Entrepreneurship stimulates economy
It doesn’t take a crystal ball to predict that both the opportunities and the pressures created by today’s global economy will continue into the next year and beyond. The economic landscape shifts dramatically nearly every month as a result of changes in the workforce, access to capital and the availability of new information.
In the midst of this, entrepreneurship has emerged as a powerful engine for economic growth. Entrepreneurship itself is nothing new, but the emphasis it is now receiving certainly is. The reason for this intense interest has to do with the growing awareness of the long-term regional employment growth created by entrepreneurship.
These businesses not only create new local jobs but also generate new growth and wealth in their communities. Entrepreneurs use regional assets to build their companies, and they are critical to bringing new ideas and innovation to the marketplace. They are largely responsible for the quality of life we all enjoy.
Entrepreneurs are educated risk-takers who reap the rewards of an innovative venture. But unlike corporate CEOs or plant managers, entrepreneurs also bear the consequences if their ventures fail. They are managerial decision-makers who marshal the resources to create success for their company.
Entrepreneurs enter self-employment for many reasons. They may want to fulfill a dream or create a lifestyle for themselves and their families. They may have a winning idea that will benefit other businesses or society as a whole. These entrepreneurs enhance the mix of businesses in their communities.
Other entrepreneurs are more aggressive in creating wealth, income and jobs. Some create ventures only to sell them and start others. Such serial entrepreneurs consistently seek new ways to create high value and economic growth.
Those who study entrepreneurship are constantly seeking ways to measure its impact on a region. According to the Federal Reserve Bank of Kansas City, a region that is rich in entrepreneurial breadth contains many kinds of entrepreneurs and a high percentage of entrepreneurs in the population. Breadth is often larger in rural regions than in metropolitan areas.
Equally important, however, is the depth of entrepreneurship in a region, which is determined by gauging the value created by entrepreneurs. Regions with a greater depth of entrepreneurship have self-employed workers with higher average income. According to this research, Boone County’s rate of self-employment is relatively low (less than 16 percent of total employment), but the county is in the mid range for entrepreneurial depth.
Twenty-five years ago, in his book The Job Creation Process, author David Birch showed that small businesses create the majority of jobs in our economy. In the past several years, the Global Entrepreneurship Monitor, an annual worldwide study conducted by Babson College, has consistently demonstrated the strong correlation between the level of entrepreneurial activity in a country and the country’s economic growth. In addition, research by The National Commission on Entrepreneurship concludes that small entrepreneurial ventures have been responsible for 67 percent of inventions and 95 percent of “radial innovations” since World War II. The commission also notes that in many parts of the country, small businesses are contributing new jobs at the same time big businesses are cutting back unemployment. At any given time, approximately 10 million Americans are engaged in business start-up.
In spite of such convincing proof, the majority of resources in economic development programs are still directed toward more traditional economic development strategies, including attraction and incentives. Landing a large distribution center or plant creates many jobs, seemingly overnight.
Along with that comes the requisite media coverage and applause for local officials and policy makers. But the research shows that as easily as those plants are attracted to a region, they can be attracted to some other place with better incentives. They have little loyalty to the community. As soon as the grass looks greener in another state, those jobs created will move to the jobs-lost column, also seemingly overnight.
Entrepreneurs are committed to their communities. They choose their locations for reasons other than incentives. They choose to add to the quality of life, to stay near family or friends, to raise their children in a certain environment, to be near other community resources, such as schools or athletics, and to create opportunities for others in their communities. The entrepreneurs sponsor the little league teams, contribute to local charities and take pride in their homegrown businesses. But entrepreneurs cannot operate in a vacuum. We should support them in every way possible.
That support can take many forms, but communities that truly support entrepreneurship generally possess the following qualities:
Openness to entrepreneurship: This means more than being delighted with the opening of a new store. It means embracing entrepreneurship as an economic development strategy with the belief that the entrepreneurs in your community can create a new generation of successful businesses that create jobs, investments and wealth.
A balance with business attraction: The traditional economic development strategy has been a search for industry to locate in our communities. But truly supporting entrepreneurship means a willingness to broaden the economic development strategy beyond plant attraction.
Programs for entrepreneurs: Community resources should include a networking infrastructure, mentoring programs, business financing services, entrepreneurial training programs, business counseling and youth entrepreneurship education programs.
Willing investors: Entrepreneurs need not only banks and other lending agencies to support their ventures but also individuals and community leaders to lend resources to the effort, either through direct funding or provision of necessary resources to support entrepreneurial growth.
Leadership: Communities need a team of individuals willing to provide leadership to this particular economic development strategy by advocating for entrepreneurs and educating community groups, business and corporate leaders and educational institutions about the importance of small business development.
Willingness to collaborate: Sometimes the necessary expertise resides within another city’s limits. Communities must be willing to reach out for assistance, best practices and critical resources to build their own entrepreneurship infrastructure.
Legislative support: State funding for local technical assistance programs is critically important. Matching funds for federal research and development grants can bring university research to commercialization.
As we look to the New Year, we should commit to supporting and celebrating entrepreneurship of all kinds. Championing high-technology and life science enterprises is wonderful for our community. But we must remember that our main street businesses are equally important. Let us all work to make the landscape as fertile as possible to enable those entrepreneurial ventures to take root and flourish in mid-Missouri and throughout the state.