When it comes to economic development, especially in rural areas, broadband matters. That’s a pretty banal statement, akin to saying something like Tom Brady is a good quarterback. Yet, it’s true in so many ways. We’ve often talked about broadband as means to link businesses to the global marketplace or to bring the “wonders” of the Internet etc. to homes in rural regions. But, a new analysis in the Daily Yonder shows that broadband may be even more important that we thought–it may be the deciding factor in where people, especially millennials, decide to live, work, and play. The study examined recent (2010-2016) population trends in rural America and found some interesting patterns. Rural counties with the highest population growth among millennials were also those with the lowest levels of digital divide, based on the Digital Divide Index created by researchers at Purdue. Meanwhile, the rural places with poor digital divide scores saw an average population decline of 3.2 percent. This population decline among millennials was even higher at 6.6. percent. Rural counties with better broadband access saw average population growth of 7.5 percent, and 13.5% among millennials. While it’s too early to claim this study as the last word, the research does suggest that if you build it, they might come. But, if you don’t build it, they’ll probably leave. Broadband will be the essential infrastructure behind any effort to spur growth and attract new residents to rural regions.
The end of April is turning out to be extremely busy in terms of speaking engagements. If you happen to be attending any of these events, give me a holler. I’d love to catch up.
Hope to see you on the road!!
Many of our customers at EntreWorks Consulting want help with mapping their innovation and entrepreneurship-related ecosystems, i.e., the set of regional actors and networks that support the start and growth of businesses. For example, we’ll soon be releasing results from an Appalachian Regional Commission project on ecosystems in Appalachia. Mapping ecosystems can be challenging. There is no one best way to proceed, and sources of data can be difficult to access. It gets easier if you have lots of funding, which is rarely the case. (See these excellent World Bank studies for examples of in-depth and high-level, high cost mapping efforts).
If you’re interested in tips for ecosystem mapping, I can highly recommend a new and very detailed guide from the German Agency for International Cooperation. The Guide for Mapping the Entrepreneurial Ecosystem does what the title promises, offering a very hands-on set of tips on how to understand your regional ecosystem and how to measure its capacities and performance. As the Guide’s subtitle suggests, it will help you to observe, analyze, and visualize what’s happening with innovation and entrepreneurship in your community.
I’ve blogged a bit in the past about how new research techniques, especially randomized controlled trials, are providing new insights into what works in innovation and entrepreneurship policy. (The Innovation Growth Lab is a great resource to track recent trends.) It’s actually getting tough to keep up with new research, as useful studies and reports seem to be coming out on a daily basis. The latest example comes to us from Geoffrey Barrows in a report published by the French Association of Environmental and Resource Economists (FAERE). This study asks the basic question: Do business accelerators and startup business competitions work? In other words, do the world’s many business accelerators and business idea/plan competitions actually produce better business outcomes in terms of jobs, profitability, innovation and firm survival? Barrows studied 460 different programs and competitions that took place in 113 countries, engaging more than 20,000 firms. He finds that the competitions have a big impact. Competition winners have a 64% higher rate of survival, and their employment levels exceed non-winners by 47%. Finally, competition winners also win in the quest for capital, as the average winner typically raises an additional $260,000 in follow-on funding. We should expect that accelerator graduates perform well–after all, that is our goal! But, it’s still helpful to have new and strong evidence that these programs work.
The latest edition of EntreWorks Insights, our quarterly e-newsletter, is now available. This issue looks at interesting new legislative proposals under consideration in the US Congress. A future issue will look at new ideas from the States. You can view back issues and subscribe here.
The quality of official data on startups and entrepreneurs in the US is generally quite poor, especially when compared to what is captured in other developed economies. Meanwhile, government funding for key programs like the decennial Census is declining. But, it’s not all bad news as some new data sources are coming on line. The latest is the US Census Bureau’s Business Formation Statistics dataset, which was just unveiled last month. The BFS tracks when individuals apply for a new Employer Identification number, via the Internal Revenue Service’s SS-4 form. The BFS, which tracks data at the state and county level, should give us an excellent picture that projects a location’s future entrepreneurial potential, i.e. are there lot of local folks starting new companies?
A related research paper assessing the BFS results offers some tantalizing ideas on how this data can be used. It finds that regions with shale gas activity showed much higher EIN application numbers. Similarly, and not surprisingly, EIN applications were also higher in places that have recovered most quickly from the Great Recession. Finally, a related National Bureau of Economic Research paper finds that the number of new EIN applicants with potential to create new jobs still falls below levels found before 2008.
There’s a lot of cool stuff happening in the Midwest-Great Plains region that many folks have dubbed The Silicon Prairie. The latest good idea is the Technology Association of Iowa’s The Iowan Project, a neat website designed to track former Iowans and encourage them to consider returning home for exciting new lives and careers. This effort is based on the recognition of core challenge facing Iowa and other rural states. They groom talent that often opts to leave for other regions (for a great book-length dive into this issue, check out Hollowing Out the Middle: The Rural Brain Drain and What it Means for America). Reversing this brain drain involves encouraging the in-migration of new residents and encouraging former residents to return home. This latter task is actually easier, as talented young people often want to return home to raise families. Yet, they fear that local career options may be limited. Efforts like the Iowan Project help these folks identify career opportunities back in Iowa, and build networks with fellow Iowans across the US. The ultimate success of the Silicon Prairie will depend on talent development—home grown talent and talent that moves or returns to the region. Efforts like the Iowan Project are sure to help on all fronts. If you’re an Iowan, drop your pin on the Iowa Project Map. If you’re not from Iowa, consider bringing a similar project to your own community.
My longtime friends and colleagues, Maria Meyers and Kate Pope Hodel, have just published a new book that’s worth your time if you’re working in economic development or entrepreneurial ecosystem building. Beyond Collisions is a how to guide on “how to build your entrepreneurial infrastructure.” Maria and Kate have been doing this for decades, so they have deep experience and an understanding of what works and what doesn’t if you’re trying to get more startups and more growth businesses in your community. It’s a quick and easy read that’s works like a playbook that you can refer to on a regular basis. The book’s real benefit is that it is chock full of real life stories and examples that come from the authors’ long experience building entrepreneurial communities in Kansas City and elsewhere. This real world focus means that you can also learn about the less sexy sides of ecosystem building: how to measure your impacts, how to fund it, and how to sustain momentum in the face of hard times. This is a useful guide for new ecosystem builders and as a refresher course for those with more experience in the field.
If you’re looking to understand what’s happening with the American economy at the state and local level, let me suggest that you check out the 2018 Prosperity Now Scorecard, which was released today. I’m a big fan of this benchmarking tool, because it provides a holistic look at economic prosperity. It doesn’t just track job or business growth; it also looks at poverty rates, home ownership, health care access and the like. It presents a deep dive look at the quality of life across the US. The Scorecard has been produced for decades, and it gets improved every year. This year’s version tracks states, counties, and metro areas, and allows for downloads of profiles for these various geographies. The site has tons of insights, and it’s worth spending some time surfing around. As usual, Prosperity Now also ranks states on how they do in terms of providing economic opportunity and prosperity for all residents. This year’s rankings have the following top performers (in rank order): Vermont, New Hampshire, Hawaii, Minnesota, and Utah. This year’s weakest performers include Mississippi, Louisiana, Georgia and Nevada.
When working with communities to build entrepreneurial ecosystems, I’m often asked for the “secret sauce” to identifying successful entrepreneurs in advance. I wish I had this power, but it’s sadly not that easy. A large chunk of the entrepreneurship literature is focused on this question of what factors contribute to a business’ long-term success. If, for example, you take a look at the excellent Startup Cartography Project, you’ll find lots of interesting correlations. For example, a new venture has a massively higher prospect of success if it takes out a patent in the first year, is headquartered in Delaware, and is organized as a corporation (as opposed to a partnership or LLC). Another interesting stream of research assesses how personality traits affect business success.
All of this excellent research still doesn’t translate well into the real world, in the sense of providing clear directions to winnow out good ideas and good businesses from bad. Another recent research piece from the World Bank as offered further confirmation on this front. This study, “Man vs. Machine in Predicting Successful Entrepreneurs,” looked at Nigerian business plan competitions and tested a number of ways—from expert judges to economic modeling to the use of machine learning to predict business success–to assess the quality of business pitches and ideas. The results? None of the methods proved to be very effective in predicting success, leading to this “dog bites man” conclusion from the authors: “Business success is really hard to predict.” Well, we knew that already but it’s always useful to be reminded of the dangers of hubris and excessive confidence. Even when we’re armed with the best research and analysis, a good entrepreneur can surprise us!