Growing resilient, self-renewing local economies

Entrepreneurship & Job Creation

Idaho Innovation Council Norris Krueger, PhD (cv)

July 22, 2010

WHAT DOES THE DATA SAY?

What does the data say?

Recent study showing that firms >1 year old shed (on average) a million jobs annually, while startups add ~3 million jobs. Not the whole picture but where is this intel in most economists’ thinking?…

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Figure B: 1995-96 Net Job Growth by Age and Type of Establishment

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The original study (Zoltan Acs & Catherine Armington)– shows a single year – note that single-unit biz & multi-unit biz have same pattern. But what’s most interesting are young firms that grow - the top %1 of firms <5 years old create 40% of the jobs.

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Figure A: Distributions of 1995 Employment by Age and Type of Establishment

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However, note that the *stock* of existing jobs is in older firms (so they are important too) & gazelle research shows that older firms can and do grow look atwork by Zoltan & by Larry Plummer on high-potential firms)

Wow- the Heritage Foundation did a great analysis – note that in the current recession, there were FEWER layoffs than in 2000-2001. Note that gross job creation is the key to net job creation. #2: Opportunity entrepreneurship peaked in 2005… note what that meant to gross job creation.

Where Did Idaho's Jobs Come From? (2000-2007)

• New businesses created around 297,000 jobs • Expanding businesses created around 200,000 jobs • Businesses moving in created around 10,000 jobs.

• but now… let's look at the net job figures: • Businesses opening: created 296,983 jobs • Businesses closing: destroyed 291,824 jobs • Net jobs from business creation: +5,519 jobs

• Business expansions: created 200,383 jobs • Business contractions: destroyed 133,502 jobs • Net jobs from business expansion: +64,781 jobs

• Businesses moving into Idaho: created 10,555 • Businesses moving out of Idaho: destroyed 10,757 • Net jobs from business attraction: -202 jobs

• (1977-2005, the US created 450 million jobs & lost 406 million jobs)

But fast-growing firms are probably even more critical. Again, look at the in-depth study by Plummer, et al. on high-growth ‘gazelle’ firms– they are in every area, in every industry (& some are quite old)rowing

Hmmm. Boise’s LMA had LOWEST rate of gazelles – agriscience-led southern Idaho ranked highest in gazelles

Do You Know... What Entrepreneurs Do??? (Implications for Growth)

Economic Role: “residual claimant of rents” [entrepreneurs create value for others] Entrepreneurs see opportunities to create value for others. Entrepreneurs find ways to act on those opportunities Entrepreneurs deliver value, then get paid.

Different Roles: Flavors of Entrepreneur?

•Necessity versus Opportunity [latter are much more likely to grow]

•* Productive versus Unproductive versus Destructive ** Social Entrepreneurs? (Sustainable Entrepreneurs?) [actually surprisingly strong in 2008-2010!]

Implications

• ‘Churn’ is normal, even good – Disrupt.. Or BE disrupted (your choice?) – Job creation is critical – It’s innovation that drives job creation – Innovation requires identifying real value – That’s the job of…. Entrepreneurs

• Growth is good? – Grow existing firms – Grow startups (especially high potential) – Works everywhere (and should): urban/rural, small/large,

new/old, high tech/low tech, profit/nonprofit

Key domains of value to Idaho

• Youth –

• Rural

• Women (0.42 versus 0.25)

• Veterans (http://whitman.syr.edu/ebv)

• Social

• Sustainable

– All are areas where we can get traction immediately

What’s different about entrepreneurial economies?

…and why does it matter?

To get ICE, we need FIRE?

• I.C.E. =

– Innovation

– Creativity &

– Entrepreneurship

• but… (very important)

• Innovation = Creativity + Entrepreneurship

• Which is the scarcer ‘ingredient’?

• You guessed!

Ideas Reality

• Knowledge Spillover (Audretsch, Acs, et al.)

• Execution/Implementation “pulls”

• This really IS about Deal Flow

IDEAS REALITY

Links Grown by Bridging Assets

Innovation Systems (think ‘ecosystem’)

Communities of any size (organizations too) need to really understand their ecosystem – need to map it. A good place to start is to rigorously map the barriers/facilitators.

The seductively-titled “triple helix” is a dominant model for innovation systems – but is very top-down. We argue instead for the bottom-up functionalist model depicted here.

…ecosystem varies across lifecycle (and successful programs support whole ecosystem across lifecycle)

I love this graphic (thanks to CTI, the great Swiss entrepreneurial support organization)

Entrepreneurial Potential is…

• Function of Potential Entrepreneurs – Quality and quantity of entrepreneurial thinking

• Skills, yes, but especially • Expert Mindset • Entrepreneurial Capital

• Finding more/better opportunities • Key Drivers of EP

– Understanding Realities – Human Capital – Social Capital

• “Celebrate & Educate” (and ???)

Critical Success Factors

• Strategic, not tactical : – Comprehensive Entrepreneurship Development System

– Select/adapt tactics to support strategy

– Select/adapt ‘players’ to support strategy (DC>CC)

– Strategy supports/grows innovation system

– Strategy builds entrepreneurial capital/potential

– “One Voice”

– Jim Collins (right people on bus) versus “Finding Nemo” (@#$%$^ seagulls)

• Do Right Things the Right Way (and for the Right Reasons)

How to Develop Entrepreneurs?

• Mindset is key (skills, yes, but…)

– Intentions

– Barriers.. and Facilitators (do we know?)

– Expert Thinking

– Cognitive Infrastructure

• Start Young [did you know? Idaho has great online

entrepreneurship course???]

• Cast Net Broadly (across the state & its citizens)

• Engage Broadly… but Strategically

Key Ingredients…

• “Bully Pulpit” (we must NOT neglect) – “Celebrate and Educate” – Championing takes many forms (Jim Collins & ‘right people

on bus’?)

• Grow entrepreneurial human capital – Grow entrepreneurial thinking – more ideasreality

• Grow entrepreneurial social capital – Grow entrepreneurial “communities” – Build an informed ecosystem

• Celebrate, Educate and…. Initiate! (mud, meet wall)

Putting it all together… use FIRE to make ICE

• Forge an Idaho that's Resilient & Entrepreneurial • • (entrepreneurial human capital)

• Foster Entrepreneurial Thinking Across Idaho • Entrepreneurship Training: How to Turn Ideas into Reality • • Inspire the Next Generation • “SAOSW”: Youth Entrepreneurship • Future Entrepreneurial Ideas... and Opportunities

• (entrepreneurial social capital)

• Revitalize & Engage Communities • Grow more entrepreneurial Idaho communities • • Enrich the Entrepreneurial Ecosystem • Help the helpers; champion the champions

Entrepreneurship Idaho: IDAHO F.I.R.E. MODEL

F: Foster Entrepreneurial Mindset across Idaho Boot Camps

Start Your Biz, Grow Your Biz, Social/Sustainable versions “Theme” Training (Rural, Youth, Women, Veterans?) * use existing, proven model, engage partners & start doing! Train-the-Trainer versions

Entrepreneurship Courses & Programs

* Youth: Expand Use of Existing Online HS Course Adult: Adapt HS online course Adult: Develop suite of courses Adult: Develop in-person versions for community college program

GREEN = already doing/easy to do + committed partners + free/cheap/OPM * = top priority (easiest/cheapest) N.B. Tactics selected for cost (free/cheap/OPM), proven best practice, vetted for Idaho, supported/suggested by >1 person/group, fits/supports strategy

I: Inspire the Next Generation “Students Are Our Secret Weapon”

* Idea To Product competition (national) “Training Wheels” Virtual Accelerator

feasibility study drafted [see slide 31] Technology Summer Camp (more than students?) feasibility study (prior study exists) Conference: Best Practices at Tech Commercialization * feasibility study (& recruiting!) underway Growing Global Partnerships * offer model course (eg, China)

R: Revitalize & Reward Entrepreneurial Community Boot Camps

Entrepreneurial Economic Development/Economic Gardening use existing curricula to train economic developers Train-the-Trainer versions

Building Local Capacity

Support Entrepreneurial Skills series * Support community events like Global Entrepreneurship Week(!) Boot camps for Grant Writing

Celebrate Successes

Support IRP Community Reviews * Showcases for Local Success Stories * “Entrepreneurial Heroes” *weekly recognition at legislature+

E: Enhance the Entrepreneurial Ecosystem Policy Analysis & Development

* Entrepreneurial Job Creation Task Force/policy working group: (white papers, policy briefings, legislation support) * Metrics [barriers/facilitators study to start] Roadmapping/alignment (quasi-summit?) Grant-writing tiger teams

* Industry-specific Opportunity Forums (also falls under “I’) Diagnostic Checklist/Portal Entrepreneurial Speaker Series Conferences (supports all the components) National (global?) Advisory Board for our CEDS [see slide 29]

The “ask”: Start with the Bully Pulpit

“Celebrate & Educate… and Initiate!” IIC (and Governor) attend/endorse existing events

• Global Entrepreneurship Week • “Opportunity Forums” (see ESTech) • Showcases, Startup Weekends, etc.

Plug the daylights out of IDLA’s Econ 102 “Entrepreneurial Heroes” Endorse series of policy briefings Endorse Entrepreneurial Job Creation Task Force endorse barriers/facilitators study lead on grant-writing lead on connecting externally support legislative groups (like Chuck Winder’s caucus)

(miscellaneous backup slides)

Consensus: Keys to TBED

1) Strong entrepreneurial culture

2) Access to People

3) Access to Resources

4) Build Broad, Deep, Rich Networks

(best predictor/driver of the last 3?)

Yup, #1 A great example we already know!

Prospects for National Board of Advisors Entrepreneurial Economic Development Erik Pages, EntreWorks (also IEDC) David Audretsch. Indiana U Zoltan Acs [Chief Economist, SBA] Cornelia Flora and/or Don Macke [rural entrepreneurship] Technology Development Brian Cummings, Utah [possible board chair?] Steve Nichols, U Texas [one of BC's mentors] Rick Holdren, Houston-based Health Care Angels Frank Peters, Tech Coast Angels Technology Entrepreneurship [depends on our needs] Mark Rice, Babson (incubators) Tim Stearns, Fresno State & Kathy Allen, USC (N2TEC.org) Cyrus Taylor, Case Western (physics entrep) Bob Hisrich, Thunderbird (science entrep) Mike Fountain, South Florida (Natl. Consortium for Life Sciences Entrep) Alan Carsrud, FIU (crosscampus programs) Tom Byers or Tina Seelig, REE/Stanford + Government (NSF, etc.)… + Major Foundations (Kauffman, et al.)… (etc.)

GROWING IDAHO BUSINESSES: “Virtual Accelerator” Model Use successful experience with programs of deep, transformative experiential learning (TEAMS) to combine multi-major, multi-school program (eg, Georgia Tech, Purdue, UCLA) with mentor/coach-intensive accelerator model (eg, TechStars , Y-Combinator.) Basic Model: Student teams matched with nascent entrepreneurs. Team goal is to help accelerate the business’s development, ideally resulting in validating business model and resulting external funding or strategic partnering. Step 1: Recruitment. * Identify highly promising startups, students (and faculty) and expert mentors

Step 2: Launching. * ‘Kickoff’ weekend with multi-day entrepreneurship boot camp (shareable with a broader audience.) Student present on proposed “battle plans” to murder board. Step 3: The Work. * Student teams get to work back home. Program directors assist in identifying local & national mentors . Course material is presented using distance learning technology Step 4. The Celebration. * Student teams return for a celebration (competition?) of team achievements. Second boot camp (also shareable).