Entrepreneurship in Economic Development | Wisconsin Public Television

Entrepreneurship in Economic Development

Entrepreneurship in Economic Development

Record date: Jul 19, 2017

Tessa Conroy, Economic Development Specialist at UW-Madison and UW-Extension, discusses the links between entrepreneurship and job growth, income growth, poverty reduction, innovation and regional stability. Conroy provides innovative strategies for growing a local economy.

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Episode Transcript

- Tessa Conroy is an economic

development specialist

and assistant professor at the

University of Wisconsin-Madison

at the Department of Agriculture

and Applied Economics and has

a joint appointment with UW-

Extension studying community

economic growth and development,

small business dynamics

and entrepreneurs.

She has a degree in

business administration

from Gonzaga University

and a PhD in economics

from Colorado State University.

She conducted postdoctoral

research at the UW-Madison

and currently holds

a research grant

from the United States

Economic Development Agency.

Her research includes interests

in applied microeconomics,

entrepreneurship, gender, firm

location, regional economics,

and economic growth.

She has written on the impact of

small business loans, business

location, the urban/rural

divide, and gender and business

ownership and entrepreneurism.

Let's welcome Tessa Conroy.

[applause]

- Thank you for the

nice introduction,

and thanks to all of you who

are watching and listening.

Tonight, I'm going to be talking

about entrepreneurship

and economic development.

So I'll be trying to give you

kind of a view of the forest

and think about how

entrepreneurship fits into

the bigger economic story of a lot of our towns and regions,

particularly in Wisconsin.

I'm starting with a

story about my hometown.

So this is downtown Goldendale,

Washington, and I'm starting

with this because this is kind

of about how I arrived at

studying entrepreneurship

and economic development.

As you can see, I think

that our downtown looks

a lot like some other downtowns.

It's old and cute but suffering. It's seen better days.

And a lot of that has happened

in the last 20 years

since our aluminum plant closed.

Our aluminum plant

employed upwards of 30%

of our population,

and since it's closed

we've kind of had to

reinvent ourselves.

This is the plant on the

Columbia River Gorge.

At its peak, it employed

close to 1300 people.

It opened in 1971 with the kind

of rise of manufacturing

in the United States.

At one point, it provided

almost $40 million in income

and almost $2 million in taxes.

So this is a really big or had

a really big economic impact

in a town of about 3500 people.

Ultimately, the plant began to

scale back in the late '90s

when energy prices

started to go up.

Aluminum plants used a lot

of energy, so being located

on the water near hydropower

was really important

for the aluminum plants.

There are about 10 other

aluminum plants spread out

across the Pacific Northwest.

But as energy prices

got more expensive,

aluminum prices also went down.

It became harder and harder

to become profitable.

We also started to face global

competition as new plants were

being built that were modern

and more efficient.

So, ultimately, there were

lobbying efforts at the local

and national level, trying to

get us maybe a better energy

price for example, but the plant

closed in the early 2000s.

It's since been raised,

and all that's left

is an industrial footprint.

So I think maybe some of you

have seen something like this.

I call them an industrial

graveyard, where something that

was, you know, really important

just isn't there anymore.

But before it closed, there

were some pretty heroic efforts

to try to get it to stay.

This is a picture of

a natural gas plant.

Also right outside my hometown.

People were really hopeful

that this natural gas plant

was going to save

the aluminum plant.

They thought this is going to

provide cheap power

and the aluminum plant

will stay open or reopen

and this will be kind

of the saving grace.

So we annexed land, we

tried to get tax incentives

to make this happen.

Interestingly, this linked my

hometown to Enron.

At a time when energy markets

were going a little bit crazy,

a subsidiary of Enron was

initially managing the building

of this new plant.

It opened briefly for about two

years and went bankrupt in 2004,

never employing more

than 20 people.

So it didn't have the effect

that a lot of us were

hoping it would.

So despite these lobbying

efforts, these local

and national efforts to save the

plant, despite our annexed land

and our tax incentives,

ultimately economic development

happened where we

weren't looking.

What you see here is a

scanning gold drone,

and in the background

you see a wind farm.

So here the wind tower

is in the far distance

of the upper picture as well.

So what happened is

we had a new company

that opened in the '90s, Insitu.

And they were developing drones

or unmanned aerial systems.

They only had a few

employees at that time.

In 2008, they sold to Boeing

with over 600 employees.

So a real success story.

Ultimately, it was our local

talent and our local

entrepreneurs that

generated new jobs for us.

Similarly, the wind farms were

first kind of coming to

fruition in the late '90s

and early 2000s.

We now have some of the largest

wind farms in the west.

So, ultimately, we had to invest

in a local asset, being wind,

and the energy infrastructure

that we have from

all the hydropower.

And those were the things

that generated economic

development in my hometown.

I want to kind of close this

story by pointing out that what

was happening in my hometown

was bigger than my hometown.

There were, like I said,

widespread plant closures.

So our plant closed in the

early 2000s, but by 2015

all nine or 10,

depending on what you count,

aluminum plants had closed

in the Pacific Northwest.

The plants closed

as profits fell and global competition increased.

So this had more to do with what

was going on in big energy

markets and around the world.

And all the time and resources

we used to try to save the

plant were unsuccessful.

And meanwhile, there may have

been missed opportunities to

support new and

local businesses.

So the question that I have as

an economist now and as a

researcher is, what might

have happened if we'd devoted

those resources even more

into our local talent,

even more into our entrepreneurs?

What might the town look like

if we had gone even further

with our efforts to

generate new businesses?

So now, as a researcher,

I think about things

a little bit differently.

I know that

entrepreneurship is linked

to several economic benefits.

I'm going to spend a lot

of time talking about how

entrepreneurship is

related to job creation.

But also we know that it's

linked to income growth,

poverty reduction

or alleviation,

innovation, and regional stability.

First, income growth

and poverty reduction.

Thinking kind of big picture,

we know that countries

with more entrepreneurship

have higher GDP.

So that means they're either

producing more and/or producing

more valuable goods

and services.

Locally, we know that within

the US entrepreneurship

is tied to rural and

urban income growth.

So that means more wealth

and higher incomes

within our communities.

We also know that

entrepreneurship

is linked to rural

poverty reduction.

The example I'm giving is

Appalachia because even in this

environment that seemingly lacks

the infrastructure to benefit

from entrepreneurship, poor,

poor part of the country,

even they have benefited

from self-employment

in terms of job growth

and income generation.

And then, at the micro or

individual level, we've also

seen how helping individuals

become self-employed can help

them out of poverty

and reduce the need

for our welfare programs.

This is one of my favorite

topics, is the economic

diversity and how

entrepreneurship helps with

kind of a portfolio approach

to economic development.

So over time, some

businesses will close,

others will do quite well.

We actually know that

dynamism is part of a

really healthy economy.

If you look at some of our most

vibrant and thriving economies,

they have really high

establishment death

rates or exit,

but there comes alongside a

high establishment birth

rate or a lot of entry.

So lots of dynamism in

our healthiest economies.

In Wisconsin, we see about,

I think it's around 10,000

businesses open and

close each year.

So that's between 25 and 30

businesses each day

kind of coming and going

from the market.

So relying on just one industry

can leave a region vulnerable,

and that's the story

of my hometown.

We had about, like I said, 20%,

30%, 35% of our employment

with one employer

in one industry.

So when that employer goes down,

or if it goes down,

there's nothing to offset it.

So having a diverse portfolio

of industries as an economic

developer can create

stability in your region.

So we call that a

portfolio approach

to economic development.

We kind of offset risks so we're

not too deeply invested in any

one industry, and at any given

time, hopefully, if something

goes down, there's

something else on the rise.

And this isn't limited

to industrial diversity.

We have also seen that places

that have more gender diversity in their business ownership

were more stable

during the recession.

So, counties that had more

women own businesses during

the recession had more stable

outcomes during the recession.

So, women tend to

manage the businesses

a little bit differently. Oftentimes more risk averse.

So some of these different

management patterns

actually create some

stability as well.

Entrepreneurship is also

linked to innovation.

So you might think of

entrepreneurs as innovators,

and that's not

necessarily incorrect.

A lot of our entrepreneurs

do innovate,

but oftentimes our

entrepreneurs are the people

who are delivering

innovations onto the market.

So they are bringing new goods

and services to consumers.

Those replace

existing technology

and ultimately

promote advancement.

They create new value

for our consumers.

So this is all part

of economic growth.

Ultimately, consumers benefit

from having many choices to

suit their needs.

So having kind of the latest

and greatest or maybe something

that you didn't even

know you wanted

is now available for

you to purchase.

This gives firms a

competitive advantage.

If they can be the ones that

create the good or service

that consumers want, then they

have an incentive to innovate,

that's their profit incentive.

So this process of

competition and innovation

and gaining a market share drives the economy forward

by creating advancement

value wealth.

In Wisconsin, and this is true

across most of the country,

or the whole country as far as I

know, businesses are responsible

for the majority

of R&D spending.

So this is a chart

kind of showing

the different shares

of R&D spending.

Here are sources

of R&D spending.

It's a little bit weird just

because we wanted to show you

the various shares and make sure

that everybody was visible.

But the blue share, above 85% in

most cases, is the share of R&D

spending that's coming

from private industry.

The orange is non-federal,

non-state.

So we would think of this

probably as nonprofits.

Maybe the Cancer

Research Association

or something to that effect.

And then the small gray sliver

is our state spending,

and then federal being the

small yellow share at the top.

So the overwhelming

majority of R&D spending

coming from businesses.

Entrepreneurship is

also linked to creating our local sense of community.

We create and support

local amenities.

So Wisconsin has a pretty

healthy tourism culture.

We need businesses to make

those amenities enjoyable for

consumers so that you can go out

on the lakes or go skiing

or something to that effect.

To enjoy being in the

outdoors in particular,

we need businesses to

support our amenities.

They also provide

specialty services

and sell culturally

specific goods.

I like to give the

example of New Glarus,

which has really leaned into their Swiss identity.

And they opened shops and they

sell those types of goods

and their restaurants sell that

kind of food and people go to

New Glarus expecting to see that

kind of cultural identity.

I think Wisconsin also has

kind of a meat and cheese

and beer identity.

And we see lots of places

offering those services.

So it's become part of our

culture and what makes us

unique, why people come

here to spend their money.

And it definitely gives

our communities

unique charm and character.

This is what I think is probably

the most important aspect

of entrepreneurship.

So many of our

policy conversations

when we talk about

economic development

we're actually really

talking about job creation.

How do we employ people?

How do we create new jobs?

That's especially been the story

coming out of the recession,

which has been a relatively

sluggish jobs recovery.

We haven't put jobs back into

the economy quite as quickly

as some would like,

particularly in rural areas.

But we've learned a lot over

time about kind of how this

works and where jobs come from.

So, historically, we thought

that job creation

was about business size.

In the 1980s, or

before the 1980s,

we thought that big

businesses create jobs.

So we were looking to kind of

our large employers and these

kind of monolithic companies

to give us new jobs.

In the 1980s, it was David Birch

at MIT who got his hands

on some really good

business data.

And he's the one who helped us

figure out that it was actually

small businesses

that generate jobs.

This actually came after the

Small Business Administration

was already established,

interestingly.

And this kind of verified maybe

what some of us already knew

on the ground, that small

businesses are really important

for job creation.

So this kind of brought

about a renewed emphasis

on our small businesses

and entrepreneurship.

But we've gotten even better at

understanding small businesses.

More recent work shows

that job creation

has more to do

with business age.

It's not necessarily small

businesses that create jobs.

It's new businesses

that create jobs.

And it is their newness

more than their smallness

that drives job creation.

New businesses often

happen to be small.

So that's part of kind of like

we're conflating these two

ideas, but when we can keep

track of business age,

we actually see that it's our

entrepreneurs, our newest

businesses that are

the job generators.

I'll show you what I mean.

So this is the share of

creation or of job creation

from businesses with

less than 500 employees.

That's the Small Business

Administration definition

of a small business.

A lot of us think of a

small business as something

much smaller than that.

And here we have Wisconsin as

well as some regional neighbors

in the United States kind of

here in the middle at 83%.

So, in Wisconsin, we have

nearly 90% of job creation

coming from small businesses.

So it's not wrong to say that

small businesses create jobs.

I would just argue

that it's more precise

to look at job creation

by business age.

So here we have five-year

age increments.

So businesses from zero to five,

six to 10, 11 to 15,

16 to 20,

and 21 to 25.

So, again, these are age

classes of businesses.

And you see that in Wisconsin

almost 44% of job creation,

almost 44% of job creation

comes from our new businesses

or our new and youngest

businesses under age five.

That's actually a little less

than the country on average.

Between 50% and maybe even

up to two-thirds of new jobs

come from our

youngest businesses.

In Wisconsin, we tend to have a

slightly less entrepreneurial

activity compared to

the rest of the country

and more large

legacy industries.

So what I've done here is break

apart that youngest category.

So I have age zero

businesses here,

one, two, three, four, and five.

And when we then kind of

disaggregate even further,

we see that over a

quarter of our new jobs

come from age zero businesses.

So over a quarter of jobs

coming from our brand new

establishments.

That's really substantial.

It's still a little bit less

of the rest of the country.

Typically about a third of jobs

come from our

youngest businesses.

But this hopefully is really

striking to you that almost a

quarter of jobs or more than a

quarter of jobs in Wisconsin are

coming from our entrepreneurs

and new businesses.

So I mentioned that Wisconsin is

a little bit below the national

average but it's still the case,

so, nationally, I do want to

point out about a third of new

jobs come from new businesses,

another third from that youngest

age group from one to five.

And then I have this statistic

or this figure here just because

I think it demonstrates how

important entrepreneurship is.

From 1980 to 2005, so over a

25-year period, annual net

employment growth in the US

would have been negative

without the job creation

from new ventures.

So we would have lost

jobs over this period

had it not been

for entrepreneurs,

all the while our population

and labor force are growing.

So we would have been

in quite the jobs hole

without our entrepreneurs.

So, I spent some time talking

about the benefits of

entrepreneurship, how

it's linked to growth,

poverty reduction, economic

diversity and stability,

the job creation benefits,

of course,

but I want to balance that

with some of the bad news.

Young businesses face

high failure rates.

Depending on the data you use,

usually we expect about 50%

of businesses to make it

past their fifth year.

So we lose about half

in those young stages.

So that means that after five

years, 40% of the jobs initially

created have been

eliminated by closure.

So that's an important part

of economic development.

Most people, when they take a

job, they want to know that that

job is going to be here nine

months from now or two years

from now or five years from now.

Some new jobs are not

high-quality jobs.

It's the case that our

older firms are likely to

offer better benefits.

So, young firms are far less

likely to healthcare

and retirement programs,

things like that.

So, from an economic development

perspective, I would say that

this speaks to the importance

of helping young firms survive

and get to that point where

they can really enhance

their employment offerings.

What's most concerning,

though, I would say,

is that entrepreneurship

is declining.

This is another figure that

I hope is really striking.

It starts in 1977 here

and ends in 2014,

the most recent data available.

And what we're seeing is the

start-up rate in Wisconsin.

So our start-up activity has

fallen by more than half over

the last one, two, three,

four, almost four decades.

So without the start-up

activity, we aren't seeing the

same amount of job creation.

You've seen it kind of tank here

with the recession and it

hasn't really come back.

Granted, we're missing about two

years of data just because it's

not yet available, but we're

not seeing the start-up rate come back quite like we'd hoped.

I think that that might

be part of the story as to why we've seen a slow jobs recovery.

If we don't have start-ups, then

we're not going to get those

jobs benefits that

I just described.

That can be, these kind

of negative aspects,

though, I think can

still be offset.

Firms that do survive

grow rapidly.

For the most part

with businesses

we observe an up

or out phenomenon.

So, you either exit the market

or you grow and do quite well.

We also know that failure

alongside openings is the sign

of a healthy dynamic economy.

So Colorado, for example, high

birth rate, high death rate.

So, lots of turn.

And we've known this for some

time, that turning dynamic

economies are doing quite well.

So even though firms are

exiting, it's still part of a

healthy economy, and we think

part of that is because of the

informational aspect

of entrepreneurship.

So even when an

entrepreneur fails,

they're still poking

the edges of the market.

They're still figuring out

what works and what doesn't.

They're still

generating information

about what consumers want.

And that's valuable to

subsequent entrepreneurs.

So you, I've heard the example

at least, that in Silicon Valley

entrepreneurs aren't taken

seriously until they've failed

three or four times. Right?

So there's just a lot of

information, a lot of knowledge

to be gained, and even a failed

enterprise helps us do that.

So there are long-term, and

we've shown this empirically,

there are long-term job benefits

of even the death rate

of new businesses.

One thing that I find also

hopeful in a time when rural

areas are kind of struggling

in terms of job creation

and their economic story

is that rural areas

are surprisingly entrepreneurial.

We see higher rates

of proprietorship

and higher rates

of business survival.

So a proprietorship is just a

tax status but it's indicative

of at least some

self-employment, of at least one

person who has

created a business.

He may or may not employ others.

So, here we have

non-metro counties

or the most rural counties

in Wisconsin in the top

and then move towards

the most urban.

And we see that in our rural

areas we have the most

proprietorships per 1,000

residents.

And this is based on, again,

the rural/urban continuum code,

but I've just lumped

them together

so we can see kind of easily from most rural to most urban

we actually have the

most proprietorships

or the most kind of

seedlings of new companies

in our rural settings.

Here we have rural

business survival.

And similarly,

I've arranged them

from most rural to more urban.

We've seen that business

survival is actually higher or

they're more likely to make it

to five years in rural settings.

So I think this is hopeful

for rural America.

There is some kind of

mixed explanations

as to why that might be.

One explanation is

the persistence

of rural entrepreneurs.

That maybe for some reason

they have a little bit more stick-with-it-ness.

On the other hand, this could be

a lack of competition

in rural areas.

Maybe they survived because

nobody's putting that

competitive pressure on them.

Nobody's forcing them out

of the market, essentially.

And it could be that rural

areas don't have as many wage and salary options.

They don't have competitive jobs

being offered, so people feel

the need to create a job for

themselves for lack of something

better already in

their community.

But even still, I think this

speaks to some self-initiative

and some persistence

in rural areas.

So, how do we go about

enhancing entrepreneurship?

So this speaks to shifting away

from attraction-based economic

development or recruitment.

A lot of dollars and energy have

historically been spent

on trying to get new firms

to come into an area

and create a bunch

of jobs all at once.

Supporting entrepreneurship

is a lower cost strategy

for job creation.

So rather than get one

business with 50 employees,

entrepreneurship is more about

maybe planting the seed for

25 businesses that will

each have two employees.

But those entrepreneurs

are going to be tied to

the community.

They're likely going to

have relationships there.

They're more likely to stay, and

they're willingness to stay

is going to have less to

do with the tax structure

or something like that.

So this is a long-term approach

to economic development.

So we can emphasize creating

and growing local entrepreneurs

and small businesses, and there

are several kind of strategies I'm going to talk about.

And these are what I considered

the latest in the research.

These are things that

I've been working on over the last three to five years.

These are what's coming out

from my colleagues as well.

So there are other probably more

obvious strategies in terms

of making sure you have retail

space, for example, but I'm just

going to speak to those that I

feel like I know the most about.

So the first one I want to make

is about changing demographics.

And the first is an

aging population.

The country is aging,

especially rural areas.

The average age in rural

areas, in general,

is higher than in

our urban areas.

But we also know that start-up

rates are higher for people age

55 to 64 than they are even for

people in their 20s and 30s.

So this is a particularly

entrepreneurial population.

It's kind of pre-retirement

or retirement age folks

who I think maybe are ready

to exit their traditional job

but not ready to stop

being productive.

They still have

something to contribute.

And they also have significant

amounts of experience

and financial capital.

So I think this is

a group of people

rich with entrepreneurial potential.

We've also been able to

show that rural areas

within migration in this age

group, net in migration,

these places have

higher start-up rates.

So I think oftentimes when we

think of entrepreneurship,

we might think of maybe a

young man in the tech center,

or tech sector, that's what

comes to mind first.

But I think we need to think

more broadly about who can be

entrepreneurs and make

sure they're included

in our outreach efforts.

Along those lines, I also

want to talk about women.

Women are a small but growing

number or share of businesses.

About three out of 10,

four out of 10 businesses

are women-owned.

At the same time, women make up

about half of the labor force.

And they make up more than

half of our college graduates,

right now.

So there's reason to think that

there's potential for women

to own about half

of our businesses.

We also know that the

businesses that we do have

tend to be out-performed by

male-owned businesses.

So, they don't have the same

sales, they don't have the

same employment as

male-owned businesses.

I've given the example here

that the typical male-owned

businesses, for every dollar

earned in the typical male-owned

business, a woman-owned business

is going to earn 27 cents.

So, compared to the wage gap,

that's really dramatic.

That's even more stark,

I would say.

So what's going on here,

and what can we do about it?

We know that when we kind of

talked to entrepreneurs about

why did you choose this form of

employment for yourself?

What made you decide

to start a business?

When we ask men, they say,

well, this is high growth

or this is my primary

source of income.

When we ask women, they're not

likely to say or not as likely

to say that this is their

primary source of income.

We do hear them say that they've

done it so that they can

increase the time

spent on childcare.

So this is a strategy

for dealing

with the demands of kind

of household production.

So we see them increase time

spent on child-rearing.

We also see modestly performing businesses, and you could argue

it's because they simply don't

have the time to do it all.

And I think this is certainly

not true of all women.

We have high growth

women entrepreneurs.

But at the mean it's more likely

that you're going to see this

from women than

you are from men.

So what happens when we

have adequate childcare?

So, high quality and

affordable childcare.

We tend to see kind of

a fork in the road.

Women either stay in high wage

salary jobs in the private

sector, so they're producing

more, they're contributing to

the economy, generating income,

or they're able to pursue their

high-growth entrepreneurship.

So, I say sometimes that good

entrepreneurship policy

doesn't always look like

entrepreneurship policy, and I

think this is an example of

that, where childcare can

actually be something

that lends itself to

a more entrepreneurial community.

I also want to talk

about networks.

So not just in relation to

women but in relation to other

entrepreneurs who maybe kind

of outside the mainstream.

So that's minorities, that's

veterans, that's maybe our older

populations that

I just mentioned.

Networks are really

important to entrepreneurs.

We know that entrepreneurs

are constantly learning

from each other about what

works and what doesn't.

We know that they're connecting

with lenders to find out about

feasible financing strategies.

They're connecting with

real estate agents

to learn about good locations.

They need to connect

with suppliers.

They need to learn

about their consumers.

So networks are

really important.

We see places that are more

entrepreneurial,

our entrepreneurs are more

networked in with each other,

they've established reciprocity

where they're kind of working

to benefit each other mutually.

So entrepreneurs, or excuse me,

networks are really important.

And it's not enough, say,

to have a women's business

association, I would argue.

That's a great start in that

women can learn from each other

and support one another, but we

actually need to make sure our

entrepreneurs are kind of

networked into the economic

center of our towns so that we

can all learn from each other

and benefit one another.

This is an example from a study

I've been reading, and it says,

"Irrespective of how shrewd or

clever the woman is, she will

"still not have access to the

well-kept information that is saved for the good old boys."

So I know we've all heard the

good old boys network and I know

it's easy to dismiss that it's

still around, but, anecdotally,

when I go around talking about

entrepreneurship, when I talk

about gender differences, this

is a story that I still hear,

that women are perceiving kind

of a certain, they're perceiving

that to some extent they're

outside the main information

exchanges that would

benefit their businesses.

So, thinking about how could

we create opportunities for

networking with our chamber of

commerce or with our business

associations and

things like that.

Lending is also important to

entrepreneurs, or financing.

I'm talking here specifically

about institutional finance.

So we know that small business

lending is linked to higher

start-up rates, especially

in rural areas.

And we also know that lenders

face information asymmetries

that can limit

credit availability.

So what do I mean by that?

When an entrepreneur goes to a

bank and needs to be evaluated

for a loan, that loan officer is

going to be trying to collect

as much information as they

can about that business

and how likely it is

to be successful.

When they don't have

good information,

it's like looking

into a black box.

You don't really

know what's there.

It looks risky.

It looks uncertain.

That loan candidate is less

likely to get approved.

When lenders have good

information, maybe because they

have a personal relationship

with the entrepreneur, you have

sort of an insider's perspective

or an informal connection to

that businessperson, you're

more likely to get a loan

because they have better

information that reduces

risk and uncertainty.

We see this a lot in

rural areas. We call it

relationship lending.

So to the extent that we can

encourage a healthy exchange of

information between lenders and

entrepreneurs, we would expect

easier access to financing

for entrepreneurs.

This is especially relevant,

again, to our women

and minority entrepreneurs

who might be less networked

than our other entrepreneurs.

I also want to connect here

and point out that most

entrepreneurs are financed

through personal savings

and credit cards.

We use the saying, "Friends,

family, and fools."

Only about 10% or 15% of

entrepreneurs are actually

going to go to the bank

and get a loan.

Most people are going to

use their own resources.

And oftentimes they're actually

getting a home equity loan.

So this is another way where

entrepreneurship policy or good

entrepreneurship policy

might not look like good

entrepreneurship policy because

having a healthy housing market

can actually lend itself to more

entrepreneurship in that people

have valuable homes that can get

them some access to capital.

So, coming out of the housing

crisis, the populations that

were hurt most by the housing

crisis likely has consequences

for their access to capital and

maybe explains that low rate

of start-up activity that

I showed a few slides ago.

The last point that I want to

make also comes out of the

networking studies

that I've been doing.

And it basically shows, we can

show that even if two places

were identical, their social

networks would evolve uniquely.

And I think that makes

intuitive sense to people.

But what that means from an

entrepreneurship or economic

development perspective is that

it's extremely difficult to

recreate Silicon Valley

or Austin, Texas.

And I think that that's a

story that we hear sometimes.

People go to the high growth

city or the splashy city

and they come back and they say

we're going to be the next

San Francisco, we're going to

be the next Austin, Texas,

but that's really

difficult to do.

Even if you could replicate the

industrial composition,

the education system,

the demographic profile,

it's still the case the those

entrepreneurial ecosystems

are going to form uniquely and

that's going to dictate, to some

extent, the entrepreneurial

outcomes in each city.

So I would argue that it's

more effective to invest

in local strengths.

Don't try to be

something you're not.

I give the example again, I want

to circle back to my hometown,

ultimately it was our wind,

our energy infrastructure,

our local entrepreneurs

that generated the kind

of economic development

that we were looking for.

And I'm new here, but I am

interested to hear kind of what

the local assets might

be in this area.

So just a few

concluding thoughts.

New firms are critical

to generating new jobs.

So, in terms of when towns have

to kind of reinvent themselves,

particularly after losing a

major industry, I would argue

that new firms are a

good place to look.

Fostering entrepreneurship is a

low-cost, long-term approach to

economic development, so kind of

thinking differently

about economic development,

moving away from that

attraction-based

recruitment strategy.

And fostering entrepreneurship

requires a mix of strategies that will vary by community.

There's not a silver bullet

when it comes to

entrepreneurship policy.

Every town is going to be a

little bit unique in terms of

thinking about what they can do

to develop their local assets.

A few more resources for you. Thank you for your time.

[applause]

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