strategies for supporting rural entrepreneurship

STRATEGIES FOR SUPPORTING RURAL ENTREPRENEURSHIP

MICHAEL W-P FORTUNATOSAM HOUSTON STATE UNIVERSITYCENTER FOR RURAL STUDIES

Presented at NADOOctober 16, 2016

PREVIEW• Background• Urban and rural

entrepreneurship• Approaches to

entrepreneurship development• How to catalyze

action

Who is an Entrepreneur?

Who is an Entrepreneur?• Job creators – From 1980-2005, all net job growth in the U.S. was

from firms less than five years old

• Risk-takers – Only half of new firms in the U.S. survive to age

five – But, about half the firms on the 2009 Forbes 500

list were launched during a recession – Only 16 percent of new U.S. firms in 2009 were

started with venture funding, with over 67 percent funded by personal debt in 2008 • (Source: Kaufmann Foundation 2012)

Who is an Entrepreneur?• In the U.S., most likely to be in the 50-64

age range, least likely to be in the 20-34 age range – Creative class anyone?

• 70 percent are men • 81 percent are white, followed by 9

percent African-American, 6.6 percent Hispanic, and 4 percent Asian

• Startup rates very consistent over time • (Source: Kaufmann Foundation 2012)

Who is an Entrepreneur?• Several “typologies” – Serial vs. Single – Opportunity vs. Necessity – Investment vs. Lifestyle – Farm vs. Nonfarm – High-tech vs. Low-tech – High-growth vs. Low-growth – Venture capital vs. personal funds • Which are more likely to stimulate economic

growth? • Which are more likely to exist in rural areas?

Who is a RURAL Entrepreneur?

• Are rural entrepreneurs different than urban entrepreneurs? – Henderson (2002) suggests that: • Rural areas actually had higher self-employment

growth in the 2000’s than urban areas • Higher likelihood of employment in ag and

natural resources, manufacturing, and services than urban areas

– But… • Rural entrepreneurs earn less, conflated with

lower education levels (Nolan 2003) • Micropolitans have lowest rates overall

(Henderson 2002)

Strategy!

Strate

gy!

RECRUITMENT IS DEAD

Idea Plan Fund Launch Meh.

SILICON VALLEY LATE 90’S MODEL OF STARTUP SUCCESS!



X

Picking winners

THE ECOSYSTEM

Growth

Lifestyle

Culture

Meet

ing

Need

s

Iden

tity

Sustainabilit

yIn

nova

tionProblem Solving

URBAN INFLUENCE

Entrepreneurship: An Urban Phenomenon• “High Growth” entrepreneurship tends

to be highly concentrated in urban areas – Spatially driven by agglomeration economies

(Acs and Armington 2006) – Spillover effects from major research

universities (Audretsch and Lehmann 2005) – Supported by physical and human

infrastructures (Henderson et al. 2007) – Same in Europe (Glaeser and Kerr 2009)

• But, highly variable across the U.S. – Different county types require a custom

approach (Goetz and Rupasingha 2011)

Why Does Any of this Matter?

• Think about it… – How we define entrepreneurship eventuates

how we cultivate what we have defined • Are most rural/lagging regions appropriate for

high-tech, high-growth development • Are entrepreneurship development programs

really helping rural areas? • Do local residents even have a voice in the

matter? – If entrepreneurs are so beneficial to the

economy and job creation… • … are current approaches therefore biased

against rural areas, creating barriers for citizens?


• But… –We can’t just plop down a university, tech

sector, or set of urban networks • Even if we did, is this culturally appropriate for

rural areas?


• … and, Lichtenstein and Lyons (2001) have shown the inefficacy of most entrepreneurship programs – Compete for the same entrepreneurs – Huge overlap in offerings – Firm-by-firm rather than community-wide

• State-level efforts ineffective (Dabson et al. 2003)

• Can we build a better program? – Can we build a better culture for

entrepreneurship?

CHALLENGES FACING THE NEW RURAL ECONOMY

• Low population density

• Limited local demand

• Isolation from critical networks

• The “real” Wal-Mart phenomenon

• No spaces/institutions for innovators

• Limited tech access/uptake

CULTURE

• Habits | norms• Role models | tacit knowledge• Priorities | values

PROGRESS

OPPORTUNITY • FOOD• Growth in demand• New product segments• Demand for local/organic• Global luxury

• ENERGY• Global growth 1.5% per year

(EIA 2013)• Diversification• Low environmental impact

• WATER• Drought risk• New irrigation/ag techniques• Clean water technology

• LIFESTYLE• Families/retirees• Room to think• Low overhead

Rural Entrepreneurship Advantage• Entrepreneurs are natural problem-solvers, and can

quickly develop solutions to persistent local problems. Got a tricky local issue? Give it to a group of local entrepreneurs to solve with input from citizens.

• Entrepreneurs are more likely to stay in the communities where they launch their business, unlike large companies based elsewhere.

• Rural entrepreneurs may create fewer jobs than large companies, but those jobs are more likely to be tailored to the skills available in the local community.

• Entrepreneurs can provide goods and services in important niches that meet local tastes and preference. They do this much better than Wal-Mart.

• Entrepreneurs often participate in community and civic life.

Rural Entrepreneurship Advantage• When something goes wrong with their product or

service, you can talk to an entrepreneur to make things right.

• Entrepreneurs often take paths others find too risky, serving as either warning or encouragement to others – a public service either way.

• In some rural places, creating even 5 jobs (instead of 500) still makes a big difference.

And my favorite:

• Entrepreneurs help bring creativity and imagination to the community, and can serve as a role model for others who want to take creative risks.

Source: Statistic Brain (2014)

SUPPORTING RURAL ENTREPRENEURS

Alternative Entrepreneurship Development Strategies• Let’s go back to our background as

community scholars: – Networks matter (Granovetter 1973) – Development of social fields and the

broader community field in a place people care about (Wilkinson 1991)

– Places contain assets of all sorts that can be used as building blocks for development (Kretzmann and McKnight 1993)

– Development requires purposive action (Wilkinson 1991)

Local Society and Rural Entrepreneurship• In deeply lagging areas, there may not be

sufficient resources for “mainstream development” – It costs too much to build incubators,

sophisticated infrastructure, programs

• Can we capitalize on making the culuture more supportive for entrepreneurs? – Hustedde (2007) thinks so • Culture plays a vital role in supporting

entrepreneurship

And Knowledge Systems Matter

• Mentoring as tacit knowledge – Non-codified knowledge transfer through

mentoring • Storey (1994): People more likely to become

entrepreneurs if they have parents who are entrepreneurs

• Blanchflower (2007): Having close relations who are entrepreneurs very important to entrepreneurial likelihood

• New approaches use mentoring – Entrepreneurship Development Systems

(EDS) (Lichtenstein and Lyons 2001)

National/Regional PolicyFacilitating Conditions

Entrepreneurial CommunitiesEntrepreneurial Ecosystem

Entrepreneurship Development Approaches



• Like a recipe book • About the stuff/programs in

your community • Spatial determinants of

success

• Driven by governments/quasi-government organizations

• Beneficial legal framework • Incentive systems

• Entrepreneur-led • PROCESS of entrepreneurship

development • Highly adaptable and

stochastic • Develops along lines of natural

advantage • Evolves over time

• Community-led • PROCESS of

entrepreneurship development

• Inheres in networking/relationships

• Building a common ethic/culture



• PRO: Conceptually simple • PRO: Easy to analyze - you’ll

be popular at conferences • CON: Not process/people

oriented

• PRO: Looks great politically • PRO: Provides some

legitimately good incentives • CON: Historically ineffective • CON: Wrong incentive

structure

• PRO: Highly durable/sustainable due to adaptive nature

• PRO: Entrepreneur-led and highly credible

• CON: Hard to control • CON: Can be necessarily brutal

• PRO: Highly effective and cheap!

• PRO: Also builds community beyond entrepreneurs

• CON: Sustainability • CON: Often not entrepreneur-

led

Entrepreneurs also need• Cultural/human support • An ethic of collaboration • A minimal amount of resistance (via

negativa) • PROCESS ELEMENTS THAT

APPLY TO THE GROUP • Among entrepreneurs • Between entrepreneurs and their

communities

IT’S NOT ABOUT YOU.

(BUT YOU CAN TAKE THE FIRST STEP AND PLAY AN IMPORTANT ROLE!)

CASE STUDIES

ROCKLAND

MCCONNELLSBURG

THE LOW END

Power Systems in Communities

• “Company Towns” –Where is the tacit knowledge? • Entrepreneurship not viewed as legitimate or

valued lifestyle – Get a job

– Core/periphery problems may stifle entrepreneurship • In places where employment is valued over self-

sufficiency • Necessity entrepreneurs not very successful

– Only leads to bad publicity

NEW MODEL OF ENTREPRENEURIAL DEVELOPMENT

COMMUNITY

IDEA

REFI

NE

INSPIRE

PROTOTYPE PROTOTYPE PROTOTYPE

FAIL SMALL TRY AGAIN

SCALE UP!

TEN STEPS TO ACTION

Fortunato’s Brain

Ursus arctos horribilis

1) Create Networks

Build Weak Tie

s

2) Diversify

Bridge Structural Holes

3) Create a Safe Space

4) Create Purpose

Identify Common Purpose

5) Get SMART

SMART

pecific

easurable

ttainable

elevant

ime-bound

6) Goal Hierarchy

Pain

t a F

ence

7) Learn Your ABC’s

–B – Belonging: “Let’s Work Together” in a downtown group

–C – Competence: “Let’s Try New Things” and create a local space for innovation

–A – Autonomy: Freedom to pursue individual interests, not dictated by broader group. Direct competition welcome

8) Celebrate Success!

9) Learn From Failure

10) Repeat

12 PEOPLE YOU MEET IN COMMUNITIES

1) Facilitator 2) Very quiet, shy, and

awkward 3) Extremely outgoing &

popular 4) Super agreeable 5) Professional

contrarian 6) Bizarre off-topic guy/

lady

7) Detail-oriented analyst 8) Abstract high-creative 9) Wants to get to work

now 10)Scared of new ideas

& change 11)Just be yourself 12)Just be yourself

1) Create Networks

Build Weak Tie

s

2) Diversify

Bridge Structural Holes

??• Break into

groups

•What is the best thing about the place you live? What is the worst thing?

3) Create a Safe Space

!!• Set some rules

for the group. •What is essential

for good communication? •How will you

handle failure/bad ideas?

4) Create Purpose

Identify Common Purpose

??• Break into

groups

• How can we build common purpose around entrepreneurship? Who should lead?

5) Get SMART

SMART

pecific

easurable

ttainable

elevant

ime-bound

6) Goal Hierarchy

Pain

t a F

ence

!!

• List specific goals that ENTREPRENEURS control. • What is the highest

priority?

7) Learn Your ABC’s

–B – Belonging: “Let’s Work Together” in a downtown group

–C – Competence: “Let’s Try New Things” and create a local space for innovation

–A – Autonomy: Freedom to pursue individual interests, not dictated by broader group. Direct competition welcome

SOLVE PROBLEMS WITH PROBLEMS

NEW MODEL OF ENTREPRENEURIAL DEVELOPMENT

COMMUNITY

IDEA

REFI

NE

INSPIRE

PROTOTYPE PROTOTYPE PROTOTYPE

FAIL SMALL TRY AGAIN

SCALE UP!

??• Solve the top two

simultaneously

• Who will take ownership over the first steps?

• What can they contribute that is unique?

8) Celebrate Success!

9) Learn From Failure

10) Repeat

!!•Create a basic

charter/identity. •How will you

keep people coming back? •How will you

expand membership?

Solving local problems with local talent

= empowerment

GET YOUR ECOSYSTEM MOVING!

• Get your innovators together

• Create a safe space for sharing ideas

• Foster and involve entrepreneurial leadership

• Tolerate failure, celebrate success

• Prototype, prototype prototype, THEN scale up!

Leaping Barriers• Focus on building local interaction – Effective ways of convening people who

normally do not communicate

• Focus on building purpose – Everyone interacts, but about what? • Strategic, focused interaction around small business

• Focus on building voice – The floodgates open when small business

has a seat at the table • Taken seriously

Conclusions – New Directions?

• Community theory may unlock some secrets for developing a more supportive entrepreneurship culture – And a broader community culture as well • Use one to fuel the other

• Create alternative economies based on different values – Not just alternative products, services, or

markets

Conclusions – New Directions?

• Encourage non-traditional participation and collaboartion – Start small and scale up! – Culture of prototyping and quick action

Questions• Michael W-P Fortunato • Sam Houston State

University • Center for Rural Studies

• [email protected]

strategies for supporting rural entrepreneurship

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