Op-Ed: “The talent is there. They just need key supporting elements to thrive.”
Research recently published by Harvard Business Review reveals that entrepreneurship has the power to revitalize impoverished communities – if policymakers shift their focus from venture capital-style investing, “scaling up” investment and instead designing programs that help neighborhood businesses “deep scale.” My experience, working with small towns and villages across America, supports this finding and offers lessons for any community seeking to build a resilient, local economy.
In the article “Research: How Entrepreneurship Can Revitalize Local Communities,” by Suntae Kim of Boston College and Anna Kim of McGill University, the authors share what they have found in eight years of investigating two organizations dedicated to revitalizing Detroit through entrepreneurship. One was a venture capital business accelerator; the other was a locally-oriented incubator.
“Deep scaling” involves slow growth and integration into the local economy, the researchers explain, and requires building “rich relationships with local partners” and finding “creative ways to leverage resources available in their local environment to solve urgent local problems”. .” The researchers found that companies that “scaled deep” had a significant positive impact in the community, while those that “scaled” only had a short-term impact, with most moving out of town.
Deep scaling has a major related benefit that I’ve found in my work with struggling downtowns and long-neglected neighborhoods: It yields locally distinctive businesses that set one community apart from another. These local businesses not only create a unique atmosphere and culture; they contribute to a broader sense of community and often provide gathering places that unite residents and attract visitors. And they help households in the community to create wealth and stay in the community to participate in its success. This dynamic adds to the revitalization and focuses on neighborhood assets, not imports.
Deep scaling also increases and improves diversity of business ownership, as it builds on local heritage and strengths. These small businesses and entrepreneurs already live in the neighborhood. The talent is there. They just need key support elements to thrive. Additionally, these local business owners are more likely to partner with other local businesses and organizations and help them grow as well.
Prospects for successful scaling can be boosted by drawing on several lessons I’ve learned working in more than two dozen states.
First, in most communities, even those that have historically been excluded from investment, there are financial and other resources to tap into. But aspiring entrepreneurs — especially in communities considered what Majora Carter calls “lower status” — may not know the resources or how to access them. In some cases, they may have been told in the past that these resources were not intended for them. It is essential that economic development officials reach out to aspiring entrepreneurs where they live and work. Meet them where they are. Engage them. Connect the dots and build trust. Work with neighborhood or community leaders who believe in this community and start building new personal relationships with existing business owners to understand what they need to grow and evolve in the community.
Second, policymakers must ensure that business assistance programs are designed to serve aspiring entrepreneurs in these communities. Do they provide the necessary assistance? Are they offered in convenient locations? Do they distinguish between the needs of companies that provide services and those that create tangible products? Bring training to the neighborhood and ensure that existing programs include business owners from historically excluded places. Where the programming is hosted and who teaches it are critical considerations if entrepreneurs are to feel and trust the programming is for them.
Third, new emerging businesses typically transition from home real estate to commercial real estate, but flexible real estate options are often needed to facilitate business growth. Entrepreneurs may need smaller spaces, shorter rental terms, or even shared spaces. It is important that local authorities understand these needs and engage relevant owners to determine the potential for flexibility and communicate this flexibility to emerging entrepreneurs. Community development corporations or local housing authorities can also fill this gap in the necessary space. Some shared spaces, like commercial kitchens, can even become destinations and help define entire communities. Flexible real estate arrangements should also be combined with training and mentoring to advance the prospects of emerging businesses.
Fourth, small manufacturers should be prioritized because they can sell products in storefronts and online and therefore are not solely dependent on foot traffic, as so many struggling stores are in economically excluded neighborhoods or cities. When production and retail are combined in an urban setting, it also provides a fantastic retail experience as passers-by can see things being done.
Fifth, initiatives should be taken to ensure that emerging business owners have access to other business owners. Extensive research shows that business owners are more likely to succeed if they have this access. Incubators typically provide this service in tech communities. Similar small business centers and their services should be made available in historically excluded neighborhoods.
Research reported in Harvard Business Review makes a compelling case for reinvesting in America’s cities and towns and growing local entrepreneurship. This comes at a time when many jurisdictions are looking for ways to boost their economies in the wake of the COVID-19 pandemic. “Deep scaling up” should be a priority for economic development in the future.
Ilana Preuss is Founder and CEO of Recast City and author of Recast Your City: How to Save Your Downtown with Small-Scale Manufacturing (Island Press, 2021).