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Strategies for Supporting Rural Entrepreneurship
- 1. STRATEGIES FOR SUPPORTING RURAL ENTREPRENEURSHIP MICHAELW-P FORTUNATO SAM HOUSTON STATE UNIVERSITY CENTER FOR RURAL STUDIES Presented at NADO October 16, 2016
- 2. PREVIEW • Background • Urbanand rural entrepreneurship • Approaches to entrepreneurship development • How to catalyze action
- 3. Who is anEntrepreneur?
- 4. Who is anEntrepreneur?
- 5. Who is anEntrepreneur? • Job creators – From 1980-2005, all net job growth in the U.S. was from firms less than five years old • Risk-takers – Only half of new firms in the U.S. survive to age five – But, about half the firms on the 2009 Forbes 500 list were launched during a recession – Only 16 percent of new U.S. firms in 2009 were started with venture funding, with over 67 percent funded by personal debt in 2008 • (Source: Kaufmann Foundation 2012)
- 6. Who is anEntrepreneur? • In the U.S., most likely to be in the 50-64 age range, least likely to be in the 20-34 age range – Creative class anyone? • 70 percent are men • 81 percent are white, followed by 9 percent African-American, 6.6 percent Hispanic, and 4 percent Asian • Startup rates very consistent over time • (Source: Kaufmann Foundation 2012)
- 7. Who is anEntrepreneur? • Several “typologies” – Serial vs. Single – Opportunity vs. Necessity – Investment vs. Lifestyle – Farm vs. Nonfarm – High-tech vs. Low-tech – High-growth vs. Low-growth – Venture capital vs. personal funds • Which are more likely to stimulate economic growth? • Which are more likely to exist in rural areas?
- 8. Who is aRURAL Entrepreneur? • Are rural entrepreneurs different than urban entrepreneurs? – Henderson (2002) suggests that: • Rural areas actually had higher self-employment growth in the 2000’s than urban areas • Higher likelihood of employment in ag and natural resources, manufacturing, and services than urban areas – But… • Rural entrepreneurs earn less, conflated with lower education levels (Nolan 2003) • Micropolitans have lowest rates overall (Henderson 2002)
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- 11. Idea Plan FundLaunch Meh. SILICON VALLEY LATE 90’S MODEL OF STARTUP SUCCESS!
- 12. Idea Plan FundLaunch Meh. SILICON VALLEY LATE 90’S MODEL OF STARTUP SUCCESS! X
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- 16. Entrepreneurship: An Urban Phenomenon •“High Growth” entrepreneurship tends to be highly concentrated in urban areas – Spatially driven by agglomeration economies (Acs and Armington 2006) – Spillover effects from major research universities (Audretsch and Lehmann 2005) – Supported by physical and human infrastructures (Henderson et al. 2007) – Same in Europe (Glaeser and Kerr 2009) • But, highly variable across the U.S. – Different county types require a custom approach (Goetz and Rupasingha 2011)
- 20. Why Does Anyof this Matter? • Think about it… – How we define entrepreneurship eventuates how we cultivate what we have defined • Are most rural/lagging regions appropriate for high-tech, high-growth development • Are entrepreneurship development programs really helping rural areas? • Do local residents even have a voice in the matter? – If entrepreneurs are so beneficial to the economy and job creation… • … are current approaches therefore biased against rural areas, creating barriers for citizens?
- 21. Why Does Anyof this Matter? • But… – We can’t just plop down a university, tech sector, or set of urban networks • Even if we did, is this culturally appropriate for rural areas?
- 22. Why Does Anyof this Matter? • … and, Lichtenstein and Lyons (2001) have shown the inefficacy of most entrepreneurship programs – Compete for the same entrepreneurs – Huge overlap in offerings – Firm-by-firm rather than community-wide • State-level efforts ineffective (Dabson et al. 2003) • Can we build a better program? – Can we build a better culture for entrepreneurship?
- 23. CHALLENGES FACING THE NEWRURAL ECONOMY
- 24. • Low populationdensity • Limited local demand • Isolation from critical networks • The “real” Wal-Mart phenomenon • No spaces/institutions for innovators • Limited tech access/uptake
- 26. CULTURE • Habits |norms • Role models | tacit knowledge • Priorities | values
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- 28. OPPORTUNITY • FOOD •Growth in demand • New product segments • Demand for local/organic • Global luxury • ENERGY • Global growth 1.5% per year (EIA 2013) • Diversification • Low environmental impact • WATER • Drought risk • New irrigation/ag techniques • Clean water technology • LIFESTYLE • Families/retirees • Room to think • Low overhead
- 29. Rural Entrepreneurship Advantage •Entrepreneurs are natural problem-solvers, and can quickly develop solutions to persistent local problems. Got a tricky local issue? Give it to a group of local entrepreneurs to solve with input from citizens. • Entrepreneurs are more likely to stay in the communities where they launch their business, unlike large companies based elsewhere. • Rural entrepreneurs may create fewer jobs than large companies, but those jobs are more likely to be tailored to the skills available in the local community. • Entrepreneurs can provide goods and services in important niches that meet local tastes and preference. They do this much better than Wal-Mart. • Entrepreneurs often participate in community and civic life.
- 30. Rural Entrepreneurship Advantage •When something goes wrong with their product or service, you can talk to an entrepreneur to make things right. • Entrepreneurs often take paths others find too risky, serving as either warning or encouragement to others – a public service either way. • In some rural places, creating even 5 jobs (instead of 500) still makes a big difference. And my favorite: • Entrepreneurs help bring creativity and imagination to the community, and can serve as a role model for others who want to take creative risks.
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- 33. Alternative Entrepreneurship Development Strategies •Let’s go back to our background as community scholars: – Networks matter (Granovetter 1973) – Development of social fields and the broader community field in a place people care about (Wilkinson 1991) – Places contain assets of all sorts that can be used as building blocks for development (Kretzmann and McKnight 1993) – Development requires purposive action (Wilkinson 1991)
- 34. Local Society andRural Entrepreneurship • In deeply lagging areas, there may not be sufficient resources for “mainstream development” – It costs too much to build incubators, sophisticated infrastructure, programs • Can we capitalize on making the culuture more supportive for entrepreneurs? – Hustedde (2007) thinks so • Culture plays a vital role in supporting entrepreneurship
- 35. And Knowledge SystemsMatter • Mentoring as tacit knowledge – Non-codified knowledge transfer through mentoring • Storey (1994): People more likely to become entrepreneurs if they have parents who are entrepreneurs • Blanchflower (2007): Having close relations who are entrepreneurs very important to entrepreneurial likelihood • New approaches use mentoring – Entrepreneurship Development Systems (EDS) (Lichtenstein and Lyons 2001)
- 36. National/Regional PolicyFacilitating Conditions EntrepreneurialCommunitiesEntrepreneurial Ecosystem Entrepreneurship Development Approaches
- 37. National/Regional PolicyFacilitating Conditions EntrepreneurialCommunitiesEntrepreneurial Ecosystem • Like a recipe book • About the stuff/programs in your community • Spatial determinants of success • Driven by governments/quasi- government organizations • Beneficial legal framework • Incentive systems • Entrepreneur-led • PROCESS of entrepreneurship development • Highly adaptable and stochastic • Develops along lines of natural advantage • Evolves over time • Community-led • PROCESS of entrepreneurship development • Inheres in networking/ relationships • Building a common ethic/ culture
- 38. National/Regional PolicyFacilitating Conditions EntrepreneurialCommunitiesEntrepreneurial Ecosystem • PRO: Conceptually simple • PRO: Easy to analyze - you’ll be popular at conferences • CON: Not process/people oriented • PRO: Looks great politically • PRO: Provides some legitimately good incentives • CON: Historically ineffective • CON: Wrong incentive structure • PRO: Highly durable/ sustainable due to adaptive nature • PRO: Entrepreneur-led and highly credible • CON: Hard to control • CON: Can be necessarily brutal • PRO: Highly effective and cheap! • PRO: Also builds community beyond entrepreneurs • CON: Sustainability • CON: Often not entrepreneur- led
- 40. Entrepreneurs also need •Cultural/human support • An ethic of collaboration • A minimal amount of resistance (via negativa) • PROCESS ELEMENTS THAT APPLY TO THE GROUP • Among entrepreneurs • Between entrepreneurs and their communities
- 41. IT’S NOT ABOUTYOU. (BUT YOU CAN TAKE THE FIRST STEP AND PLAY AN IMPORTANT ROLE!)
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- 47. Power Systems inCommunities • “Company Towns” – Where is the tacit knowledge? • Entrepreneurship not viewed as legitimate or valued lifestyle – Get a job – Core/periphery problems may stifle entrepreneurship • In places where employment is valued over self- sufficiency • Necessity entrepreneurs not very successful – Only leads to bad publicity
- 48. Idea Plan FundLaunch Meh. SILICON VALLEY LATE 90’S MODEL OF STARTUP SUCCESS!
- 49. NEW MODEL OFENTREPRENEURIAL DEVELOPMENT COMMUNITY IDEA REFINE INSPIRE PROTOTYPE PROTOTYPE PROTOTYPE FAIL SMALL TRY AGAIN SCALE UP!
- 50. TEN STEPS TOACTION
- 51. Fortunato’s Brain Ursus arctoshorribilis
- 52. 1) Create Networks BuildWeak Ties
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- 56. 3) Create aSafe Space
- 57. 4) Create Purpose IdentifyCommon Purpose
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- 61. 7) Learn YourABC’s –B– Belonging: “Let’s Work Together” in a downtown group –C– Competence: “Let’s Try New Things” and create a local space for innovation –A– Autonomy: Freedom to pursue individual interests, not dictated by broader group. Direct competition welcome
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- 64. 9) Learn FromFailure
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- 66. 12 PEOPLE YOUMEET IN COMMUNITIES 1) Facilitator 2) Very quiet, shy, and awkward 3) Extremely outgoing & popular 4) Super agreeable 5) Professional contrarian 6) Bizarre off-topic guy/ lady 7) Detail-oriented analyst 8) Abstract high-creative 9) Wants to get to work now 10)Scared of new ideas & change 11)Just be yourself 12)Just be yourself
- 67. 1) Create Networks BuildWeak Ties
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- 69. ? ?• Break into groups •What is the best thing about the place you live? What is the worst thing?
- 70. 3) Create aSafe Space
- 71. ! !• Set somerules for the group. • What is essential for good communication? • How will you handle failure/ bad ideas?
- 72. 4) Create Purpose IdentifyCommon Purpose
- 73. ? ?• Break into groups •How can we build common purpose around entrepreneurship? Who should lead?
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- 76. ! !• List specificgoals that ENTREPRENEURS control. • What is the highest priority?
- 77. 7) Learn YourABC’s –B– Belonging: “Let’s Work Together” in a downtown group –C– Competence: “Let’s Try New Things” and create a local space for innovation –A– Autonomy: Freedom to pursue individual interests, not dictated by broader group. Direct competition welcome
- 79. SOLVE PROBLEMS WITHPROBLEMS
- 80. Idea Plan FundLaunch Meh. SILICON VALLEY LATE 90’S MODEL OF STARTUP SUCCESS!
- 81. NEW MODEL OFENTREPRENEURIAL DEVELOPMENT COMMUNITY IDEA REFINE INSPIRE PROTOTYPE PROTOTYPE PROTOTYPE FAIL SMALL TRY AGAIN SCALE UP!
- 82. ? ?• Solve thetop two simultaneously • Who will take ownership over the first steps? • What can they contribute that is unique?
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- 84. 9) Learn FromFailure
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- 86. ! !• Create abasic charter/identity. • How will you keep people coming back? • How will you expand membership?
- 87. Solving local problemswith local talent = empowerment
- 88. GET YOUR ECOSYSTEMMOVING! • Get your innovators together • Create a safe space for sharing ideas • Foster and involve entrepreneurial leadership • Tolerate failure, celebrate success • Prototype, prototype prototype, THEN scale up!
- 89. Leaping Barriers • Focuson building local interaction – Effective ways of convening people who normally do not communicate • Focus on building purpose – Everyone interacts, but about what? • Strategic, focused interaction around small business • Focus on building voice – The floodgates open when small business has a seat at the table • Taken seriously
- 90. Conclusions – NewDirections? • Community theory may unlock some secrets for developing a more supportive entrepreneurship culture – And a broader community culture as well • Use one to fuel the other • Create alternative economies based on different values – Not just alternative products, services, or markets
- 91. Conclusions – NewDirections? • Encourage non-traditional participation and collaboartion – Start small and scale up! – Culture of prototyping and quick action
- 92. Questions• Michael W-PFortunato • Sam Houston State University • Center for Rural Studies • [email protected]