Mapping Rural Entrepreneurship


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Mapping Rural Entrepreneurship

  1. 1. W.K. KELLOGG FOUNDATIONCorporation for Enterprise Development
  2. 2. About the CorporationAbout the W.K. Kellogg Foundation for Enterprise DevelopmentThe W.K. Kellogg Foundation was established The Corporation for Enterprise Development isin 1930 “to help people help themselves a nonprofit organization that creates economicthrough the practical application of knowledge opportunity by helping the poor save andand resources to improve their quality of life invest, succeed as entrepreneurs, and partici-and that of future generations.” Its program- pate as contributors to and beneficiaries of theming activities center around the common economy. By helping individuals and communi-vision of a world in which each person has a ties harness latent potential, we build long-sense of worth; accepts responsibility for self, term models to help people move from povertyfamily, community, and societal well-being; and to prosperity while strengthening the overallhas the capacity to be productive, and to help economy. The Corporation for Enterprisecreate nurturing families, responsive institu- Development identifies and researches promis-tions, and healthy communities. ing ideas, collaborates with the private and public sectors to test them, and helps drive theTo achieve the greatest impact, the Foundation application and adoption of proven concepts.targets its grants toward specific areas. Theseinclude health; food systems and rural develop- Established in 1979, the Corporation forment; youth and education; and philanthropy Enterprise Development works nationally andand volunteerism. Within these areas, attention internationally through its offices inis given to the cross-cutting themes of leader- Washington, DC, Durham, North Carolina,ship; information systems/technology; capital- San Francisco, California, and St. Louis,izing on diversity; and social and economic development programming. Grantsare concentrated in the United States, LatinAmerica and the Caribbean, and the southernAfrican countries of Botswana, Lesotho,Mozambique, South Africa, Swaziland andZimbabwe.More information about the W.K. KelloggFoundation and its programs is available on theFoundation’s Web site at
  3. 3. Table of ContentsAcknowledgments ......................................................................................................3Executive Summary ..................................................................................................4Introduction ..............................................................................................................7Economic Context for Rural America ......................................................................9Entrepreneurship as a Rural Economic Development Strategy ..............................12Rural Entrepreneurship by the Numbers ................................................................17Policy Context ..........................................................................................................25The Components of Entrepreneurship Development ..............................................31A Closer Look at Two States ....................................................................................45Orchestrating an Entrepreneurial Climate in Rural America ..................................56Endnotes ..................................................................................................................60 W.K. Kellogg Foundation • Corporation For Enterprise Development 1
  4. 4. AcknowledgementsThe authors thank Deborah Markley, co-director Special thanks to David Dangler, Ray Daffner,of the Rural Policy Research Institute (RUPRI) Cornelia Flora, Jay Kayne, Tom Lyons (again),Center for Rural Entrepreneurship for her guid- Don Macke, Erik Pages, and Nancy Stark forance in structuring this study and for allowing their helpful counsel on the “big picture.”her meeting on entrepreneurship research spon- Much appreciation is also due to the 60 expertssored by the Farm Foundation to be used to test and practitioners who agreed to be interviewedsome methodological assumptions. by phone about their perspectives and experi- ences on different aspects of entrepreneurshipThanks also go to a number of people in in rural America.Kentucky and Nebraska for their insights andhospitality during the two main field visits: in Finally, thanks to Rick Foster, CarolineKentucky, Jim Clifton, Phillip Danhauer, Kris Carpenter, and Gail Imig for the opportunity toKimmel, Joanne Lang, Tom Lyons, Justin carry out this study and for their continuingMaxson, Becky Naugle, Jerry Rickett, Kevin support and encouragement.Smith, and Cheryl Moorhead Stone; and inNebraska, John Allen, John Bailey, Greg Brian Dabson, Jennifer Malkin, Amy Matthews,Christensen, Janelle Anderson Ehrke, Doug Kimberly Pate, and Sean StickleFriedli, Rob Hamer, Chuck Hassebrook, Rose Corporation for Enterprise DevelopmentJasperson, Loren Kucera, Glennis McClure, August 2003Judy Meyer, Stuart Miller, Lance Morgan, JeffReynolds, Marilyn Schlake, Sandra Scofield,Cory Smathers, Brian Thompson, and Jeff Yost. W.K. Kellogg Foundation • Corporation For Enterprise Development 3
  5. 5. Executive SummaryAt the invitation of the W. K. KelloggFoundation, the Corporation for EnterpriseDevelopment conducted a study to gather infor-mation on institutions, programs, and activitiesthat support entrepreneurship in rural America;to assess the distribution and scale of entrepre-neurial activity; and to identify potentiallyinfluential contextual factors. The study includ-ed the collection of best available publisheddata to map entrepreneurial activity, an exten-sive literature and Internet search, and a seriesof telephone interviews with 60 experts andpractitioners. In addition, site visits and person-al interviews were held with practitioners andentrepreneurs in Kentucky and Nebraska.Rural America comprises an extraordinary anddynamic variety of economic, geographical, andcultural characteristics. Many rural communi- entrepreneurial climate where all kinds ofties face enormous economic challenges of low entrepreneurs can succeed, lays the ground-population size and density and remoteness, work for the five out of 100 small businesseswhich in turn bring diseconomies of scale and that evolve into the fast-growing drivers of theincreased costs of doing business. Poorly edu- national economy.cated and low-skilled workers, weak entrepre-neurial cultures, and entrenched racial inequali- Efforts to measure entrepreneurial activity andties inhibit full participation in the new econo- performance across rural America are still inmy. The public policy context is not encourag- their developmental stages, but it is possible toing with rural policy dictated by agri-business create an initial impression of the scale and dis-interests, fiscal crises at the state and county tribution of entrepreneurial activity. Whereaslevels, and no organized constituency for rural such activity is broadly distributed across theAmerica in all its diversity. There is an urgent country, there appear to be particular concen-need for rural people and communities to trations in heartland and northern mountaindefine the future they want for themselves and states and in Appalachia.their children. This will take vision, innovation,and risk-taking – the work of the entrepreneur. Using a two-part framework – creating a pipeline of entrepreneurs and enhancing busi-There is growing understanding that economic ness services for entrepreneurs – the studydevelopment strategies founded primarily on team gathered a large amount of informationbusiness recruitment are not in rural America’s on national, regional, and local programs andbest interests and that there needs to be a initiatives. The components of the pipeline aregreater emphasis on homegrown development. entrepreneurship education in kindergartenMany observers see entrepreneurship as being a through the 12th grade and at the post-second-critical, if not major piece of rural economic ary level and entrepreneurship networks; fordevelopment, although not all are convinced business services, the components are trainingthat entrepreneurship is likely to be an engine and technical assistance, and access to capital.of economic growth in rural areas. However, There is a very wide array of programs and ini-there is a compelling argument that creating an tiatives, ranging from the old-established to4 Mapping Rural Entrepreneurship
  6. 6. exciting new experiments, but it is impossible be sufficient scale, resources, and expertiseto gauge whether on the ground these come to enable individual communities to playtogether in coherent, entrepreneurial systems their full role. There are issues and concernsof support or as disconnected, bureaucratic common to both urban and rural areas thatprograms. These were the concerns that can best be addressed through regional solu-became the focus of site visits and interviews in tions; regions represent the economicKentucky and Nebraska. engines and markets that rural enterprises have to serve.The study concludes that what is needed is a • Entrepreneur-focused: Systems thinking isnew framework that will animate people and required to align the plethora of training,institutions at all levels around four principles technical assistance, and financing programsfor entrepreneurship development in rural to meet the variety of needs of entrepreneursAmerica: and their different levels of education, skills,• Community-driven: Local communities and maturity. need the tools and resources to identify and • Continuously learning: Networks for peer build upon their assets; to make choices that support and learning are essential for entre- appropriately balance economic, social, and preneurs and for practitioners, community environmental imperatives; to learn from the leaders, and policymakers. Learning about experiences of others; and to be open to entrepreneurship should be part of the experimentation and innovation. school curriculum. The need for rigorous• Regionally oriented: Only through regional evaluation of the effectiveness of entrepre- cooperation across multiple jurisdictions neurship strategies and returns on invest- and through regional institutions can there ment is pressing. W.K. Kellogg Foundation • Corporation For Enterprise Development 5
  7. 7. The study also highlighted a number of other Four main strategies are recommended to cre-important essentials for promoting an entrepre- ate a more supportive environment climate inneurial climate: rural America:• Anchor institutions: Universities, community • Investment strategies: Create incentives colleges, community development financial and long-term investments that encourage institutions, and research and advocacy urban-rural and regional collaborations and groups can play a vital role in articulating a the development of effective systems and vision, building partnerships, and attracting accountable systems of entrepreneurial sup- and mobilizing resources for entrepreneurship port. Invest in innovations in entrepreneur- development. ial education, technical assistance and training, capital access, and networking• Supportive public policy: Creative public that show promise for widespread replica- policy can unlock resources and channel tion in rural communities. efforts into rural counties, but demonstrat- ing effectiveness and returns on investment • Learning strategies: Ensure rigorous evalua- is crucial for generating further support at tion of strategies, systematic case studies, federal and state levels. The need is not nec- training programs for elected officials and essarily to create special legislation for opportunities for peer exchanges. Encourage entrepreneurship in rural areas but to ensure experiential education in schools, colleges, that all programs have the capability and community centers, and camps. flexibility to be tailored to the needs of dif- • Advocacy strategies: Energize networks of ferent rural regions and their entrepreneurs. organizations and institutions that can use• All entrepreneurs welcome: Fostering a the results of the investment and advocacy diverse pool of entrepreneurs with different strategies to support entrepreneurship motivations, whether for survival, lifestyle, development in rural America. or wealth, increases the odds that there will • Information strategies: Develop method- be some that will become the fast-growth ologies and statistical tools that adequately enterprises that will bring improvement to describe and measure entrepreneurial activ- economic conditions to rural communities ity and climates, including report cards and and regions. other benchmarking and assessment tools. The study presents ample evidence of organiza- tions, institutions, and agencies pursuing vari- ous types of programs and initiatives that are meant to encourage greater entrepreneurship in rural America. The task ahead is to make their efforts more community-driven, regionally ori- ented, entrepreneur-focused, and continuously learning.6 Mapping Rural Entrepreneurship
  8. 8. IntroductionScope of WorkThe W. K. Kellogg Foundation invited theCorporation for Enterprise Development (CFED)to carry out a consulting assignment that would:• Gather data on current institutions, pro- grams, and activities that support rural entrepreneurship;• Develop a narrative and graphic presenta- tion of the data in ways that would high- light “hotspots” of activity that might offer models and/or potential investment targets;• Determine the factors that influence the development of these “hotspots;” and• Present an analysis of the findings leading to observations and options for Foundation intervention.Definitions – Growth entrepreneurs: those who are motivated to develop and expand theirFor the purposes of this report, the following businesses that create jobs and wealth.definitions have been used: – Serial entrepreneurs: those who go on• Rural refers to geographical areas outside sta- to create several growth businesses. tistical metropolitan areas and thus includes over 80 percent of the U.S. land mass and its • Social entrepreneurs are people who create wide array of economic, physical, cultural, and grow enterprises or institutions that are and demographic characteristics. primarily for public and community purposes.• Entrepreneurs are people who create and • Entrepreneurship is the process through grow enterprises. This definition is deliber- which entrepreneurs create and grow enter- ately widely drawn to encompass the follow- prises. This process includes four critical ing types of entrepreneurs: elements: opportunity recognition, idea cre- ation, venture creation and operation, and – Aspiring entrepreneurs: those who are creative thinking. attracted to the idea of creating enter- prises, including young people. • Entrepreneurship development refers to the – Survival entrepreneurs: those who infrastructure of public and private supports resort to creating enterprises to supple- that facilitate entrepreneurship. ment their incomes. • Entrepreneurial communities are those – Lifestyle entrepreneurs: those who where there is significant economic and create enterprises in order to pursue a social entrepreneurial activity and where certain lifestyle or live in a particular there is an effective system of entrepreneur- community. ship development. W.K. Kellogg Foundation • Corporation For Enterprise Development 7
  9. 9. Methodology The consulting assignment was conducted in three main stages: • A quantitative assessment that used best available published data to prepare maps of entrepreneurial activity across rural America; • An assessment of institutions, programs, and activities that support entrepreneurship development in rural America based on an extensive literature and Internet search and a series of telephone interviews with 60 experts and practitioners; and • Site visits and interviews with practitioners and entrepreneurs in Kentucky and Nebraska. Report Structure This report begins with an overview of the eco- nomic realities and options for rural America and explores the role that entrepreneurship plays (or could play) as a rural economic devel- opment strategy. The next section presents the quantitative assessments, including some of the challenges for measuring rural entrepreneur- ship, followed by a description of both the poli- cy context at national, regional, and local levels and of the institutions and programs that sup- port different facets of entrepreneurship. This national overview is then followed by a closer look at entrepreneurship development in Kentucky and Nebraska. The report concludes with some thoughts about what the assessments have revealed and what opportunities may exist for policy and practical action.8 Mapping Rural Entrepreneurship
  10. 10. Economic Context forRural AmericaWithin rural America, there is an extraordinary tions. Map 1 shows the location of distressedvariety of economic, geographical, and cultural rural counties using an index devised by thecharacteristics. Moreover, the situation is very Appalachian Regional Commission (ARC) fordynamic, with significant depopulation across its 10-state region and applied to all non-met-the Great Plains and net population growth in ropolitan America. The index combines meas-rural counties that are within reach of sprawl- ures of a three-year average of unemployment,ing metropolitan regions or in areas of high per capita market income, and poverty rates.amenity. In addition, many counties with man-ufacturing or food processing plants are experi- A critical issue for many rural counties is edu-encing a rapid growth in immigrant workers cation. Although overall, rural high schooland the challenges associated with sudden graduation rates match or exceed their urbanexpanding diversity. counterparts, out-migration of the youngest and more highly-educated is a primary export forPoverty rates tend to be higher in rural areas – many communities. The result is that the adult7.5 million rural residents are in poverty. Two- workforce is less well-educated. In fact, a studythirds of them live in households where at least of the rural South showed that 38 percent ofone member is working. Measures of persist- adults do not have high school diplomas.ently high poverty levels or of economic dis-tress show that the greatest hurt found in the From an economic development viewpoint,Delta and the Cotton Belt, Appalachia, the rural communities, especially those locatedTexas border, and Native American reserva- some distance from larger cities, face a numberMap 1: Distressed Rural Counties(Source: Bureau of Labor Statistics, Bureau of Economic Analysis, Census Bureau, Appalachian Regional Commission) W.K. Kellogg Foundation • Corporation For Enterprise Development 9
  11. 11. of major challenges. Low population size and tracts of federally-owned land have becomedensity and associated limited local demand, battlegrounds around forestry, mining, recre-make it difficult for rural businesses and serv- ational, and water rights issues, with local com-ice providers to achieve economies of scale. munities and local jobs left as merely by-This has an impact on the cost and availability standers. Fiscal crises at the state level areof goods and services and drives many attempts being passed onto counties in the form ofto achieve efficiencies through consolidation in reduced financial support, resulting in severeeverything from schools to banking. service cuts with disproportionate impacts onRemoteness from markets and from key infra- the rural poor. Unfortunately, there is no organ-structure limits the range of economic opportu- ized constituency for rural America, with polit-nities that can be supported and often results ical power increasingly suburban and no coher-in a lack of connection to regional and global ent public understanding of how and wherepossibilities. Poorly educated and low-skilled national and rural interests intersect.workers, weak entrepreneurial cultures, andentrenched racial inequalities all serve to inhib- So what of the future? One of the moreit the participation of rural families and com- thoughtful and thought-provoking analysesmunities in the new economy. comes from Northwest Area Foundation presi- dent, Karl Stauber.1 He first divides ruralThe public policy context for rural America is America into four main types:not encouraging. Powerful agri-business inter-ests have ensured that commodity price sup- • Urban periphery: rural areas within a 90-port is the primary rural policy, leaving little minute commute of urban employment,scope for diversified rural development. Large services, and social opportunities;10 Mapping Rural Entrepreneurship
  12. 12. • High amenity: rural areas of significant sce- • Create new markets and linkages so as to nic beauty, cultural opportunities, and increase regional competitive investments attraction to wealthy and retired people; in urban periphery and sparsely populated areas – primarily investments in value-• Sparsely populated: areas where the popu- added production rather than commodity lation density is low and often declining and price supports. therefore demand for traditional services, • Develop and use new technology to over- employment, and social opportunities are come remoteness to produce an infrastruc- limited by isolation; and ture that expands competitive advantage in• High poverty: rural areas characterized by sparsely populated and high-poverty areas persistent poverty or rapid declines in – creating and reinforcing links between income. metropolitan and rural economies. • Encourage immigration to rural communi-Stauber then lays out four outcomes for a rural ties to increase human capital in sparselypublic policy: increased human capital, conser- populated and high-poverty areas – withvation of the natural environment and culture, a particular emphasis on attracting entre-increased regional competitive investments, preneurs.and investments in infrastructure that supportthe expansion of new competitive advantage. Two other expert rural observers, ThomasFrom these elements, he then proposes a set of Rowley and David Freshwater, contend that thestrategic directions:2 answers to the current challenges of rural• Redefine and restructure the rural-serving America will only be found “by finally coming college and university so as to increase to terms with what we as a nation want our human capital in sparsely populated and rural areas to be. If we want them to be sources high poverty rural areas – essentially dis- of cheap commodities, then the people who mantling the 19th century land-grant sys- will provide [them]…will be low-wage labor. If tem in favor of a 21st century information we desire pristine wilderness, the people will grant system. not fit at all. If receptacles for our refuse are what we seek, then trash heaps are what we will get. What we want (and what we are will- ing to pay for) will go a long way in determin- ing what we get.” 3 There is no shortage of urban, suburban, and newly settled rural dwellers willing to define a future for rural America, but if rural people and communities are to take matters into their own hands and succeed, it will take vision, innova- tion, and risk – the work of the entrepreneur. W.K. Kellogg Foundation • Corporation For Enterprise Development 11
  13. 13. Entrepreneurshipas a Rural EconomicDevelopment StrategyAmong researchers, policy advocates, and oth- economic changes, fewer communities are host-ers engaged in community and economic ing large facilities that provide jobs over longdevelopment in rural America, there is broad periods of time…At the same time, small andagreement that relying on recruiting companies medium-sized businesses are growing in impor-from other states or overseas should not and tance…Entrepreneurial growth companies –cannot be the answer to struggling rural fast-growing new businesses – account for ateconomies. Yet each year, state governments least two-thirds of new jobs in the Americanhave been willing to commit through tax economy…These firms will drive the future ofincentives, tax breaks and direct investments, innovation and prosperity in nearly everybillions of dollars to snag a car assembly plant, American community, and thus should be thea high technology production unit, or some focus of our economic development efforts.”5other potentially transformative industrialactivity. Increased public scrutiny has shed The Federal Reserve Bank of Kansas Citylight on some of the more egregious examples observed: “Rural policymakers, who once fol-of “investments” that were poorly structured, lowed traditional strategies of recruiting manu-had inadequate reporting or accountability facturers that export low-value products, haverequirements, or yielded disappointingly low realized that entrepreneurs can generate newreturns in terms of jobs and local multiplier economic value for their communities.effects. And this in turn has led to a greater Entrepreneurs add jobs, raise incomes, createemphasis on transparency, clear expectations wealth, improve the quality of life of citizens,on returns on investment, and clawbacks if and help rural communities operate in the glob-expectations are not met. But concern remains al economy…Rural policymakers are respond-that recruitment has to be balanced, if not ing to these challenges by making entrepreneur-replaced altogether by policies that support ship the cornerstone of many economic devel-homegrown development. opment strategies.”6 In a similar vein, the ARC “views entrepreneurship as a critical element inAn Aspen Institute report that looks at the the establishment of self-sustaining communi-economy of rural Kentucky, noted: “Traditional ties that create jobs, build local wealth, andapproaches to economic development…have contribute broadly to economic and communitytheir place, but only as they help to create the development.”7 And this was the basis of aconditions for dynamic, indigenous economic commitment by the Commission in 1997 toactivity. In a very real sense, Kentucky’s future commit $17.6 million over a number of years torests on its ability to nurture homegrown firms an initiative to build entrepreneurial communi-and to encourage the innovation, risk-taking ties across Appalachia.and investment that are the hallmarks of a vitaleconomy…In short, entrepreneurship mustbecome a matter of course and a habit of mind In 1999, the National Governors Associationif Kentucky is to thrive.”4 (NGA) surveyed its members to gauge each state’s perspective on entrepreneurship and itsThe National Commission on importance as part of an overall state economicEntrepreneurship in its guide for candidates development strategy. While 34 of the 37 statesfor elected office put the argument this way: that responded indicated that they did indeed“While winning a new manufacturing facility consider entrepreneurship as part of their eco-may be a home run in economic development nomic development strategy, only four had aterms, these home-run opportunities are clearly articulated statement within the strategybecoming scarcer every day. As a result of glob- document. Jay Kayne observed a “distinctionalization, technological evolution, and other between states that try to meet the specific12 Mapping Rural Entrepreneurship
  14. 14. needs of aspiring and emerging entrepreneurs investigation into the relationship betweenand states that view entrepreneurs as a segment entrepreneurship and economic growth. Byof the state economy who can take advantage 2002, 37 countries were being surveyedof state programs.”8 In other words, the survey according to a common protocol. The nationalemphasized the difference between active and report on the United States10 provides somepassive support for entrepreneurship. good contextual information on the role andInterestingly enough, given the assessments importance of entrepreneurship:described later in this report, Kentucky wasidentified as having one of the best articulated GEM estimates that 10.5 percent of the U.S.goals of creating an entrepreneurial economy. adult population (aged 18-64) are engaged in some form of “entrepreneurial activity,” definedAn important obstacle to a more vigorous pur- by the 2002 GEM as being involved in thesuit of entrepreneurship as an economic devel- start-up process or is the owner/manager of anopment strategy is the lack of hard evidence active young business less than 42 months old.that it actually yields the results claimed. As This population can be divided into two broadthe Federal Bank of Kansas City noted, “As categories: opportunity entrepreneurs, thosepolicymakers stretch the frontier of entrepre- who are starting a business to take advantage ofneurial development, the impacts of these pro- a business opportunity, and necessity entrepre-grams will need to be assessed to identify the neurs, those who are starting a businesscosts and benefits of supporting high-growth because they had no better choices for work.entrepreneurs in rural America.”9 In the United States, approximately 90 percentThe Global Entrepreneurship Monitor (GEM) fall into the opportunity category.was created in 1997 by Babson College and the This high level of opportunity entrepreneur-London Business School with support from the ship appears to be the result of a strong econo-Kauffman Center for Entrepreneurial my, although recession, mass layoffs, andLeadership as a long-term, multi-national increasing unemployment are likely to spur a W.K. Kellogg Foundation • Corporation For Enterprise Development 13
  15. 15. sharp rise in necessity entrepreneurship. As the The relationship between level of education2001 GEM report notes: “The difficulty with and entrepreneurial activity is not straightfor-this scenario is that although necessity entre- ward. The highest entrepreneurial participationpreneurship often creates self-employment, it is rate is for those who have completed highnot a strong driver for creating new jobs. school; for those who do not have a highBecause the primary concern of necessity entre- school diploma, the tendency is self-employ-preneurs is survival, they typically have a limit- ment and little vision for job creation; for thoseed vision for growth. Opportunity entrepre- with college degrees, there is some drop-off inneurs, however, tend to create high-potential, participation, possibly because of the greaterhigh-growth ventures. The majority of jobs cre- opportunities to earn high incomes as employ-ated from entrepreneurial activity in the United ees of other businesses.States is a result of fast-growth businesses.”11 A potentially contentious conclusion comes from the 2002 GEM report, which makes the point that entrepreneurship is an urban phe- nomenon, presumably as urban areas are where the highest density of entrepreneurship is to be found. The report went on to assert: “It should be noted that entrepreneurship in rural areas may not be the best mechanism for economic growth.”12 Another recent effort to provide evidence of the effectiveness of entrepreneurial strategies is an Organization for Economic Development and Cooperation (OECD) publication, Entrepreneurship and Local Economic Development, researched and written by Alistair Nolan. He noted: “For a variety of reasons, pro- moting entrepreneurship enjoys support from governments at both ends of the political spec- trum. Pro-entrepreneurship policies have been embraced as a means of increasing economic growth and diversity, ensuring competitive markets, helping the unemployed to generate additional jobs for themselves and others,U.S. entrepreneurs, compared with their coun- countering poverty and welfare dependency,terparts overseas, tend to be older – 36 percent encouraging labor market flexibility, and draw-of entrepreneurs are in the 45 to 64 age brack- ing individuals out of informal economic activ-et. Older Americans, the report asserts, are ity. In short, an enterprise initiative has beenmore likely to have deep industry experience charged with addressing a broad array of eco-and networks that help with identifying and nomic and social aspirations…However, givenfinancing opportunities. At the same time, the the widespread interest in promoting enter-proportion of women entrepreneurs is increas- prise, it is perhaps surprising that few empiri-ing. There is one female entrepreneur for every cal studies have systematically examined the1.5 male entrepreneurs, with parity in the 45 to relationship between the birth of new firms and64 age bracket. local economic change.”1314 Mapping Rural Entrepreneurship
  16. 16. The following are some of the main conclusions Research on the impact of microenterpriseof Nolan’s analyses of 30 OECD countries: development in the United States by The Aspen Institute14 provides some counter-evidence:• There are many obstacles that hinder entre- preneurship in disadvantaged areas, influ- • Low-income microentrepreneurs reduced encing both the extent and form of entrepre- their reliance on government assistance by neurial activity and its prospects for sur- 61 percent with the greatest reduction in the vival. Such obstacles range from limited net- amount of cash benefits received. Average works, low levels of effective local demand, benefits fell by $1,679 per year. finance constraints, lack of role models, and • Seventy-two percent of low-income cultural barriers – all familiar to rural com- microentrepreneurs experienced gains in munities in the United States. household income over five years. The aver-• Efforts to stimulate self-employment can raise age gain was $8,485. incomes and provide a cost-effective alterna- • Fifty-three percent of low-income entrepre- tive to paying unemployment insurance, but neurs had large enough household gains to only for the small sub-section of the unem- move out of poverty, with the business being ployed who are more motivated, have work the major source of earnings. experience, and some accumulated assets. • Average household assets of low-income entre-• Entrepreneurship strategies yield important preneurs grew by $15,909 over five years. benefits but do not constitute a panacea. Such strategies inevitably favor those who Earlier research conducted by CFED15 indicated possess superior financial, human, and that: social assets. There may not be a significant expansion in employment opportunities for • Forty-nine percent of microenterprises the most disadvantaged. Entrepreneurship owned by low-income entrepreneurs sur- strategies are long-term in their effects and vived after five years – a rate comparable to therefore not appropriate to short-term the national average for all small businesses. crises. There may be issues of displacement • On average, microenterprises create 1.5 full- in local markets as new entrants cause losses and part-time jobs per business in revenues or employment among existing enterprises rather than create an expanded During field work in Kentucky, there was some economy. suggestion that a significant number of emerg-• Although every community hopes to ing entrepreneurs were in fact making the tran- encourage fast-growing businesses that will sition from the informal to the formal economy. generate wealth and good jobs, the reality is A recent literature review on the informal econ- that in most cases, the direct employment omy by Institute for Social and Economic effects will be modest – a reflection of the Development and The Aspen Institute,16 con- small average size of start-ups, low survival firms that the informal economy – defined as and growth rates, and displacement. individuals operating unregistered businesses Moreover, employment in small enterprises or engaging in “under the table” work – is does not necessarily translate into good jobs indeed especially important to rural residents: with family-supporting wages and benefits. • Essential services are more likely to be unavailable or deficient in less densely settled areas, forcing people to develop and rely on informal alternatives. W.K. Kellogg Foundation • Corporation For Enterprise Development 15
  17. 17. • The extent to which informal activities around 10 percent of the gross domestic prod- require access to land – crops, wood prod- uct. Those who work in some form of subcon- ucts, game – increase their prevalence in tracting capacity, often outside the framework rural areas. of regulation, benefits, and health and safety protections. And those who work in odd jobs• Austerity – in the form of lower wages and for cash or operate microenterprises outside declining demand for labor and less public the realm of regulation and taxation. “In all spending – promotes informal economies as cases, the greatest competitive advantage that an important survival strategy. these workers bring to the market is a price• Informal economies exist in part because of advantage built on lower labor and overhead the social interdependence of community costs. While this creates access to income and members, thus the “connected feeling” typi- employment for many, it also constrains earn- cal of rural places makes them more con- ing power…and…for many microentrepreneurs ducive to informal economic activity. it is not clear whether the benefits of formaliza- tion would outweigh the costs involved. [ItThe authors point to the fact that there are in would appear that] the desire to grow and afact two main components of the informal corresponding need for financing [are] theeconomy – in total estimated to represent most compelling triggers.”17 Commentary The conclusion to be drawn from these scope for income supplementation and a way expert observations and research is that out of poverty. While this is undoubtedly entrepreneurship development appears to be important for individual families, it is unlike- a logical and appropriate counterpoint to ly that in the aggregate, such enterprises will business recruitment strategies in rural have a significant transforming impact on America. There are strong advocates and local economies. Nevertheless, in many hard- arguments at the national level for lauding pressed communities, small improvements and supporting opportunity-driven entrepre- can make the difference between community neurs – those most likely to create jobs and survival and collapse. Moreover, there is the wealth at any scale. compelling argument that creating an entre- preneurial climate where all kinds of entre- There are also benefits for encouraging preneurs can succeed, lays the groundwork necessity-driven entrepreneurs and those for the five out of 100 small businesses that with only modest aspirations for their small develop into the fast-growing drivers of the enterprises. For some, microenterprise offers economy.16 Mapping Rural Entrepreneurship
  18. 18. Rural Entrepreneurshipby the NumbersEfforts to measure entrepreneurial activity and which generally accorded with expectations.performance by geographical area are still in However, the authors observed, “Some resultstheir developmental stages. Progress is hampered are perplexing: Florida, Nebraska, andby a lack of any agreed and coherent framework Kentucky do not make large investments infor understanding the essential factors (and their entrepreneurial activity, but they perform farinteractions) that shape the entrepreneurial better than the model predicts…they get veryprocess and by the dearth of available data that strong returns.”19 As will be described later,serve as meaningful proxies for these factors. this became one factor in the selection of Nebraska and Kentucky for further assessment.Goetz and Freshwater in a recent paper18 pre-sented their framework for capturing state-level The strong technology and innovation bias indeterminants of entrepreneurship and for the Goetz and Freshwater analysis and themeasuring what they called “entrepreneurial absence of any differentiation between urbanclimate.” They focused on states, recognizing and rural makes this less than ideal as a meansthat although these are not functional econom- to measure entrepreneurship in rural America.ic units, they do have the power to influence Nevertheless, the authors did draw some inter-many of the factors important to economic esting preliminary conclusions, the most signifi-development. Using a regression model that cant of which was that entrepreneurship activityequated entrepreneurial activityi within a state can be expanded by improving the human capi-with a set of inputs that related to ideas and tal base of a state – a better educated workforceinnovation, human capital, and financial capi- increases the effectiveness with which ideas aretal, they derived a measure of entrepreneurial translated into entrepreneurial opportunities.climate. If entrepreneurial activity exceeded thelevel of inputs, that would suggest a positive In 2002, the National Commission onentrepreneurial climate – a set of factors con- Entrepreneurship published the results ofducive to or supportive of entrepreneurship. research20 on the location of the fastest growingConversely, if the level of entrepreneurial activ- companies across the United States. Theity did not match the level of inputs, a poor research led to the creation of the Growthentrepreneurial climate would be assumed. Company Index, which weighs the percentageGoetz and Freshwater also thought it important of existing firms with high growth (at least 15to distinguish entrepreneurial activity that percent per year over the period 1992-1997)involves fundamental change in an economy and the percentage of firms that started in 1992based on new products, combination of inputs, or 1993 and had at least 20 employees by 1997.or production processes from that which is The data was presented at the level of Labordriven by income and population growth. Market Areas as defined by the U.S. Department of Agriculture.The resultant entrepreneurial climate measuresranked Colorado, California, Massachusetts, Map 2 shows the top-performing labor marketVirginia, and Maryland as the top five states, areas with populations between 100,000 andi “Entrepreneurial activity” for the purposes of the model was measured by the number of Inc Magazine’s 500 fastestgrowing firms in the state and the number of initial public offerings (IPOs) per million population. “Ideas and innova-tion” was measured by the number of Small Buisness Innovation Grants and patents, “human capital” by the proportionof college graduates in the population, and “financial capital” by the number of venture capital commitments and SmallBusiness Investment Companies. Goetz and Freshwater’s definition of “entrepreneurial climate” was based on the workof David Birch on what constituted “entrepreneurial hotspots” – a series of intangibles relating to political engagement,media interest, and supportive public policies. W.K. Kellogg Foundation • Corporation For Enterprise Development 17
  19. 19. 150,000 (the smallest and assumed to be the tors are ranked and combined into indexesmost rural). Each of the nine labor market which in turn are ranked and graded. However,areas shown on Map 2 had between 109 and the need to determine entrepreneurial activity232 high-growth companies with their within rural areas raised a number of datastrongest business sectors being local market availability and methodological challenges.(4), extractive (3), retail (2), distributive (1),and manufacturing(1). The strengths of this The basic unit of measurement is the countyIndex are that it uses the Census Bureau’s and for the purpose of this analysis, the focusBusiness Information Tracking System database was on non-metropolitan counties – the gener-that allows researchers to track the employ- ally accepted definition of rural, encompassingment growth of individual firms over time and as it does a wide range of economic and demo-it seeks to measure the number of entrepre- graphic characteristics. But there are immediateneurial companies rather than local economic limitations on the availability of key data at thegrowth. Its weaknesses are that the data is county level. For instance, SBA data on newsomewhat out of date and it makes no distinc- firm starts is only available at the state level, astion between size of company. is information on small company payroll; moreover, the level of analysis achieved byCFED’s initial approach to the challenge of Goetz and Freshwater seems currently unat-mapping rural entrepreneurship was heavily tainable for rural areas. The closest availableinfluenced by its Development Report Card for proxies for entrepreneurial activity were meas-the States methodology where multiple indica- ures of self-employment and small firms:Map 2: Top-performing Small Labor Market Areas for Fast Growing Companies(Source: National Commission on Entrepreneurship)18 Mapping Rural Entrepreneurship
  20. 20. • Number of firms with no paid employees, data, with all its limitations, in a separate and annual business receipts of $1,000 or more, straightforward manner. and subject to federal income taxes, by county. (Source: Census Bureau, 2000 and Map 3 shows the distribution of self-employer change 1997-2000) firms expressed as a proportion of jobs in each• Number of companies that employ 20 county in 2000. The darkest green counties are employees or less by county. (Source: those in the top third of counties nationwide. Census Bureau’s County Business Patterns, These are concentrated in the Central Belt from 2000 and change 1997-2000) North Dakota to Texas, in the northern moun- tain states, central Appalachia, and northern• Number of private, non-farm jobs by county. New England. (Source: Bureau of Economic Analysis, 2000) Map 4 shows the change that counties haveAt a special meeting on rural entrepreneurship experienced in the number of self-employerresearch convened by the RUPRI Center for firms expressed as a proportion of jobs in eachRural Entrepreneurship and the Farm county from 1997 to 2000. Again, the darkestFoundation in May 2003, CFED staff presented green counties are those in the top third ofproposals for creating multi-factor indices that counties nationwide. These are more broadlyincluded the above measures along with firm scattered across the Southeast, Appalachian andincome data. However, it was the consensus of mid-Atlantic states, the Western mountainthe academic researchers that it would be states and across the Heartland.advisable to avoid such indices and present theMap 3: Self-Employer Firms 2000(Source: Census Bureau, Bureau of Economic Analysis) W.K. Kellogg Foundation • Corporation For Enterprise Development 19
  21. 21. Map 4: Growth in the Number of Self-Employer Firms 1997-2000(Source: Census Bureau, Bureau of Economic Analysis)Map 5: “Top-performing” Counties for Self-employer Firms, 200020 Mapping Rural Entrepreneurship
  22. 22. Map 6: “Top-performing” Counties for Growth in Self-employer Firms, 1997-2000Maps 5 and 6 show the results of a Z-score In Map 6, the distribution is mainly to the eastanalysis to identify those counties whose of the country with a few in the central states;indices were positive two or more standard clusters are evident in Kentucky and Georgia.deviations from the mean; in other words the“top-performing” counties for self-employer The following maps begin a second series of simi-firms in 2000 and growth from 1997-2000. lar presentation using data on small companies that employ 20 or fewer people.In Map 5, there is broad distribution across 17states, with clusters of counties in Nebraskaand Kentucky. W.K. Kellogg Foundation • Corporation For Enterprise Development 21
  23. 23. Map 7: Small Companies, 2000(County Business Patterns, Bureau of Economic Analysis)Map 8: Growth in the Number of Small Companies, 1997-2000(Source: County Business Patterns, Bureau of Economic Analysis)22 Mapping Rural Entrepreneurship
  24. 24. Map 9: “Top Performing” Counties for Small Companies, 2000Map 7 shows the distribution of small firms Maps 9 and 10 show the results of a Z-scoreexpressed as a proportion of jobs in each coun- analysis to identify those counties whosety in 2000. The darkest green counties are indices were positive two or more standardthose in the top third of counties nationwide. deviations from the mean; in other words theThese are concentrated in the central and “top-performing” counties for small firms innorth-west states. 2000 and growth from 1997-2000.Map 8 shows the change that counties have Map 9 shows a concentration in western statesexperienced in the number of small firms with two outliers in the east and clusters ofexpressed as a proportion of jobs in each coun- counties in Colorado and Nebraska.ty from 1997 to 2000. Again, the darkest greencounties are those in the top third of counties Map 10 indicates a broader spread across thenationwide. These more broadly scattered central and south-eastern states.across the country. W.K. Kellogg Foundation • Corporation For Enterprise Development 23
  25. 25. Map 10: “Top-performing” Counties for Growth in Small Companies, 1997-2000 Commentary The data presented in this chapter provide necessity-driven, or what the underlying fac- only glimpses of what constitutes entrepre- tors are that make one area more active than neurial activity in rural America. It shows another. As mentioned previously, the chal- that high-performing small labor markets are lenge is the lack of both data at the county found widely distributed across the country – level that adequately captures entrepreneurial there appears to be no obvious common loca- activity and of an accompanying framework tional characteristics. Counties in the heart- of the kind developed by Goetz and land and northern mountain states and in Freshwater. It is evident that some consider- Appalachia appear consistently as being com- able intellectual and statistical resources need paratively strong for both small business and to be invested so that entrepreneurship can self-employment. But there is no sense of be measured with greater confidence. how much of this activity is opportunity- or24 Mapping Rural Entrepreneurship
  26. 26. Policy ContextNational PolicyTen years ago, CFED suggested that the notionof rural development policy was misplaced.“Because rural areas are evolving into distinctlydifferent economic entities…an off-the-rack fed-eral strategy or state development policy basedon outmoded assumptions about rural areas islikely to be ineffective…Instead, state and feder-al policymakers should focus on building localand regional capacity to use flexible programsand tools, designing effective delivery systems,and creating supportive development institu-tions.”21 The report went on to recommend that“Rural advocates must work to ensure thatmainstream programs are designed so that ruralpeople, as well as urbanites and suburbanites,can benefit from them, and to ensure that ruralcommunity leaders are well-equipped to beactive and equal participants in local andregional development efforts. Effective urbanand rural development policies cannot be devel-oped separately, but instead must recognizetheir interrelationships. Thus regional strategies cy was narrowly defined as funding for agricul-are increasingly important.”22 ture through programs supported by the United States Department of Agriculture (USDA), butIn any event, many rural economic develop- the changing nature of the rural economy hasment leaders regard America’s national rural spurred a broadening of the rural economicpolicy as unfocused, if not non-existent. development policy framework. There appearsOrganizations such as RUPRI note that federal to be a growing national, state, and local policyrural development policies and programs “con- consciousness that rural communities mattersist of a fragmented constellation of programs and that entrepreneurship development shoulddispersed among several agencies… [and] a be a core component of economic developmentcomprehensive, goal-driven, community-based policy for rural America.and regionally appropriate national rural policydoesn’t exist.”23 Despite increased attention to non-farm rural development issues, a national policy aroundWhile fiscal crises have hit government fund- rural entrepreneurship still has a long way toing at all levels, including rural community go. A recent analysis by the USDA Economicdevelopment in the federal policy agenda is Research Service found that the highest levelstill a priority for rural advocates nationwide, of per capita business financial assistance fromincluding the Center for Rural Affairs, the federal government programs was concentratedNational Association of Development in the West, North Central, and New EnglandOrganizations (NADO), National Rural regions of the country and that 332 non-metroDevelopment Partnership, National Association counties received no federal assistance at all.24of Towns and Townships, and the National Additionally, numerous federal agencies investAssociation of Counties. In the past, rural poli- more resources in rural development than the W.K. Kellogg Foundation • Corporation For Enterprise Development 25
  27. 27. USDA (when agricultural programs are exclud- contribute (either directly or indirectly) toed) – the agency congressionally mandated to promoting entrepreneurship development inpromote the economic interests of rural rural areas by creating incentives for privateAmerica. investments in rural enterprises or building the capacity of communities or institutionsIndustry leaders note a vacuum in the field with to support rural entrepreneurs. Rural eco-regard to organizations that promote federal nomic development advocates maintain thatrural entrepreneurship development policy. The rural community development is not gettingEwing Marion Kauffman Foundation has signif- adequate support from the USDA and wouldicantly scaled back the policy activities of the like to see it more involved in promotingNational Commission on Entrepreneurship, rural entrepreneurship. The good news isonce the primary champion for federal entre- that although there is a long way to go inpreneurship development policy. Other poten- equalizing support between entrepreneur-tial champions for rural entrepreneurship are ship focused programs and agricultural sub-either in their early stages of development (such sidies through the USDA, within the last fewas the newly formed rural subcommittee of the years the budgets for USDA business devel-Association for Enterprise Opportunity [AEO]), opment programs have increased.are not primarily focused on policy (such as theRUPRI Center for Rural Entrepreneurship), or • The U.S. Small Business Administration’sare not specifically focused on entrepreneurship (SBA) SBA 7(a) guaranteed lending programdevelopment issues (such as the Congressional continues to be the largest single businessRural Caucus or the National Rural assistance program. However, financing perDevelopment Partnership). capita data shows that non-metropolitan areas receive less than three-quarters of theirConsequently, the majority of national rural counterparts in metropolitan areas, the resultdevelopment policies and programs still focus of both lower levels of economic activity andon natural resource conservation and industrial fewer private lending institutions. The maindevelopment, and very few resources support rural beneficiaries are counties specializingentrepreneurs specifically and directly.25 The in services, retirement-destination counties,following is not intended to be a comprehensive and non-metropolitan areas in Westernoverview of every government program or poli- states.26 Other programs such as the 504cy effort that contributes to rural entrepreneur- Certified Development Program, Microloanship development, but rather highlights some Program, Program for Investment inkey efforts that have recently emerged and/or Microentrepreneurs (PRIME), Women’shave significant impact on rural America. Business Centers program, Service Corps of Retired Executives program, and Small• USDA business assistance programs primari- Business Development Center (SBDCs) pro- ly function through loan guarantees or sup- gram, among others, are all elements of the port to community entrepreneurship devel- national small business development infra- opment initiatives and institutions. structure that can support entrepreneurship Programs such as the Business and in low-income rural areas. Industrial Guarantee and Direct Loan Programs, Intermediary Re-lending The potential benefits of these programs, Program, Rural Business Enterprise and however, have not been fully realized in Opportunity Grants, Rural Economic rural areas, according to a 2001 report by Development grants and loans and Rural the SBA Office of Advocacy, Advancing Enterprise and Empowerment Zones all Rural America, as well as from feedback26 Mapping Rural Entrepreneurship
  28. 28. from six rural roundtable meetings spon- status within the SBA is unclear. Fundingsored by the SBA in 2000. The roundtables for SBA programs that support disadvan-and report revealed that rural communities taged (rural and urban) entrepreneurs isface significant barriers in accessing SBA tenuous. Quoting the Administration’s 2003programs. Specifically, there has been a budget rationale, “economically distresseddecline in SBA guaranteed rural lending and communities and individuals have access toa lack of outreach by SBA programs such as a wide range of private for-profit and non-the 504 and SBDCs to rural entrepreneurs. profit microenterprise organizations includ-Participants in the rural roundtables cited ing federally supported CDFIs, which callsthe high cost of fees, lower guaranty levels, into question the necessity for separate SBAcentralization of servicing, lack of decision- programs.” SBA Microloan and PRIME pro-making authority at the local level, high lev- grams, the only two supporting microenter-els of paperwork, and difficulties obtaining prise development, are consistently under-technical assistance as key reasons for inade- funded.quate rural deal flow.27 • Other federal programs include the CDFI Fund of the U.S. Department of Treasury,Also of concern are the attempts by the cur- which provides capital to community devel-rent administration to cut SBA programs, opment financial institutions (CDFIs) in dis-particularly those that serve low-income tressed areas and could potentially be a valu-entrepreneurs such as the PRIME, able source of funding for organizations thatMicroloan, and New Markets Venture promote and support rural entrepreneurship.Capital Programs. Moreover, the SBA’s rural However, in 2002, only 11 percent of theseinitiative, created during the Clinton admin- awards went to rural America, reflecting theistration in response to the findings of the relative lack of eligible rural CDFIs.Rural Roundtable, has been stalled and its According to NADO, the majority of rural W.K. Kellogg Foundation • Corporation For Enterprise Development 27
  29. 29. and small metropolitan regional development initiative, charged with ensuring that all HHS organizations are ineligible for CDFI certifica- programs and policies meet the needs of tion and support due to their quasi-govern- HHS’s rural constituents. mental status.28 Other agencies, such as the Economic Development Administration and Although there have been significant shifts in ARC have for years funded local and regional federal policy in recent years, the major focus intermediaries (Economic Development remains on farming and on physical infrastruc- Districts and Local Development Districts) ture investment. Rural entrepreneurship devel- that support local economic development opment is still a new concept to many local, across rural America. state, and federal policymakers. While, there is no shortage of government programs that, in In recent years, efforts have been made to various ways, provide some sort of small busi- enable some of these regional development ness support, there is much that can be done to organizations to play greater and more effec- increase the effectiveness and outreach of fed- tive roles in entrepreneurship and business eral entrepreneurship programs in rural areas. development. ARC’s Entrepreneurship Findings from the ARC initiative reveal that Initiative is an example of a focused public effective rural entrepreneurship development sector effort to promote entrepreneurial edu- policy needs to be brought to scale, sustained cation and training, entrepreneurial net- over time, focused on enhancing the capacity works and clusters, technology transfer, of local and regional intermediary institutions, access to capital and financial assistance, and valued as a legitimate economic develop- and technical and managerial assistance to ment strategy. rural entrepreneurs. Through September 2001, ARC’s Entrepreneurship Initiative had funded 237 projects, providing a total of State Policy more than $20.1 million of support and According to a 1999 report by the Kaufman leveraging an additional $19.3 million. Center for Entrepreneurship Leadership Ninety-one projects had been completed, (KCEL), State Entrepreneurship Policy and creating 389 new businesses and retaining Programs, state commitment in support of 1,283 jobs. One hundred forty-six ongoing entrepreneurs is mixed. The report notes that, programs were projected to create 859 new “while state funding for entrepreneurship businesses and create or retain 2,726 jobs.29 development lags behind other economic The initiative, although clearly successful, development activities, many states have creat- has been constrained by the continuing lack ed programs or adopted policies that have a of local institutional capacity in rural positive impact on entrepreneurs.”30 Some Appalachia to support entrepreneurs. states are intentionally providing direct or indi- rect financing, promoting entrepreneurship The Department of Health and Human support services, and providing tax incentives Services (HHS) also offers programs and to emerging entrepreneurs, while other states funding that support entrepreneurship devel- are focused primarily on business recruitment, opment in rural communities, such as the Job which translates into resources for marketing Opportunities for Low-Income Individuals and incentives and continued expenditures on Program, Office of Refugee Resettlement basic physical infrastructure. In addition, many Microenterprise Development Project, Asset states lack a vehicle for entrepreneurs and for Independence Demonstration Program entrepreneurship development organizations to and Community Services Block Grant fund- network, share best practices, build new skills ing. HHS also recently launched a new rural28 Mapping Rural Entrepreneurship
  30. 30. ings from the USDA Economic Research Service’s Rural Manufacturing Survey reveal that state business assistance programs benefit- ed three fifths of rural manufacturing establish- ments. The national research notes, however, that only a “modest” amount of state business development services are targeted to small manufacturing establishments in non-metro distressed areas as compared to their larger urban counterparts. To encourage states to increase their funding for [rural] entrepreneur- ial friendly policies and programs, a variety of foundations and state policy stakeholders have sponsored state entrepreneurship policy and research initiatives:and competencies, or pursue an agenda of poli- • NGA convened two State Entrepreneurshipcy advocacy. Overall, findings from the Policy Academies in 2000 and 2001 toKaufman study revealed that state entrepre- assist nine state economic developmentneurship programs: teams (Idaho, Illinois, Maryland, Michigan, Mississippi, Nevada, Utah, Washington, and• Do not generally focus on the needs of Wyoming). These teams learned about the entrepreneurs during the start-up stage. role that entrepreneurship plays in state eco-• Provide debt, either through direct loans or nomic competitiveness and about develop- loan guarantee programs, rather than equity ing strategic and implementation plans to capital. promote a positive state entrepreneurial cli- mate. The initiative provided state economic• Support entrepreneurship education at the development officials with exposure to the post-secondary, rather than early education leading thinking on entrepreneurship devel- level. opment strategies and individualized techni-• Promote linkages to innovation and research cal assistance in the development of an primarily through universities. implementation plan.While these elements of support are important, While state budget crises retarded much ofthey do not make up a comprehensive “pack- the potential impact of the academies, thereage” of services for emerging or established were some notable successes. Michiganentrepreneurs. Yet, researchers and advocates integrated entrepreneurship developmentagree that state support is critical to the success into the formal mission of the state eco-of entrepreneurship development programs. A nomic development administration. Nevadarecent three-state study of Maine, Nevada, and linked networks of angel investors andPennsylvania by the National Commission on technology centers into formal economicEntrepreneurship and ACCRA’s Center for development planning activities and inte-Regional Competitiveness found that state grated entrepreneurship education into thefunding represents an important revenue state’s economic education standards.source (between 37-42 percent of a program’s Washington is developing a statewidebudget) for entrepreneurship development entrepreneurship assistance portal managedorganizations in these states. In addition, find- by the governor’s office to serve as a central W.K. Kellogg Foundation • Corporation For Enterprise Development 29
  31. 31. clearinghouse for all organizations serving – Missouri: The state team is building a entrepreneurs. more focused and integrated support system for Missouri’s small businesses NGA’s Center for Best Practices is develop- and has launched an initiative to pro- ing a Governor’s Guide to Entrepreneurial mote core skill development for recipi- Policies and Programs drawing from the ents of public assistance. findings of the research and the policy – Texas: Higher education institutions academies. and nonprofit organizations are leading• Rural Entrepreneurship Initiative was an effort to implement a statewide com- launched in 1999 with support from the munity-focused entrepreneurial support Ewing Marion Kauffman Foundation, system. Partners for Rural America, the National – West Virginia: A public-private partner- Rural Development Partnership, and the ship is working to develop a statewide Nebraska Community Foundation. The ini- intermediary organization to build tiative assisted six state teams (Colorado, entrepreneurial capacity and programs Maine, Minnesota, Missouri, Texas, and among non-governmental organiza- West Virginia) in enhancing their climate for tions, and promoting demonstration entrepreneurship development in rural areas projects such as the Entrepreneurial and was designed to provide a national League System and the Virtual learning forum on rural entrepreneurship. Entrepreneur Network. The state teams received guidance and cus- tomized technical assistance in assessing Of the six states, only Colorado failed to their state entrepreneurship climate and make progress. There, the rural develop- developing a strategy and action plan for ment council folded due to federal and implementing policies and programs that state budget cuts. The state’s SDBC system benefit rural entrepreneurs: also has been defunded. Results of the ini- – Maine: The Rural Development Council tiative thus far suggest that those efforts launched a “prototype” rural entrepre- rooted outside state government have neurial community and completed a proved to be the most robust and consis- study on the needs of rural entrepre- tent over time. As Don Macke observed, neurs in the state. The project grew into “While state governments tend to think in a collaboration with the Ewing Marion terms of programs, comprehensive state Kauffman Foundation and the Maine entrepreneurship policy development can- governor’s office to develop a compre- not be a programmatic approach and the hensive statewide entrepreneurship role of nonprofit organizations is crucial to development plan. its success.”31 – Minnesota: Practitioners have expanded the Minnesota Virtual Entrepreneurship Network, linking entrepreneurs throughout the state to resources, mar- kets, and support services. A number of other states, including North Dakota and Nebraska have or are in the process of adopting this approach.30 Mapping Rural Entrepreneurship
  32. 32. The Components ofEntrepreneurship DevelopmentThe starting point for gathering information on cations were reviewed and 60 experts and prac-entrepreneurship development efforts across titioners were interviewed. The result is not arural America was a framework developed by comprehensive directory of national, regional,CFED for the Winthrop Rockefeller Foundation and local programs and initiatives, but a cross-and published early in 2003.33 This framework section of efforts that currently have or poten-has two main parts: creating a pipeline of entre- tially have a significant impact on stimulatingpreneurs and enhancing business services for entrepreneurship in rural America in each ofentrepreneurs. The pipeline notion was that these four components.“there should be an infrastructure of lifelonglearning from elementary school to the golden Entrepreneurship Educationage, based on the simple principle that it isnever too early or too late to be an entrepre- For the past two years, ARC in partnershipneur…The aim is to create a large and diverse with the U.S. Department of Education haspool of people, across a spectrum of entrepre- held an awards competition – the Springboardneurial motivations, out of which there will Awards – to recognize outstanding youth entre-flow a steady stream of high achievers with an preneurship education programs targeted atinterest in creating jobs and wealth in their rural communities across the region. ARC’scommunities.”34 With business services, “the Federal Co-Chair, Ann Pope, captured theaim is to “graduate” significant numbers of essence of this component when she com-start-up enterprises into companies and organi- mended the 2003 winners, “The educatorszations that will provide quality jobs…”34 receiving this award are inspiring Appalachian youth to reach as far as their imagination andThe key components of the pipeline are entre- energy can take them…By giving our youngpreneurship education and entrepreneur net- people the confidence and know-how to initi-works; for business services, the components ate their own business ventures, they are help-are training and technical assistance and access ing to prepare the region for the challenges ofto capital. For this assessment, some 65 publi- the 21st century.”35 W.K. Kellogg Foundation • Corporation For Enterprise Development 31
  33. 33. The Consortium for Entrepreneurship target markets. Still others choose to provideEducation (CEE), an association of entrepre- broad support and development of tools forneurship educators and advocates, reports that young entrepreneurs of all ages.entrepreneurship education is becoming a prior-ity within all systems of education beginning inkindergarten and continuing through college as Elementary Through High Schoolwell as for adults in continuing education and The following is a selection of efforts currentlyentrepreneurship training programs. CEE has underway in the mainstream education systemsdeveloped an on-line guide, with support from and through special initiatives.ARC, which highlights model entrepreneurialeducation initiatives and provides a clearing- • Public schools and vocational educationhouse of information on entrepreneurship edu- tracks traditionally have been closely linkedcation resources. This year in Seattle, CEE will to vocational education the majority ofsponsor its 21st annual Entrepreneurship entrepreneurship efforts within the publicEducation Forum, bringing together hundreds school systems.38 The vocational tracks andof practitioners from across the country.36 their corresponding associations such as Distributive Education Clubs of AmericaIn the mid-1990s, the Ewing Marion Kauffman (DECA) – an association of marketing stu-Foundation commissioned Gallup to survey dents, Future Farmers of America (FFA),youth on knowledge of and attitudes towards Business Professionals of America (BPA),entrepreneurship and small business. One sig- Future Business Leaders of America (FBLA),nificant finding was that 65 percent of youth and Family, Career, and Community Leaderssurveyed expressed interest in starting their of America (FCCLA) see entrepreneurshipown business. Walstead and Kourilsky noted, as a career opportunity for students who“This interest in entrepreneurship is an may not go on to college. Neither theuntapped reservoir with the potential to direct- Department of Education nor these associa-ly affect standards of living and the economy. If tions track penetration of their programsjust a third of the youth who expressed an into rural schools or encourage state depart-interest in starting a business actually acted on ments of education or state affiliates totheir aspirations at some point over their life- reach out to rural students. That said, it wastimes, such initiative could significantly reported that the education departments inincrease new business formation in the United Nebraska and New Mexico have modelStates.”37 efforts underway.39 • Junior Achievement is distinguished by itsAdditionally, recent conferences on rural devel- program design that links real world entre-opment and interviews with rural economic preneurs with students and its strong part-development leaders underline the importance nership with classroom instruction. Juniorof entrepreneurship and youth development in Achievement programs are offered in 120any rural economic development strategy as a countries, all 50 states and reach 4 millionmeans to population retention, leadership U.S. high school and 2.8 million U.S. ele-development, and economic growth. In mentary school students. Currently, Juniorresponse, an increasing number of programs, Achievement does not track its outreach intoboth in-school and after school, are providing rural areas or gather demographic data fromentrepreneurship education to rural youth. individual students. There is no focusedSome programs cast a wide net and have small- effort at the national level to promote out-er impact on a greater number of students, reach into rural communities, although therewhile others focus more in-depth programs on32 Mapping Rural Entrepreneurship
  34. 34. are efforts to develop a distance learning ini- active state organizations (Alabama, Georgia, tiative for hard-to-reach areas. Examples of Mississippi, North Carolina, Upper Peninsula model programs include Ft. Wayne, Indiana Michigan, Vermont, Virginia, Washington, and Pueblo Colorado Springs.40 and West Virginia) and the curriculum is being offered in over 20 additional states• National Council for Economic Education nationwide. There has been little sustained (NCEE) offers Economics America, a class- evaluation of REAL programming due to room and standards-based curriculum, lack of funding. The best example of a which is focused on economics education, statewide commitment to REAL is North with entrepreneurship as one part of the Carolina where REAL programming is repre- broader curriculum. NCEE courses are inte- sented in 84 out of 100 counties in the state. grated into K-12 classroom curricula. NCEE does not track its outreach into rural com- • National Foundation for Teaching munities. Examples of model states include Entrepreneurship (NFTE) aims to teach Virginia, Indiana, Illinois, and Washington.41 entrepreneurship to low-income youth (ages 11-18). Historically much of its work has• Rural Entrepreneurship through Action been targeted to inner-city youth and has Learning (REAL) Enterprise program began not had any targeted rural focus. Since 1987 in 1990 and was originally designed for NFTE has trained 1,200 teachers and more school students in rural communities. than 30,000 youth in 43 states and 14 coun- Whereas REAL Enterprises offers a full range tries. The most recent analysis of programs of entrepreneurship development products found that NFTE graduates had improved and teacher training services across the communications skills, increased interest in country, it is the only national program starting a business, and started a business at specifically developed for and targeted to a much higher rates than non-NFTE students. rural target market. REAL currently has nine NFTE’s internet-based learning program, W.K. Kellogg Foundation • Corporation For Enterprise Development 33