April 23, 2015

Entrepreneurship Starts at Home: How Research Can Inform Policy

By Jason Wiens, Policy Director, Ewing Marion Kauffman Foundation

Reprinted from the 2015 Kauffman Thoughtbook with permission from the Ewing Marion Kauffman Foundation.

If states are our nation’s laboratories of democracy, we can think of America’s cities as the petri dishes.

Diverse in size, location, assets, and governance, U.S. cities are perfect proving grounds for policy innovations that can spur entrepreneurship and economic growth.

At the Kauffman Foundation, our research is increasingly pointing to the importance of location to entrepreneurship. Even in a digital and hyper-connected world, entrepreneurs are locally embedded and responsive to the distinct environments in which they exist. That means there are a set of city- and regional-specific policies that may impact entrepreneurs, which need study, thought, and elucidation.

Broadly, more research is needed to better understand the regional ecosystem of entrepreneurship and how it evolves. We are seeking to find out how entrepreneurs are connected, or not, to one another in their communities and what role local resources play in promoting entrepreneurship.

We also are conducting research on economic development strategies and how these policies either support or fail to support entrepreneurs. And being engaged in research, we want to know what additional methods of data collection can be employed to inform future work.

With our expertise and resources, the Kauffman Foundation is uniquely positioned to pursue these questions and translate our findings into actionable policy prescriptions.

Already, our research has looked at the geography and characteristics of fast-growing firms. Importantly, this work found that innovative, fast-growing companies are located in cities across the country in a variety of sectors and that the presence of a highly skilled workforce is more significant to growth firms than commonly assumed assets like the presence of venture capital investment or high-quality research universities.

This implies that policies to develop and attract talented labor are especially important when it comes to local and regional economic growth.

Other studies are dispelling myths about which cities are hubs for technology startups – those companies known for growth and innovation – and the roles universities, entrepreneurship programs, and local governments play in their development.

“Research universities and other postsecondary institutions are important for metropolitan entrepreneurship, but are not the sole cause in spurring such activity. Instead, the most fertile source of entrepreneurial spawning is the population of existing companies, which has implications for economic policymaking and economic development strategies.”

We also are beginning to explore how local entrepreneurship programs influence startup education and networking. An initial project surveyed participants in 1 Million Cups (1MC) Kansas City, which is a Kauffman program designed to engage, educate, and connect entrepreneurs. Our researchers studied participants’ networks to learn how entrepreneurial communities form and grow. Dozens of cities host 1MC and this research can be replicated in those locations to provide unique insights while also allowing us to draw broad conclusions.

The findings reinforce the importance of a local support system. Entrepreneurs follow local entrepreneurs on social media more than the well-known national “gurus,” for instance. We also learned important insights about how entrepreneurs are connected not only to one another, but also to support organizations.

Notably, the survey results indicate the existence of different programs and events that engage entrepreneurs at different stages of the entrepreneurial journey—a sign of a healthy ecosystem. We look forward to expanding on this research and sharing lessons with policymakers as we learn them.

As part of our continuing interest in immigrant entrepreneurship, Foundation-funded research on the geographic distribution of high-tech immigrant entrepreneurs found that 80 percent of immigrant high-tech entrepreneurs operate in the twenty-five largest U.S. metropolitan areas, compared with just 57 percent of their U.S.-born counterparts. This clustering has implications for regional economic development and cities hoping to attract foreign entrepreneurs.

The unique influences of location necessitate policy engagement with municipal leaders so that mayors are equipped with data and research-backed ideas to support entrepreneurs. We are cultivating relationships with local policymakers to arm these leaders with the information and policy tools they need to foster entrepreneurship.

For instance, the Kauffman Foundation collaborated with Kansas City Mayor Sylvester James to convene a gathering of mayors and city leaders from across the country to discuss their role in supporting entrepreneurship.

This first-ever Mayors Conference on Entrepreneurship in 2013 illuminated the distinction between small businesses and young businesses and served as a forum for discussion of ideas and policies that can help young businesses grow.

The second Mayors Conference, held in Louisville, Kentucky, and hosted by Louisville’s Mayor Greg Fischer, focused on the “Maker Movement.” Meanwhile, many who attended the first Mayors Conference also joined city and state leaders from around the country for a conference at the Foundation focused on incentives that can jumpstart entrepreneurship at the state and local levels.

Mayors have been energized by these events and have expressed a hunger for more data and policy ideas. To meet that need, we are distilling our research into short educational policy briefs specifically designed for policymakers. We also are exploring partnership opportunities with organizations that can expand our reach and magnify our impact. With more than 700 incorporated cities and towns in the United States with populations greater than 50,000, the value and necessity of partners are clear.

Federal and state laws certainly also have an impact on an entrepreneur’s business. Our role in learning about state and national policy challenges will continue, as will our efforts to educate policymakers in Washington, D.C., and state capitals. However, the importance of local policy combined with the opportunity to help cities become more supportive of entrepreneurship compels us to move in this direction.

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