Small Business Labs

Can Entrepreneurs Save Detroit?

In case you haven't heard, Detroit's a mess. It has acres of empty buildings, frightening crime rates, crushing public debt and sky high unemployment.

Despite these problems, there's been a flurry articles on entrepreneurs partnering with foundations and grassroots organizations to rebuild the once great city.  

These include:

How a Young Community of Entrepreneurs is Re-Building Detroit: from Fast Company, it covers some of the many entrepreneurs attempting to build businesses in Detroit.  

My favorite quote from this article is:

"Where everything's broken, anything's possible."

This article also provided the chart on the right.  

A Missionary's Quest to Remake Motor City: from the NY Times, it covers the extensive investments and efforts being made by Quicken Loan founder Dan Gilbert to revitalize downtown Detroit. Gilbert has spent over $1 billion buying and renovating downtown commercial space.

An urban affairs expert says his efforts "amount to one of the most ambitious privately financed urban reclamation projects in American history."

Detroit Shows Way to Beat Inner City Blues: authored by the noted cities expert Richard Florida, this Financial Times article says Detroit could be a model for future urban turn arounds.  Key quote:

The nascent turnround is driven by a coalition of profit-led entrepreneurs, philanthropic foundations and grassroots groups unhindered by city government. They offer a distinctive model of revival from which cities in the US and beyond can learn.

Struggling Cities, From Detroit to New Orleans, See Startups as Saviors: from Business Week, covers how a variety of cities are turning to entrepreneurs, startups and small businesses to help revitalize downtown cores.

It's of course way too early to know if Detroit can recover. But it's exciting to see private industry and entrepreneurs working to revitalize this city. 

Do Business Incubators Work?

Business incubators provide startups and small businesses with cheap office space, professional advice and other services designed to help the businesses get off the ground and succeed. 

Most are run by independent non-profits and they often are funded by government grants. 

According to the National Business Incubation Association (NBIA), incubators are quite successful at what they do.    NBIA says the 5 year survival rate for companies participating in incubator programs is 87% - almost twice the rate of non-incubated companies. 

But a recent academic study out of Syracuse Univeristy - Boon or Boondoggle? Business Incubation as Entrepreneurship Policy - has very different results.  Their research shows that far from substantially out performing non-incubated companies, incubated business tend to slightly under perform. 

Key quotes from the study conclusion:

"The findings reveal that the effects of incubation are potentially deleterious to the long-term survival and performance of new ventures."  They also go on to say  "... claims that business incubators are highly successful and serve a significant number of businesses are overstated."

So who is right?  Like a lot of issues around small business and entrepreneurship, there's not a clear answer. 

We've just started a deeper research dive on incubators as part of our broader work looking at the future of small business.  Hopefully, we'll have a better sense around incubator performance in the coming months. 

Artisans Driving Economic Development

The EDPro Weblog has a post referencing the growing role support for local artisans is playing in rural economic development. 

The post highlights an effort by a group in Northwest Arkansas to promote the region's artisans, crafts people and performing artists.

We've posted multiple times in the past on the growing trend towards promoting art and artisans as part of economic development efforts. 

This trend is not limited to rural areas.  Cities such as New York, Chattanooga and Portland and many others have active economic development programs focused on attracting and helping artisans.   

Creatives and Economic Development

A growing trend in local economic development is designing programs to attract creative professionals.  There is a growing view that attracting creative professionals leads to broader economic growth, increased entrepreneurship and more jobs.  The book The Rise of the Creative Class by Richard Florida popularized these concepts (click here for his blog). 

An interesting example of this comes from Chattanooga.  CreateHere Chattanooga is a "collective of programs, projects, incentive funding and individuals working for creative economic and cultural development in Chattanooga"

The projects include:

• mortage assistance for artists and entrepreneurs that move to approved in-town neighborhoods
• an artist grant program
• a resource center providing a range of small business and artist support services
• programs to create and build local artist and small business networks

Programs like this are becoming common as local economic development increasingly focuses on creating vibrant social communities and developing local businesses.   

New Economic Gardening Website

Economic Gardening Economies is a new website dedicated to economic gardening.  Economic gardening is is a local or regional economic development strategy that focuses on supporting local entrepreneurs and small businesses instead of "economic hunting" - attempting to attract new businesses from outside the area.  The idea was developed in Littleton, Colorado (they have a great description of economic gardening on their website) in the late 1980s and has since spread to many communities across the US.

The website is a combination wiki/group blog that is being used as repository of information and cases studies on the topic.  There is also an Economic Gardening Google Group.

I heard about this from the EDpro blog.   

Economic Gardening

Economic gardening is a local or regional economic development strategy that focuses on supporting local entrepreneurs and small businesses instead of "economic hunting" - attempting to attract new businesses from outside the area.  The idea was developed in Littleton, Colorado (they have a great description of economic gardening on their website) in the late 1980s and has since spread to many communities across the US. 

The interest in economic gardening is being driven by two main factors:

1.  The growing body of research showing that small businesses create the vast majority of new jobs. With small business creating 70-80% of all net new US private sector jobs it makes sense that local economic development should focus on local small businesses. 

2.  A growing realization that "economic hunting" by itself doesn't work very well for most communities.  While some communities benefit from economic hunting, there are too few companies moving to meet the needs of the vast majority of US towns.  Policy makers are also realizing that the incentives required to attract new businesses (especially big businesses) are expensive and do not guarantee the firm will stay after the incentives run out.

Economic gardening programs tend to focus three areas to help build local small businesses:

1.  Information resources and marketing assistance:  these programs often include access to competitive intelligence and market information that generally are not available to small businesses.  For example, Humboldt county in northern California has set up a competitive intelligence program to help small businesses.  Key quote from an article on the program:

"Competitive intelligence (C.I.) research specialists -- both industry specific and for business in general -- are experts in conducting strategic research to facilitate business growth. Competitive Intelligence research and consulting services are typically expensive and are most commonly set up to serve urban-based and very large companies. However, Humboldt State University has just launched a new service to make this strategic research for critical planning and market development challenges much more convenient and affordable to local firms."

2.  Infrastructure:  these programs focus on building the right kind of local business resources and capabilities that will support local small businesses.  This includes traditional items like roads, taxes, etc. as well as quality of life and education. 

3.  Networking and information sharing:  early economic gardening program success in Littleton and other communities has shown that providing networking opportunities and access to local universities, think tanks, trade associations, etc. is a major key to local economic development success. 

While traditional economic development methods will continue to be used, economic gardening is becoming increasingly important for local and regional economic development.  This is yet another example of the growing role small business is playing in the US economy.

For more on economic gardening see the US SBA report The Small Business Economy 2006, chapter 6 "Economic Gardening."