The latest issue of our e-newsletter, EntreWorks Insights, is now available. This issue examines the power of place in economic development, and discusses how we can use work spaces,such as our offices, business incubators, and coworking spaces, to help build social capital, build community, and advance the cause of economic development. You can learn more and subscribe here.
As a Georgetown University alum, I’m very proud to see the first graduating class of the Pivot Program, Georgetown’s new program to help returning citizens learn the ins and outs of entrepreneurship. The first cohort, who graduated in late June, included 15 participants, are already enjoying early success. A good share have started profitable businesses, and others are working at full-time jobs. In addition to accessing entrepreneurship training and other resources, Pivot participants can also access space at the Georgetown Venture Lab, co-located at a WeWork facility near the White House. The program is a partnership with the DC government and Georgetown. More communities need to embrace these kinds of strategies to better integrate and support residents who are returning from prison—entrepreneurship is a great vehicle to take a job or make a job themselves. Georgetown and DC are not only in this kind of effort. You can learn more about similar programs and resources from groups like the Association for Enterprise Opportunity and the George Washington University Law School.
I’m eagerly anticipating an upcoming vacation to Maine where we regularly hike, paddle, and just hang out on lands protected by groups such as the Maine Coast Heritage Trust and the Great Pond Mountain Conservation Trust. I’ve always appreciated these protected lands for their natural beauty, but they’re also an important contributor to new job creation and economic development. That’s the key finding of new study (reported in The Conversation) that assessed the impact of land trusts and land preservation across New England over the past 25 years. Land trusts are a big deal in New England, and, over the past few decades, they have preserved more than five million acres. But, they can be controversial and are often opposed due to their perceived limitations on resource use. But, this research finds that land preservation can often produce better economic outcomes, finding that communities with higher levels of land protection also had higher employment numbers. And, these impacts were even stronger in the most rural areas. How does this work? The protected lands support the creation of new jobs in recreational tourism and sustainable resource extraction, while also creating more attractive communities to live, work, and play. Lots of groups around the US, such as the Northern Forest Center, the Conservation Fund, Pennsylvania Wilds and Heart of Appalachia are out spreading this message that land conservation and economic development can and do go hand in hand.
As we get closer to the 2020 election year, DC-based think tanks are starting to float big ideas on how to jumpstart the economy in our distressed regions. Third Way has recently released a plan to create a new $60 billion Opportunity Fund to encourage venture capital (VC) investments in locations outside of America’s VC hotspots. That’s a big menu of places since the VC industry is heavily concentrated in a handful of locations, like Silicon Valley and the Boston area. At $60 billion, the Opportunity Fund is a big idea, but not necessarily a new one. It would operate much like parts he Obama Administration’s State Small Business Credit Initiative (SSBCI) which was developed as a response to the Great Recession. That program has been closely evaluated, and generally was found to be found effective. In addition, we have decades of experience, in the US and globally, in how to best operate public-backed venture funds of this type, and groups like SSTI, CDFA, and CDVCA have developed great expertise in this issue-area. This deep knowledge base yields several important lessons for the Opportunity Fund. Any new venture fund must be part of a continuum of capital sources, closing persistent capital gaps. It shouldn’t be a stand-one fund that only targets a small share of the local market. In addition, customization and localization matter. Local investors must be on board, and the fund must be targeted toward local entrepreneurial needs, which, in many places, will mean investments in smaller deals at earlier stages in a more diverse mix of industries. I don’t know if the Fund has a chance of being enacted, but I’m happy to see the Opportunity Fund concept out in the policy debate. We need more discussion and more focus on this important topic.
For the past few years, the economics and policy literature has been full of stories bemoaning declining dynamism in the US economy. As recent studies have shown, the number of new firm starts is down, their survival rates are shorter, and their contributions to new job growth are lower. All of these findings come from excellent research using data on employer businesses, i.e. business establishments with at least one employee. This is a sizable data set, accounting for about 6 million establishments. Yet, this focus misses an important submerged part of the iceberg, i.e. America’s 22 million sole proprietorships. These 22 million establishments have only one employee—the owner or sole proprietor. Self-employment ventures have typically been under-represented in the research literature, and in economic development circles, where it’s often argued that they have little impact on local economies. However, as the gig economy becomes more important, we’re going to have to change this outdated way of thinking.
An interesting new research paper from economists at the University of Toronto and Texas A&M helps advance this cause. Pedro Bento and Diego Restuccia opted to look at recent business dynamism trends in a manner that included all types of establishments—employer businesses and non-employer businesses. Their paper, “The Role of Nonemployers in Business Dynamism and Aggregate Productivity,” finds that the number of non-employer firms has grown rapidly while the number of firms with employees has stagnated. This shift in business patterns also has effects on economic productivity, and these growing non-employer firms have contributed up to ¼ of aggregate productivity growth (roughly .26% of overall 1% productivity growth since the 1980s). This preliminary research suggests some interesting avenues for future research, which are well covered by the authors. For practitioners, it suggests that we need to pay closer attention to these non-employer businesses, recognizing their growing economic importance and their important potential contributions to improved economic competitiveness as well.
We’ve seen a recent flurry of interesting (to me at least) academic writing on innovation policy, much of which is linked to the NBER’s annual Innovation Policy and the Economy conference.. Here’s a quick snapshot and some links to some articles that might be worth a scan.
The Spatial Mismatch between Innovation and Joblessness (Glaeser/Hausman): Ed Glaeser is considered one of the leading “gurus” on regional economics and innovation. Here, he and his colleague, Naomi Hausman address one of the key issues facing the US economy today: why are innovative activities concentrated in expensive, crowded cities and are not being dispersed to less expensive and job and innovation hungry areas across the US? The essay reviews various causal factors for this “spatial mismatch,” and addresses potential policy solutions, such as creation of new “entrepreneur friendly zones,” providing more education support to residents in distressed areas, targeting grants and research funds to these regions, and so on. Ultimately, the authors are somewhat skeptical about any of these potential “solutions,” but they recognize that the spatial mismatch problem cannot be ignored.
The Changing Structure of American Innovation: Some Cautionary Remarks for Economic Growth (Arora, Belenzon, Pattaconi and Suh): This paper describes a critical divide in American innovation. For the past thirty years, corporations have dropped their research arms to focus primarily on “development” as opposed to pure research. Universities have stepped in to fill the research void, but this division does not bode well for economic growth. Today, small start-ups and university tech transfer offices fill the gap that was previously addressed by deep pocketed corporate research arms that tackled major technological challenges. This new innovation division of labor does a poorer job of turning good ideas into novel products and processes.
The Gift of Global Talent (Kerr): This article summarizes William Kerr’s recent book of the same name. He makes a strong case that America’s past innovation success is largely due to our role as the prime landing spot for global talent. As immigration rules tighten, this innovation edge is being lost. Kerr makes the case for an expanded commitment to attract high-skilled immigrants to the US; their contributions will be critical to fueling future economic growth and in addressing widely expected shortages in coming years.
If you’re in the market for professional development opportunities, I’ve got some training programs for you to consider. Over the next couple of months, I’ll be leading several training efforts that might be worth your while. They include:
- June 18-19: National CEDS Forum (Columbus, OH): I’ll be leading a session on economic diversification and resilience, discussing how the regional Comprehensive Economic Development Strategy (CEDS) process can help regions make smart decisions about their economic futures.
- July 30: North Carolina Basic Economic Development Course (Chapel Hill, NC): I’ll be one of the instructors for the annual introductory training program for economic developers in North Carolina and elsewhere.
- July 31: Development District Association of Appalachia (Charleston, WV): I’ll be leading a training session on “Measuring Entrepreneurship and Business Dynamism.”
Hope to see you on the road this summer.
Back in 2014, Congress wisely opted to try a new approach for revitalizing American manufacturing: the Manufacturing USA Network. Manufacturing USA is a public-private network of 14 Manufacturing Institutes that fund and promote research in key disciplines related to manufacturing. Current institutes include centers that focus on additive manufacturing (America Makes), advanced robotics (ARM), sustainable manufacturing (REMADE), and many other sectors. To date, the Institutes have been highly successful. Recent evaluations have been very positive, and they are being considered for future expansion, via new efforts such as the Defense Manufacturing Communities support program. We now have a new Manufacturing Institute evaluation from the Government Accountability Office—something of an in-house government look at the how the Institutes are doing. GAO is also bullish on the programs, finding that they are making good progress. GAO also recommends a greater focus on the long-term sustainability of these programs, especially on how they can attract more private sector funding. The positive assessments are helpful, but I also hope that GAO, Congress, and various federal agencies recognize that a sustained funding commitment will be required to make Manufacturing USA work. Assuming that these programs can be “self-sustaining” in five years is a mistake that will not only affect individual institutes, but will also hamper the ongoing revitalization of American manufacturing. If manufacturing is key to “making America great again,” it’s important enough to continue investing our tax dollars for this important mission.
I spent this morning over at the Aspen Institute for a great panel on Rural Development Hubs. Rural development hubs are a new concept meant to describe new types of organizations and networks focused on rural community building in a holistic way that embraces traditional economic development, local institution building, and a focus on enhancing all forms of local wealth (cultural, social, natural, etc.). The panel included excellent organizations from Arkansas, California, New Hampshire, and Wisconsin, presenting some inspiring stories and some real-life perspectives on the difficulties—and the critical importance—of embracing new approaches to community building in rural America. The event also coincided with release of an excellent issue brief on Rural Development Hubs. This brief offers a lot of good ideas and an excellent introduction to this work—it should be followed later this year by a deeper dive into the rural development hub concept. Look for this work in Summer 2019.
Last week, I was in Denver for an important and interesting meeting of eleven coal-impacted communities from around the Mountain West. The community teams were meeting to develop work plans and to share ideas on how to create new economic opportunities while also responding to job losses in coal-related industries. On Friday, Route 50 published an excellent summary of the session, and our larger project, that is well worth reading. Give it a look—you’ll be inspired by these communities and you’ll also learn some good ideas about economic diversification and smart community planning as well.