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As Michigan communities grapple with the effects of the economic crisis gripping the world economy, entrepreneurship continues to be an ever-brightening spot on the economic horizon.
Communities essentially have two choices when it comes to generating new economic growth:
(1) "Business attraction"—the traditional approach of encouraging businesses to relocate here from outside of the region; and
(2) "Economic gardening"—a grow-from-within strategy that encourages business creation, retention, and expansion.
Given that most new jobs creation, wealth creation, innovation, and economic growth comes from entrepreneurial companies—specifically those with between 10 and 99 employees and $1-$50 million in sales—more and more communities are adopting a blended strategy with increased emphasis on economic gardening.
Judith Cone, vice president, Ewing Marion Kauffman Foundation, defines “entrepreneurship” as the assumption of “risks to transform ideas into sustainable enterprises that create value.” According to the National Governors Association, Center for Best Practices, “Entrepreneurs are the engines of growth and innovation to a greater extent than other types of firms and hold greater potential to enhance local and regional economies.” Raymond W. Smilor, in his work titled “Entrepreneurship and Community Development,” has found that entrepreneurship is also an engine of community development that confers “identity, belonging and security not only on those who elect to start and grow enterprises, but also on those who join them in that effort and on the wider environment in which they operate.”
Michigan Entrepreneurship Score Card
Entrepreneurship is important to both economic and community development. The Annual Michigan Entrepreneurship Score Card report by the Small Business Foundation of Michigan (SBFM) compares Michigan to all states with regard to the relationship between entrepreneurship, community, and economic development. In 2007, Michigan entrepreneurs were surveyed to determine the role community played in their success. Community infrastructure was designated the number one factor in helping (“greatest help”) businesses in the start-up phase.
The report shows that Michigan has a tremendous number of assets, and is well prepared for the knowledge-based economy (e.g., the Kauffman Foundation “State New Economy Index” found that Michigan had made more progress in preparing for the knowledge-based economy since 1999 than any other state). The report also shows that there has been substantial progress in the development of programs and services in the state that encourage the creation, retention, and expansion of entrepreneurial ventures.
The Score Card has taken great care to encourage policy makers—at all levels—to recognize that an entrepreneurship “culture” is a necessary condition for robust entrepreneurship. Within this context, while traditionally associated with small businesses, it is important to note that an entrepreneurial culture results from the synergy among three distinct and important groups of entrepreneurs:
(a) Small business entrepreneurs launch new growth-oriented ventures in markets with high economic multiplier effects (typically in emerging industries),
(b) Intrapreneurs are entrepreneurs that reside in existing companies who use the resources of the host firm to launch new ventures that result in diversification and positive growth; and
(c) Social Entrepreneurs work in the not-for-profit sector and use the tools of innovative entre/intrapreneurship to generate positive social change.
Innovation: An Instrument of Entrepreneurship
Another important finding related to community and economic development is that entrepreneurs differ significantly from non-entrepreneurial organizations in a number of ways. First of all, entrepreneurship is the effective application of strategic management tools and practices to ventures that combine “intent” and “capacity” for growth and/or impact. Even more important is the fact, aptly noted by Peter Drucker, that “innovation is the instrument of entrepreneurship.” The key role of innovation in entrepreneurship and related economic recovery cannot be taken lightly. For example, in her groundbreaking new work “Closing the Innovation Gap,” Judy Estrin writes that “today, more than ever, innovation is critical to the role we will play in the global economy. . . the innovation process can result in life-changing breakthroughs or incremental improvements to existing ideas or products. . . opportunities for innovation are all around us, in every field. . . .” Indeed, the National Council on Competitiveness has declared, “If Americans stop innovating, we stop being Americans.”
New York Times columnist Thomas Friedman has written that, “innovation is where creative thinking and practical know-how meet to do new things in new ways, and old things in new ways.” In practical terms, innovative entrepreneurship occurs in three distinct and important ways:
(a) Innovative Entrepreneurs modify or improve upon an existing technology, product and/or process in order to enhance organizational processes;
(b) Practitioner Entrepreneurs employ current off-the-shelf knowledge to create incremental improvements in existing technology, products, and processes; and,
(c) First-Mover Entrepreneurs pioneer breakthrough disruptive innovations that create new paradigms, making previous technologies, products and/or processes obsolete.
Economic Gardening and Entrepreneurial Culture
Many Michigan communities are now using a nationally recognized community reinvention model—economic gardening—as a way to actively foster robust innovative entrepreneurship as an economic recovery strategy. Developed by Chris Gibbons of Littleton, Colorado, and endorsed by the Edward Lowe Foundation, the U.S. Small Business Administration, and others, economic gardening is a way for communities to marshal and focus their limited resources to accelerate the formation and growth of innovative entrepreneurs. In an October 2008 paper released by the U.S. Small Business Administration, titled, “Look Ahead: Opportunities and Challenges for Entrepreneurship and Small Business Owners,” economic gardening is highlighted as one of five “opportunities” for economic development and job creation.
Economic Gardening Plus
Saginaw Valley State University (SVSU) is one of the few universities in the state—and nation—to offer an accredited degree in entrepreneurship. SVSU’s Center for Business and Economic Development has launched a new Economic Gardening PLUS Institute to train and assist local communities to develop entrepreneurial cultures. The underlying premise of the “PLUS” model is that all three types of entrepreneurs (small business entrepreneurs, intrapraneurs, and social entrepreneurs) must be prevalent in a community in order for an economic culture to exist, for small business entrepreneurship to flourish, and for related economic recovery to occur.
Mark H. Clevey, MPA, is director of Entrepreneurship & Commercialization at Saginaw Valley State University and primary author of the annual Michigan Entrepreneurship Score Card. You may reach him at email@example.com.