What Factors Spur Rural Startups? Lessons from Texas

An interesting new research article sheds some interesting light on the factors affecting the startup and growth prospects of businesses based in rural communities.  The study, from researchers at the University of Texas-Austin, uses machine learning techniques to distill which community factors are most associated with the creation of new firms based in rural Texas counties between 2008 and 2018.  Besides pioneering new data analysis techniques, the study finds some interesting distinctions in the startup patterns of urban vs. rural firms. In urban areas, key factors associated with firm creation include patents, local bank deposits, education levels, and employment levels.  The mix of impact factors in rural regions is slightly different, rural firm growth more closely associated with a strong local presence of health care/childcare industries, age distribution, in-migration, the unemployment rate, and social capital. Ethnic diversity, population size, and the number of firms created in the previous are important related variables in both urban and rural settings.

The study includes some useful insights, and suggests that different policy emphases may be warranted in urban vs rural settings.   Some of the findings, such as those related to local energy development capacity, may be unique to Texas, and others may reflect the growing importance of regional service center communities (e.g., strong health care and childcare industries). This is definitely worth a read for those working to support rural entrepreneurs.