/10.26719/emhj.22.007

47.

Pew Research Center. (2021, April 7). Internet/broadband fact sheet. https://www.pewresearch.org/internet/fact-sheet/internet-broadband/?menuItem=2ab2b0be-6364-4d3a-8db7-ae134dbc05cd

48.

Pooley

K. B.

(2014). Using community development block grant dollars to revitalize neighborhoods: The impact of program spending in Philadelphia. Housing Policy Debate, 24(1), 172–191. https://doi.org/10.1080/10511482.2013.851100

49.

Rosenfeld

R. A.

Reese

L. A.

Georgeau

Wamsley

(1995). Community development block grant spending revisited: Patterns of benefit and program institutionalization. Publius, 25(4), 55–72. https://doi.org/10.1093/oxfordjournals.pubjof.a038225

50.

Shambaugh

J. C.

Nunn

(2018). Place-based policies for shared economic growth. Hamilton Project, Brookings. https://www.brookings.edu/wp-content/uploads/2018/09/THP_PBP_fullbook_web_1003.pdf

51.

Song

A. K.

(2019). The digital entrepreneurial ecosystem—a critique and reconfiguration. Small Business Economics, 53(3), 569–590. https://doi.org/10.1007/s11187-019-00232-y

52.

Stam

van de Ven

(2021). Entrepreneurial ecosystem elements. Small Business Economics, 56(2), 809–832. https://doi.org/10.1007/s11187-019-00270-6

53.

Stokan

Overton

(2020). NTA Paper: 45 years and counting: What is the fiscal and economic legacy of the CDBG program. UMBC Faculty Collection. https://nta.confex.com/nta/2020/mediafile/ExtendedAbstract/Paper4035/NTA%20Paper%20Final%20Stokan%20and%20Overton.pdf

54.

Sussan

Acs

Z. J.

(2017). The digital entrepreneurial ecosystem. Small Business Economics, 49(1), 55–73. http://www.jstor.org/stable/44697212 https://doi.org/10.1007/s11187-017-9867-5

55.

The National Association of Housing and Redevelopment Officials (NAHRO). (2024, October 10). No home left offline: Closing the digital divide for public housing residents. https://www.nahro.org/news/no-home-left-offline-closing-the-digital-divide-for-public-housing-residents/

56.

The Pew Charitable Trusts. (2016). Neighborhood poverty and household financial security. https://www.pewtrusts.org/∼/media/assets/2016/01/chartbook–neighborhood-poverty-and-household-financial-security_v3.pdf

57.

The Pew Charitable Trusts. (2023). How to close the digital divide in affordable rental communities. https://pew.org/429aoIM

58.

University of Central Florida Libraries. (2023). Statistics, demographics and census: ZIP Code > Census tracts. UCF Research Guides. https://guides.ucf.edu/statistics/zip

59.

van Deursen

Helsper

Eynon

van Dijk

(2017). The compoundness and sequentiality of digital inequality. International Journal of Communication Systems, 11(0), 22. https://ijoc.org/index.php/ijoc/article/view/5739

60.

Varadhan

Seeger

J. D.

(2013). Estimation and reporting of heterogeneity of treatment effects. In Developing a protocol for observational comparative effectiveness research: A user’s guide (pp. 35–43). Agency for Healthcare Research and Quality (US). https://www.ncbi.nlm.nih.gov/books/NBK126188/

61.

Venture Forward; GoDaddy. (2022). 2022 National survey results. https://www.godaddy.com/ventureforward/2022-national-survey-results/

62.

Venture Forward; GoDaddy. (2024). 2024 National survey results. https://www.godaddy.com/research/explore-the-data/annual-report-2024/

63.

Walker

Hayes

Galster

Boxall

Johnson

(2002). The impact of CDBG spending on Urban neighborhoods. The Urban Institute. https://citeseerx.ist.psu.edu/document?repid=rep1&type=pdf&doi=e3084adb069b06412d71d2ae7f54d2a090d6632d

64.

Wang

Hamad

White

J. S.

(2024). Advances in difference-in-differences methods for policy evaluation research. Epidemiology (Cambridge, Mass.), 35(5), 628–637. https://doi.org/10.1097/EDE.0000000000001755

65.

Wardrip

Williams

Hague

(2011). The role of affordable housing in creating jobs and stimulating local economic development: A review of the literature. The Center for Housing Policy. https://www.opportunityhome.org/wp-content/uploads/2018/02/Housing-and-Economic-Development-Report-2011.pdf

66.

Wing

Simon

Bello-Gomez

R. A.

(2018). Designing difference in difference studies: Best practices for public health policy research. Annual Review of Public Health, 39, 453–469. https://doi.org/10.1146/annurev-publhealth-040617-013507

67.

Wooldridge

J. M.

(2025). Two-way fixed effects, the two-way mundlak regression, and difference-in-differences estimators. Empirical Economics, 69, 2545–2587. https://doi.org/10.1007/s00181-025-02807-z

68.

Yáñez-Valdés

Guerrero

(2024). Determinants and impacts of digital entrepreneurship: A pre- and post-COVID-19 perspective. Technovation, 132, 102983. https://doi.org/10.1016/j.technovation.2024.102983

69.

Zuo

G. W.

(2020). Getting beneath the hood of effective place-based policies: Evidence from the Community Development Block Grant. University of Maryland College Park. http://econweb.umd.edu/∼zuo/files/ZuoGeorge_JMP.pdf

Supplementary Material

Please find the following supplemental material available below.

For Open Access articles published under a Creative Commons License, all supplemental material carries the same license as the article it is associated with.

For non-Open Access articles published, all supplemental material carries a non-exclusive license, and permission requests for re-use of supplemental material or any part of supplemental material shall be sent directly to the copyright owner as specified in the copyright notice associated with the article.

0.04 MB

0.00 MB