In today’s virtual world, it’s easy to downplay the significance of place. Yet when it comes to regional prosperity, geography matters. Income and job growth is not random but rather spill over from one region to another, meaning that merely being next to a prosperous region will make your own economy more vibrant.

This may sound like a no-brainer, but until recently it’s been hard to prove from a statistical perspective. Yet by using new models that factor in location and blending microeconomic ideas with macro ones, researchers at the Edward Lowe Foundation’s Institute for Exceptional Growth Companies (IEGC), University of North Carolina at Charlotte and Northern Illinois University (NIU) have advanced the longstanding theory of regional income convergence — and revealed new insights about the geographic dynamics of the U.S. economy.

Convergence theory maintains that capital and wealth shift over long periods of time, spreading from richer areas to lagging ones, which allows these poorer areas to catch up to national averages. Although income convergence is a geographic process, most studies have ignored geographic relationships, says Harrison Campbell, an associate professor of geography and public policy at UNC Charlotte and the study’s principal investigator. “Some have looked at industry composition, and a few have looked at how neighboring regions affect each other, but none have looked at how individual companies affect convergence.”

Leveraging data from IEGC, Campbell and fellow researchers Ryan James and Gary Kunkle studied 177 regions over a 20-year period (1990-2010). The team used both a traditional model and one with spatially explicit tools, which yielded two sets of results to compare. Key findings include:

• Convergence is happening, but at a slower rate than previous studies have indicated — about one-third slower (or 1.3 percent per year as opposed to 2 percent per year).
• The economic health of one region has a definite spillover effect on neighboring regions.
• Particular kinds of establishments, known as sustained growth companies, accelerate the convergence process through their ability to create jobs.
• The presence of these sustained growth companies has a bigger impact in rural areas than non-rural areas.

Change agents of convergence

The concept of sustained growth companies builds upon previous research done by Kunkle, IEGC’s research fellow. Although these companies represent different sizes, different industries and are located in different places, they share a common hallmark: the ability to generate repeated growth over long periods of time.

“Sustained growth companies are the hidden allocators of new jobs in the economy,” says Kunkle. “This paper shows that they also play a significant role in allocating income growth as well — and help determine which regions experience faster income growth than others. Thus, income growth is not limited just to owners and employees of sustained growth companies, but extends throughout their neighboring communities.”

The fact that sustained growth companies have a larger impact in rural areas was a surprise, Campbell says. “Previous literature suggests that these firms will perform better if they cluster in urban areas. Yet our results reveal the opposite — they had a negligible or slightly negative effect on income growth and convergence in metro areas.”

The dramatic impact of sustained growth companies in rural areas might be explained by the fact that they are big fish in small ponds. “It doesn’t matter how they land in that pond — it could be a brand new startup, an expansion of a nearby company or a business that has relocated to the area — but when they land, it’s like a shot of adrenaline for the area,” Campbell says. “What’s also interesting is that concentration doesn’t matter; the sheer presence of sustained growth companies makes an impact.”

Innovative modeling and data

Critical to the study was developing an effective geographic model. To achieve this, the researchers leveraged new types of spatially explicit tools and introduced new geographic units: 177 economic areas defined by the U.S. Bureau of Economic Analysis. Smaller than a state and larger than an MSA, these multicounty areas approximate the extent of a labor market.

One of the benefits of the geographic model was that it produced far fewer outliers, which gave the researchers more confidence in their results. “The theory of income convergence is in itself geographical,” says James, an economic geographer and assistant professor at NIU. “It suggests that capital is going to flow from capital rich areas to capital poor ones. Yet traditional models don’t take into account the performance of neighboring regions, which is extremely important.”

Another hallmark of the study: factoring in the role of individual business establishments. Past studies have looked at location attributes and regional conditions, such as population density, access to interstate highways, land quality and water supply, instead of looking at the individual actors responsible for economic growth.

The National Establishment Times Series (NETS) data set, which IEGC made available, was essential to studying the sustained growth company connection, Campbell observes: “This research couldn’t have been done without it. NETS is an extraordinary data set that’s potential is still unknown to most people. Past studies have relied on industries, which are like cruise ships; their averages turn very slowly because they consist of many different firms. In contrast, NETS enabled us to track individual U.S. establishments, the DNA of what really makes our economy run.”

Moving forward

The researchers’ findings provide statistical evidence that spatial relationships are extremely significant to regional prosperity. “So there’s basis, at least for certain projects, for regions to start think beyond their own borders and work more cooperatively,” says Campbell.

Connecting the dots between sustained growth companies and regional prosperity is equally important. “This study begs a whole new set of questions about how firms manage themselves,” Campbell says. “If we can understand what makes the sustained growth companies tick, we may be able to reorient our approach to economic development and introduce policies that positively impact these important firms.”

Other policy implications revolve around regional income convergence. “For example, many Southern states are right-to-work states — states that were poor and are now starting to catch up. A question arises about how policies such as right-to-work status might impact a state or region’s ability to grow its economy,” Campbell explains.

“Part of IEGC’s mission is to get unique establishment time-series data into the hands of capable researchers so they can shed new light on the U.S. economy and the role of exceptional growth companies,” says Gregg Cole, information technology research leader at the Edward Lowe Foundation, which launched IEGC in 2011. “This study is a wonderful example of how researchers are using the data not only to make new discoveries, but also reexamine traditional observations and improve on previous models.”

To read the full paper, “Firm Growth and Regional Income Convergence: Is There a Connection?” visit youreconomy.org.

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About Institute for Exceptional Growth Companies (IEGC)
The Institute for Exceptional Growth Companies was created by the Edward Lowe Foundation through a three-year grant from the NASDAQ Educational Foundation. IEGC is creating new datasets and using existing data in innovative ways to track and better understand exceptional growth companies, their impact on community and economic development, and their relationship with equity funding sources. For more information, visit youreconomy.org/pages/iegc.lasso.

Initial results from the 28 companies who participated in the NetWork kansas economic gardening pilot program are favorable, showing growth in both employment and revenue of approximately 30% on average. The economic gardening pilot program officially closed in 2012 and our staff has been busy completing follow-up visits with the CEOs of the 28 participating companies. Determining the long-term impact of economic gardening engagements is paramount for improving the program and assessing sustainability.

After the conclusion of the pilot program, the Kansas Economic Gardening Network was officially launched as one of NetWork Kansas’ core offerings and is currently accepting…

Click here to view the full infographic

To read more of this NetWork Kansas article, click here.

By Clay Smithers
Clay Smithers is the principal at Upriver GIS and provides GIS services to the Florida Economic Gardening Institute and National Center for Economic Gardening.

Jobs, jobs, jobs! From the local newspaper to the presidential election, finding new ways to create jobs is the topic du jour. GISs are proving to be a valuable tool in supporting the companies that are most likely to create jobs, through efforts such as “economic gardening.”

“What’s a ‘Ghiss’?” is one of the most-frequent questions asked when working with a new company. Most companies, outside of engineering and a sparse few other professions, haven’t had the opportunity to work with GIS technology, and it’s often a bit of a stretch to help a new company understand the power of GIS in a few short minutes. However, their eyes open rather quickly when given the opportunity to see where customers are located in comparison to large pools of customers in other untapped markets on a map.

Meeting the challenges of second-stage companies requires a good deal of flexibility on the part of each GIS practitioner and often some adaptation on the use of existing GIS tools. Working in large-scale economic-gardening programs, such as the statewide Florida Economic Gardening Institute (www.growfl.com) at the University of Central Florida, requires the use of powerful business-targeted geospatial tools, such as…

To read more of this GeoPlace.com article, click here.

 
Dear GrowFL Network:

We wanted to make sure you were aware of funding for training that is available through the state of Florida. General program requirements are included below. Please visit Workforce Florida’s IWT page for detailed information, applications, and contact information.

Workforce Florida is now accepting IWT grant applications for the 2012/2013 fiscal year.

The Incumbent Worker Training (IWT) grants provide funding for training to existing for-profit businesses. Through this grant, Florida is able to effectively retain businesses and help them stay competitive by supporting skills-upgrade training for existing full-time employees.

Head to the IWT page of Workforce Florida’s website for more information: click here.

IWT grants are structured to be flexible to meet the business’s training objectives. The business may use a public or private training provider, or may use an in-house training provider based on the nature of the training. From July 2011 through June 2012, Workforce Florida awarded 230 IWT grants totaling more than $6.1 million to help companies train and retain more than 12,000 full-time employees. Trainees’ wages have increased more than 25 percent on average within a year of completing IWT-supported training.

Program Requirements

Existing Florida businesses applying for an IWT grant must:
• Have been in operation in Florida for at least one year prior to application date
• Have at least one full-time employee
• Demonstrate financial viability be current on all state tax obligations

Funding priority given to businesses:

• With 25 or fewer employees
• Located in a distressed Rural Area, Urban Inner-City Area or Enterprise Zone
• In qualified targeted industries (pdf, 9K)
• Whose grant proposals represent a significant layoff avoidance strategy
• Whose grant proposals represent a significant upgrade in employee skills

Reimbursable training expenses:

• Instructors’/trainers’ salaries/tuition
• Curriculum development
• Textbooks/manuals

For more information about the IWT grants, head to Workforce Florida’s website.

Tallahassee.com A GANNETT COMPANY

Our profession, and the tools we use to positively impact Florida’s economy, have come under attack. I am here to set the record straight.

Across the state of Florida, more than 400 economic, workforce and community developers are going to work every day with one goal — to help make their communities a better place to live, both now and for years to come.

Florida’s economic development professionals live in all 67 counties and hold positions with our 24 workforce boards, our 28 community and state colleges and Florida’s 12 state universities. They work with…

To read more of this Tallahassee.com article, click here.

CASSOPOLIS, Mich. – Traditionally researchers have looked at either absolute growth or relative growth to evaluate how much or how fast businesses are expanding. Yet there is a third metric, sustained growth — the number of times a company expands over a period of years — that provides new insights into economic development, says Gary Kunkle, economist and research fellow at the Edward Lowe Foundation’s Institute for Exceptional Growth Companies (IEGC), which is releasing a paper on Kunkle’s findings.

Kunkle, who has a Ph.D. in public policy and regional economy, determined that a very small group of companies (about 1 percent) was responsible for 72 percent of job growth from 2005 to 2010. Yet their success, he shows, was not triggered by large, singular growth events but instead was due to repeated, incremental expansions. In a nutshell, the more frequently these companies grew, the more jobs they accumulated over time.

What’s more, Kunkle goes on to show that sustained growth (both at the establishment and firm levels) is linked with regional growth in a cumulative process — something that has never been demonstrated before. As firms grow more frequently, they acquire more scale; and as regions increase their number of sustained growth firms, they achieve higher employment growth. “Bottom line, what goes on inside of companies determines whether or not a region will grow,” Kunkle explains. For example, he points to Florida, which grew faster than New York during the 2005-2010 period. “Although Florida had fewer people, it had more sustained growth companies.”

The stickiness of sustained growth

Sustained growth is a powerful metric because it not only analyzes past performance but also helps predict future success. In his paper, Kunkle shows that companies with sustained growth (those that expanded employment at least twice during the 2005-2010 period) increased their survival rate by 50 percent — and increased their chances of growing again in the next five years by 67 percent.

In contrast, relative growth, which measures the speed or percent of employment change over a period, correlates negatively to future growth. Kunkle found the faster a company grew in the past, the less likely it was to survive and grow in the future. “It’s the story of the tortoise and the hare,” he says. “Those that run the fastest tend to burn out.”

Similarly, absolute growth, the total amount of employment change, had no influence on the odds of future survival or growth for the next five years and reduced the odds of a company being in the top 1 percent of sustained growth companies.

“Our evidence strongly suggests that growth is a learning curve,” Kunkle says. “It doesn’t matter if your company offers industrial cleaning services, makes medical devices or breeds cattle. All companies face the same set of challenges and decisions each time they expand. And the more frequently they grow, the better they get at making these decisions.”

Don’t fence them in

What’s especially interesting about sustained growth companies is their diversity. Rather than being concentrated in specific industries or geographic areas, these powerful job creators can be found in all industry sectors and in every populated county across the United States.

This challenges traditional thinking about economic development, such as industry cluster theory, which believes that business growth is largely driven by external factors, such as a firm’s industry, geographic location and reaction to government policy.

Yet if that were true, then sustained growth companies would be overwhelmingly concentrated in a few knowledge-intensive industries, located in urban areas and be the ones that billions of dollars of cluster policies have favored, Kunkle says. “Our data shows that is not the case. The superheroes of job growth can be found in all locations and industries — and they’re not necessarily the ones favored by public policy.”

Other preliminary findings of Kunkle’s research include:

In addition to his own studies, Kunkle is coordinating other research teams with leading scholars from around the world to track the performance of U.S. companies for IEGC. Research topics include: the impact of capital markets, supply chains, relocations, policy and legislation.

Instead of relying on government data that is aggregated and confidential at the firm level, IEGC leverages the National Establishment Time-Series (NETS), a unique longitudinal data set that tracks more than 44 million U.S. establishments from 1990 to 2010. This data, which IEGC combines with other data sets, enables researchers to decompose the economy down to its most basic components — establishments, which are individual workplaces. “This has given us insights into mechanics that underlie growth in the economy — processes that were previously hidden from view,” Kunkle says.

Recognizing sustained growth as a key metric is just the tip of the iceberg, says Kunkle, who will be collecting additional data through surveys and the development of more data tools. “If we can capture the insights behind these expansion challenges, then we can help educate management teams on how to solve these problems and reduce the risk every time they expand.”

“Gary’s research debunks some commonly held beliefs about how jobs are generated in this country, and presents a thesis that is hugely important for the academic and policy community to engage with,” says Doug Tatum, chairman of IEGC’s advisory committee and an associate professor at Middle Tennessee State University who holds the Wright Travel Chair in Entrepreneurship. “His theories and conclusions are consistent with the experiences and observations of business people in the marketplace — it’s truly a landmark piece of work.”

One of IEGC’s goals is to expand the knowledge base of entrepreneurship, especially with regard to the middle market, points out Gregg Cole, information technology research and development leader at the Edward Lowe Foundation. “Gary’s work sheds new light on how regions can support their growth companies and what kind of regulatory practices and taxing policies are needed,” Cole says. “In addition, by finding more high potential growth companies and helping them achieve repeated growth, we will be able to increase the percentage of exceptional growth companies.”

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About the IEGC and the Edward Lowe Foundation:
The IEGC was created by the Edward Lowe Foundation in 2011 through a three-year grant from the NASDAQ Educational Foundation. IEGC is creating new data sets and using existing data in innovative ways to track and better understand exceptional growth companies, their impact on community and economic development, and their relationship with equity funding sources. One of its key data resources is the National Establishment Time-Series (NETS), a unique longitudinal data set compiled by Oakland, Calif.-based Walls & Associates. More information about IEGC can be found at: youreconomy.org/pages/iegc.lasso

Established in 1985, the Edward Lowe Foundation is a national, nonprofit organization that supports entrepreneurship through research, recognition and educational programs, which are delivered through entrepreneur support organizations. The foundation focuses on second-stage companies — those that have moved beyond the startup phase and seek significant, steady growth. For more information, visit edwardlowe.org

Media contact: T.J. Becker at 269-445-4257 or tjbecker@lowe.org

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To read Gary Kunkle’s full report, visit the YourEconomy.org website by clicking here.

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Would you allocate more of society’s resources to giving birth to more babies or to raising children well? Now, think about enterprise creation and the challenge of economic growth. Societies’ leaders need to rebalance entrepreneurship policy towards scale, not start.

In recent years, we have been witnessing a significant global shift in attitudes towards entrepreneurship in countries around the globe. This is reflected in the dramatic proliferation of start-up programs: Start-up America, Start-up Chile, Start-up Russia, Start-up Britain, Start-up Weekend, and dozens of others. “Start-up” has replaced “Silicon” as the reigning entrepreneurship buzzword: There is hardly a country or city that is lacking a start-up program.

Unfortunately, this is being guided almost exclusively by a narrow conception of entrepreneurship as consisting primarily in the starting-up of an enterprise. Equating entrepreneurship with start-up is not wrong; it is just very incomplete. It is also problematic because of two flawed implied messages: The first is that…

To read more of this Harvard Business Review article, click here.

Gleaming office parks, bustling retail centers and billion-dollar sports arenas don’t necessarily make for a thriving metropolis.

What does?

Patents.

The nation’s most innovative metro areas — as measured by the number of patents granted in the community — enjoy the strongest economies, according to a Brookings Institution study out today

“A strong innovation system is a critical contributor to prosperity,” says Brookings senior fellow Mark Muro, an author of the report…

To read more of this USA Today Article, click here.

Encouraging and supporting new business creation has enjoyed renewed popularity in recent years as an economic development strategy at the local and regional levels. After decades of “smokestack chasing” and, increasingly, office-park-chasing, leaders at all levels of government have realized that homegrown development through new businesses is better than lavishing tax incentives on existing companies. Some call this “economic gardening,” while others have called attention to “startup communities” and “entrepreneurial ecosystems.” Call it what you will – it is clear that entrepreneurship is the key to stronger local and regional economies.

For most policymakers, during the recession and recovery their attention has understandably focused on the contribution of entrepreneurs in terms of how many jobs they can create. With unemployment high, wages stagnant and large corporations sitting on mounting piles of cash, the answer to the question of where new jobs will come from is increasingly, “entrepreneurs.”

Jobs are obviously important, especially now, and a fairly easy metric to track. But the focus on counting jobs can obscure the forces that lead to new job creation. Entrepreneurs don’t set out to create jobs – that’s not necessarily their mission. Job creation occurs when teams of cofounders move from idea to business, when they enjoy early success in the market, and when they hit on a successful and repeatable strategy. At that point, the company needs to add people in order to scale – hiring people makes business sense and…

To read more of this Forbes Article, click here.