2. About the Corporation
About the W.K. Kellogg Foundation for Enterprise Development
The W.K. Kellogg Foundation was established The Corporation for Enterprise Development is
in 1930 “to help people help themselves a nonprofit organization that creates economic
through the practical application of knowledge opportunity by helping the poor save and
and resources to improve their quality of life invest, succeed as entrepreneurs, and partici-
and that of future generations.” Its program- pate as contributors to and beneficiaries of the
ming activities center around the common economy. By helping individuals and communi-
vision of a world in which each person has a ties harness latent potential, we build long-
sense of worth; accepts responsibility for self, term models to help people move from poverty
family, community, and societal well-being; and to prosperity while strengthening the overall
has the capacity to be productive, and to help economy. The Corporation for Enterprise
create nurturing families, responsive institu- Development identifies and researches promis-
tions, and healthy communities. ing ideas, collaborates with the private and
public sectors to test them, and helps drive the
To achieve the greatest impact, the Foundation application and adoption of proven concepts.
targets its grants toward specific areas. These
include health; food systems and rural develop- Established in 1979, the Corporation for
ment; youth and education; and philanthropy Enterprise Development works nationally and
and volunteerism. Within these areas, attention internationally through its offices in
is given to the cross-cutting themes of leader- Washington, DC, Durham, North Carolina,
ship; information systems/technology; capital- San Francisco, California, and St. Louis,
izing on diversity; and social and economic Missouri.
community development programming. Grants
are concentrated in the United States, Latin
America and the Caribbean, and the southern
African countries of Botswana, Lesotho,
Mozambique, South Africa, Swaziland and
Zimbabwe.
More information about the W.K. Kellogg
Foundation and its programs is available on the
Foundation’s Web site at www.wkkf.org.
3. Table of Contents
Acknowledgments ......................................................................................................3
Executive Summary ..................................................................................................4
Introduction ..............................................................................................................7
Economic Context for Rural America ......................................................................9
Entrepreneurship as a Rural Economic Development Strategy ..............................12
Rural Entrepreneurship by the Numbers ................................................................17
Policy Context ..........................................................................................................25
The Components of Entrepreneurship Development ..............................................31
A Closer Look at Two States ....................................................................................45
Orchestrating an Entrepreneurial Climate in Rural America ..................................56
Endnotes ..................................................................................................................60
W.K. Kellogg Foundation • Corporation For Enterprise Development 1
4.
5. Acknowledgements
The authors thank Deborah Markley, co-director Special thanks to David Dangler, Ray Daffner,
of the Rural Policy Research Institute (RUPRI) Cornelia Flora, Jay Kayne, Tom Lyons (again),
Center for Rural Entrepreneurship for her guid- Don Macke, Erik Pages, and Nancy Stark for
ance in structuring this study and for allowing their helpful counsel on the “big picture.”
her meeting on entrepreneurship research spon- Much appreciation is also due to the 60 experts
sored by the Farm Foundation to be used to test and practitioners who agreed to be interviewed
some methodological assumptions. by phone about their perspectives and experi-
ences on different aspects of entrepreneurship
Thanks also go to a number of people in in rural America.
Kentucky and Nebraska for their insights and
hospitality during the two main field visits: in Finally, thanks to Rick Foster, Caroline
Kentucky, Jim Clifton, Phillip Danhauer, Kris Carpenter, and Gail Imig for the opportunity to
Kimmel, Joanne Lang, Tom Lyons, Justin carry out this study and for their continuing
Maxson, Becky Naugle, Jerry Rickett, Kevin support and encouragement.
Smith, and Cheryl Moorhead Stone; and in
Nebraska, John Allen, John Bailey, Greg Brian Dabson, Jennifer Malkin, Amy Matthews,
Christensen, Janelle Anderson Ehrke, Doug Kimberly Pate, and Sean Stickle
Friedli, Rob Hamer, Chuck Hassebrook, Rose Corporation for Enterprise Development
Jasperson, Loren Kucera, Glennis McClure, August 2003
Judy Meyer, Stuart Miller, Lance Morgan, Jeff
Reynolds, Marilyn Schlake, Sandra Scofield,
Cory Smathers, Brian Thompson, and Jeff Yost.
W.K. Kellogg Foundation • Corporation For Enterprise Development 3
6. Executive Summary
At the invitation of the W. K. Kellogg
Foundation, the Corporation for Enterprise
Development conducted a study to gather infor-
mation on institutions, programs, and activities
that support entrepreneurship in rural America;
to assess the distribution and scale of entrepre-
neurial activity; and to identify potentially
influential contextual factors. The study includ-
ed the collection of best available published
data to map entrepreneurial activity, an exten-
sive literature and Internet search, and a series
of telephone interviews with 60 experts and
practitioners. In addition, site visits and person-
al interviews were held with practitioners and
entrepreneurs in Kentucky and Nebraska.
Rural America comprises an extraordinary and
dynamic variety of economic, geographical, and
cultural characteristics. Many rural communi- entrepreneurial climate where all kinds of
ties face enormous economic challenges of low entrepreneurs can succeed, lays the ground-
population size and density and remoteness, work for the five out of 100 small businesses
which in turn bring diseconomies of scale and that evolve into the fast-growing drivers of the
increased costs of doing business. Poorly edu- national economy.
cated and low-skilled workers, weak entrepre-
neurial cultures, and entrenched racial inequali- Efforts to measure entrepreneurial activity and
ties inhibit full participation in the new econo- performance across rural America are still in
my. The public policy context is not encourag- their developmental stages, but it is possible to
ing with rural policy dictated by agri-business create an initial impression of the scale and dis-
interests, fiscal crises at the state and county tribution of entrepreneurial activity. Whereas
levels, and no organized constituency for rural such activity is broadly distributed across the
America in all its diversity. There is an urgent country, there appear to be particular concen-
need for rural people and communities to trations in heartland and northern mountain
define the future they want for themselves and states and in Appalachia.
their children. This will take vision, innovation,
and risk-taking – the work of the entrepreneur. Using a two-part framework – creating a
pipeline of entrepreneurs and enhancing busi-
There is growing understanding that economic ness services for entrepreneurs – the study
development strategies founded primarily on team gathered a large amount of information
business recruitment are not in rural America’s on national, regional, and local programs and
best interests and that there needs to be a initiatives. The components of the pipeline are
greater emphasis on homegrown development. entrepreneurship education in kindergarten
Many observers see entrepreneurship as being a through the 12th grade and at the post-second-
critical, if not major piece of rural economic ary level and entrepreneurship networks; for
development, although not all are convinced business services, the components are training
that entrepreneurship is likely to be an engine and technical assistance, and access to capital.
of economic growth in rural areas. However, There is a very wide array of programs and ini-
there is a compelling argument that creating an tiatives, ranging from the old-established to
4 Mapping Rural Entrepreneurship
7. exciting new experiments, but it is impossible be sufficient scale, resources, and expertise
to gauge whether on the ground these come to enable individual communities to play
together in coherent, entrepreneurial systems their full role. There are issues and concerns
of support or as disconnected, bureaucratic common to both urban and rural areas that
programs. These were the concerns that can best be addressed through regional solu-
became the focus of site visits and interviews in tions; regions represent the economic
Kentucky and Nebraska. engines and markets that rural enterprises
have to serve.
The study concludes that what is needed is a
• Entrepreneur-focused: Systems thinking is
new framework that will animate people and
required to align the plethora of training,
institutions at all levels around four principles
technical assistance, and financing programs
for entrepreneurship development in rural
to meet the variety of needs of entrepreneurs
America:
and their different levels of education, skills,
• Community-driven: Local communities and maturity.
need the tools and resources to identify and
• Continuously learning: Networks for peer
build upon their assets; to make choices that
support and learning are essential for entre-
appropriately balance economic, social, and
preneurs and for practitioners, community
environmental imperatives; to learn from the
leaders, and policymakers. Learning about
experiences of others; and to be open to
entrepreneurship should be part of the
experimentation and innovation.
school curriculum. The need for rigorous
• Regionally oriented: Only through regional evaluation of the effectiveness of entrepre-
cooperation across multiple jurisdictions neurship strategies and returns on invest-
and through regional institutions can there ment is pressing.
W.K. Kellogg Foundation • Corporation For Enterprise Development 5
8. The study also highlighted a number of other Four main strategies are recommended to cre-
important essentials for promoting an entrepre- ate a more supportive environment climate in
neurial climate: rural America:
• Anchor institutions: Universities, community • Investment strategies: Create incentives
colleges, community development financial and long-term investments that encourage
institutions, and research and advocacy urban-rural and regional collaborations and
groups can play a vital role in articulating a the development of effective systems and
vision, building partnerships, and attracting accountable systems of entrepreneurial sup-
and mobilizing resources for entrepreneurship port. Invest in innovations in entrepreneur-
development. ial education, technical assistance and
training, capital access, and networking
• Supportive public policy: Creative public
that show promise for widespread replica-
policy can unlock resources and channel
tion in rural communities.
efforts into rural counties, but demonstrat-
ing effectiveness and returns on investment • Learning strategies: Ensure rigorous evalua-
is crucial for generating further support at tion of strategies, systematic case studies,
federal and state levels. The need is not nec- training programs for elected officials and
essarily to create special legislation for opportunities for peer exchanges. Encourage
entrepreneurship in rural areas but to ensure experiential education in schools, colleges,
that all programs have the capability and community centers, and camps.
flexibility to be tailored to the needs of dif-
• Advocacy strategies: Energize networks of
ferent rural regions and their entrepreneurs.
organizations and institutions that can use
• All entrepreneurs welcome: Fostering a the results of the investment and advocacy
diverse pool of entrepreneurs with different strategies to support entrepreneurship
motivations, whether for survival, lifestyle, development in rural America.
or wealth, increases the odds that there will
• Information strategies: Develop method-
be some that will become the fast-growth
ologies and statistical tools that adequately
enterprises that will bring improvement to
describe and measure entrepreneurial activ-
economic conditions to rural communities
ity and climates, including report cards and
and regions.
other benchmarking and assessment tools.
The study presents ample evidence of organiza-
tions, institutions, and agencies pursuing vari-
ous types of programs and initiatives that are
meant to encourage greater entrepreneurship in
rural America. The task ahead is to make their
efforts more community-driven, regionally ori-
ented, entrepreneur-focused, and continuously
learning.
6 Mapping Rural Entrepreneurship
9. Introduction
Scope of Work
The W. K. Kellogg Foundation invited the
Corporation for Enterprise Development (CFED)
to carry out a consulting assignment that would:
• Gather data on current institutions, pro-
grams, and activities that support rural
entrepreneurship;
• Develop a narrative and graphic presenta-
tion of the data in ways that would high-
light “hotspots” of activity that might offer
models and/or potential investment targets;
• Determine the factors that influence the
development of these “hotspots;” and
• Present an analysis of the findings leading
to observations and options for Foundation
intervention.
Definitions – Growth entrepreneurs: those who are
motivated to develop and expand their
For the purposes of this report, the following businesses that create jobs and wealth.
definitions have been used:
– Serial entrepreneurs: those who go on
• Rural refers to geographical areas outside sta- to create several growth businesses.
tistical metropolitan areas and thus includes
over 80 percent of the U.S. land mass and its • Social entrepreneurs are people who create
wide array of economic, physical, cultural, and grow enterprises or institutions that are
and demographic characteristics. primarily for public and community purposes.
• Entrepreneurs are people who create and • Entrepreneurship is the process through
grow enterprises. This definition is deliber- which entrepreneurs create and grow enter-
ately widely drawn to encompass the follow- prises. This process includes four critical
ing types of entrepreneurs: elements: opportunity recognition, idea cre-
ation, venture creation and operation, and
– Aspiring entrepreneurs: those who are
creative thinking.
attracted to the idea of creating enter-
prises, including young people. • Entrepreneurship development refers to the
– Survival entrepreneurs: those who infrastructure of public and private supports
resort to creating enterprises to supple- that facilitate entrepreneurship.
ment their incomes. • Entrepreneurial communities are those
– Lifestyle entrepreneurs: those who where there is significant economic and
create enterprises in order to pursue a social entrepreneurial activity and where
certain lifestyle or live in a particular there is an effective system of entrepreneur-
community. ship development.
W.K. Kellogg Foundation • Corporation For Enterprise Development 7
10. Methodology
The consulting assignment was conducted in
three main stages:
• A quantitative assessment that used best
available published data to prepare maps of
entrepreneurial activity across rural
America;
• An assessment of institutions, programs, and
activities that support entrepreneurship
development in rural America based on an
extensive literature and Internet search and
a series of telephone interviews with 60
experts and practitioners; and
• Site visits and interviews with practitioners
and entrepreneurs in Kentucky and Nebraska.
Report Structure
This report begins with an overview of the eco-
nomic realities and options for rural America
and explores the role that entrepreneurship
plays (or could play) as a rural economic devel-
opment strategy. The next section presents the
quantitative assessments, including some of the
challenges for measuring rural entrepreneur-
ship, followed by a description of both the poli-
cy context at national, regional, and local levels
and of the institutions and programs that sup-
port different facets of entrepreneurship. This
national overview is then followed by a closer
look at entrepreneurship development in
Kentucky and Nebraska. The report concludes
with some thoughts about what the assessments
have revealed and what opportunities may exist
for policy and practical action.
8 Mapping Rural Entrepreneurship
11. Economic Context for
Rural America
Within rural America, there is an extraordinary tions. Map 1 shows the location of distressed
variety of economic, geographical, and cultural rural counties using an index devised by the
characteristics. Moreover, the situation is very Appalachian Regional Commission (ARC) for
dynamic, with significant depopulation across its 10-state region and applied to all non-met-
the Great Plains and net population growth in ropolitan America. The index combines meas-
rural counties that are within reach of sprawl- ures of a three-year average of unemployment,
ing metropolitan regions or in areas of high per capita market income, and poverty rates.
amenity. In addition, many counties with man-
ufacturing or food processing plants are experi- A critical issue for many rural counties is edu-
encing a rapid growth in immigrant workers cation. Although overall, rural high school
and the challenges associated with sudden graduation rates match or exceed their urban
expanding diversity. counterparts, out-migration of the youngest and
more highly-educated is a primary export for
Poverty rates tend to be higher in rural areas – many communities. The result is that the adult
7.5 million rural residents are in poverty. Two- workforce is less well-educated. In fact, a study
thirds of them live in households where at least of the rural South showed that 38 percent of
one member is working. Measures of persist- adults do not have high school diplomas.
ently high poverty levels or of economic dis-
tress show that the greatest hurt found in the From an economic development viewpoint,
Delta and the Cotton Belt, Appalachia, the rural communities, especially those located
Texas border, and Native American reserva- some distance from larger cities, face a number
Map 1: Distressed Rural Counties
(Source: Bureau of Labor Statistics, Bureau of Economic Analysis, Census Bureau, Appalachian Regional Commission)
W.K. Kellogg Foundation • Corporation For Enterprise Development 9
12. of major challenges. Low population size and tracts of federally-owned land have become
density and associated limited local demand, battlegrounds around forestry, mining, recre-
make it difficult for rural businesses and serv- ational, and water rights issues, with local com-
ice providers to achieve economies of scale. munities and local jobs left as merely by-
This has an impact on the cost and availability standers. Fiscal crises at the state level are
of goods and services and drives many attempts being passed onto counties in the form of
to achieve efficiencies through consolidation in reduced financial support, resulting in severe
everything from schools to banking. service cuts with disproportionate impacts on
Remoteness from markets and from key infra- the rural poor. Unfortunately, there is no organ-
structure limits the range of economic opportu- ized constituency for rural America, with polit-
nities that can be supported and often results ical power increasingly suburban and no coher-
in a lack of connection to regional and global ent public understanding of how and where
possibilities. Poorly educated and low-skilled national and rural interests intersect.
workers, weak entrepreneurial cultures, and
entrenched racial inequalities all serve to inhib- So what of the future? One of the more
it the participation of rural families and com- thoughtful and thought-provoking analyses
munities in the new economy. comes from Northwest Area Foundation presi-
dent, Karl Stauber.1 He first divides rural
The public policy context for rural America is America into four main types:
not encouraging. Powerful agri-business inter-
ests have ensured that commodity price sup- • Urban periphery: rural areas within a 90-
port is the primary rural policy, leaving little minute commute of urban employment,
scope for diversified rural development. Large services, and social opportunities;
10 Mapping Rural Entrepreneurship
13. • High amenity: rural areas of significant sce- • Create new markets and linkages so as to
nic beauty, cultural opportunities, and increase regional competitive investments
attraction to wealthy and retired people; in urban periphery and sparsely populated
areas – primarily investments in value-
• Sparsely populated: areas where the popu-
added production rather than commodity
lation density is low and often declining and
price supports.
therefore demand for traditional services,
• Develop and use new technology to over-
employment, and social opportunities are
come remoteness to produce an infrastruc-
limited by isolation; and
ture that expands competitive advantage in
• High poverty: rural areas characterized by sparsely populated and high-poverty areas
persistent poverty or rapid declines in – creating and reinforcing links between
income. metropolitan and rural economies.
• Encourage immigration to rural communi-
Stauber then lays out four outcomes for a rural ties to increase human capital in sparsely
public policy: increased human capital, conser- populated and high-poverty areas – with
vation of the natural environment and culture, a particular emphasis on attracting entre-
increased regional competitive investments, preneurs.
and investments in infrastructure that support
the expansion of new competitive advantage. Two other expert rural observers, Thomas
From these elements, he then proposes a set of Rowley and David Freshwater, contend that the
strategic directions:2 answers to the current challenges of rural
• Redefine and restructure the rural-serving America will only be found “by finally coming
college and university so as to increase to terms with what we as a nation want our
human capital in sparsely populated and rural areas to be. If we want them to be sources
high poverty rural areas – essentially dis- of cheap commodities, then the people who
mantling the 19th century land-grant sys- will provide [them]…will be low-wage labor. If
tem in favor of a 21st century information we desire pristine wilderness, the people will
grant system. not fit at all. If receptacles for our refuse are
what we seek, then trash heaps are what we
will get. What we want (and what we are will-
ing to pay for) will go a long way in determin-
ing what we get.” 3
There is no shortage of urban, suburban, and
newly settled rural dwellers willing to define a
future for rural America, but if rural people and
communities are to take matters into their own
hands and succeed, it will take vision, innova-
tion, and risk – the work of the entrepreneur.
W.K. Kellogg Foundation • Corporation For Enterprise Development 11
14. Entrepreneurship
as a Rural Economic
Development Strategy
Among researchers, policy advocates, and oth- economic changes, fewer communities are host-
ers engaged in community and economic ing large facilities that provide jobs over long
development in rural America, there is broad periods of time…At the same time, small and
agreement that relying on recruiting companies medium-sized businesses are growing in impor-
from other states or overseas should not and tance…Entrepreneurial growth companies –
cannot be the answer to struggling rural fast-growing new businesses – account for at
economies. Yet each year, state governments least two-thirds of new jobs in the American
have been willing to commit through tax economy…These firms will drive the future of
incentives, tax breaks and direct investments, innovation and prosperity in nearly every
billions of dollars to snag a car assembly plant, American community, and thus should be the
a high technology production unit, or some focus of our economic development efforts.”5
other potentially transformative industrial
activity. Increased public scrutiny has shed The Federal Reserve Bank of Kansas City
light on some of the more egregious examples observed: “Rural policymakers, who once fol-
of “investments” that were poorly structured, lowed traditional strategies of recruiting manu-
had inadequate reporting or accountability facturers that export low-value products, have
requirements, or yielded disappointingly low realized that entrepreneurs can generate new
returns in terms of jobs and local multiplier economic value for their communities.
effects. And this in turn has led to a greater Entrepreneurs add jobs, raise incomes, create
emphasis on transparency, clear expectations wealth, improve the quality of life of citizens,
on returns on investment, and clawbacks if and help rural communities operate in the glob-
expectations are not met. But concern remains al economy…Rural policymakers are respond-
that recruitment has to be balanced, if not ing to these challenges by making entrepreneur-
replaced altogether by policies that support ship the cornerstone of many economic devel-
homegrown development. opment strategies.”6 In a similar vein, the ARC
“views entrepreneurship as a critical element in
An Aspen Institute report that looks at the the establishment of self-sustaining communi-
economy of rural Kentucky, noted: “Traditional ties that create jobs, build local wealth, and
approaches to economic development…have contribute broadly to economic and community
their place, but only as they help to create the development.”7 And this was the basis of a
conditions for dynamic, indigenous economic commitment by the Commission in 1997 to
activity. In a very real sense, Kentucky’s future commit $17.6 million over a number of years to
rests on its ability to nurture homegrown firms an initiative to build entrepreneurial communi-
and to encourage the innovation, risk-taking ties across Appalachia.
and investment that are the hallmarks of a vital
economy…In short, entrepreneurship must
become a matter of course and a habit of mind In 1999, the National Governors Association
if Kentucky is to thrive.”4 (NGA) surveyed its members to gauge each
state’s perspective on entrepreneurship and its
The National Commission on importance as part of an overall state economic
Entrepreneurship in its guide for candidates development strategy. While 34 of the 37 states
for elected office put the argument this way: that responded indicated that they did indeed
“While winning a new manufacturing facility consider entrepreneurship as part of their eco-
may be a home run in economic development nomic development strategy, only four had a
terms, these home-run opportunities are clearly articulated statement within the strategy
becoming scarcer every day. As a result of glob- document. Jay Kayne observed a “distinction
alization, technological evolution, and other between states that try to meet the specific
12 Mapping Rural Entrepreneurship
15. needs of aspiring and emerging entrepreneurs investigation into the relationship between
and states that view entrepreneurs as a segment entrepreneurship and economic growth. By
of the state economy who can take advantage 2002, 37 countries were being surveyed
of state programs.”8 In other words, the survey according to a common protocol. The national
emphasized the difference between active and report on the United States10 provides some
passive support for entrepreneurship. good contextual information on the role and
Interestingly enough, given the assessments importance of entrepreneurship:
described later in this report, Kentucky was
identified as having one of the best articulated GEM estimates that 10.5 percent of the U.S.
goals of creating an entrepreneurial economy. adult population (aged 18-64) are engaged in
some form of “entrepreneurial activity,” defined
An important obstacle to a more vigorous pur- by the 2002 GEM as being involved in the
suit of entrepreneurship as an economic devel- start-up process or is the owner/manager of an
opment strategy is the lack of hard evidence active young business less than 42 months old.
that it actually yields the results claimed. As This population can be divided into two broad
the Federal Bank of Kansas City noted, “As categories: opportunity entrepreneurs, those
policymakers stretch the frontier of entrepre- who are starting a business to take advantage of
neurial development, the impacts of these pro- a business opportunity, and necessity entrepre-
grams will need to be assessed to identify the neurs, those who are starting a business
costs and benefits of supporting high-growth because they had no better choices for work.
entrepreneurs in rural America.”9
In the United States, approximately 90 percent
The Global Entrepreneurship Monitor (GEM) fall into the opportunity category.
was created in 1997 by Babson College and the This high level of opportunity entrepreneur-
London Business School with support from the ship appears to be the result of a strong econo-
Kauffman Center for Entrepreneurial my, although recession, mass layoffs, and
Leadership as a long-term, multi-national increasing unemployment are likely to spur a
W.K. Kellogg Foundation • Corporation For Enterprise Development 13
16. sharp rise in necessity entrepreneurship. As the The relationship between level of education
2001 GEM report notes: “The difficulty with and entrepreneurial activity is not straightfor-
this scenario is that although necessity entre- ward. The highest entrepreneurial participation
preneurship often creates self-employment, it is rate is for those who have completed high
not a strong driver for creating new jobs. school; for those who do not have a high
Because the primary concern of necessity entre- school diploma, the tendency is self-employ-
preneurs is survival, they typically have a limit- ment and little vision for job creation; for those
ed vision for growth. Opportunity entrepre- with college degrees, there is some drop-off in
neurs, however, tend to create high-potential, participation, possibly because of the greater
high-growth ventures. The majority of jobs cre- opportunities to earn high incomes as employ-
ated from entrepreneurial activity in the United ees of other businesses.
States is a result of fast-growth businesses.”11
A potentially contentious conclusion comes
from the 2002 GEM report, which makes the
point that entrepreneurship is an urban phe-
nomenon, presumably as urban areas are where
the highest density of entrepreneurship is to be
found. The report went on to assert: “It should
be noted that entrepreneurship in rural areas
may not be the best mechanism for economic
growth.”12
Another recent effort to provide evidence of the
effectiveness of entrepreneurial strategies is an
Organization for Economic Development and
Cooperation (OECD) publication,
Entrepreneurship and Local Economic
Development, researched and written by Alistair
Nolan. He noted: “For a variety of reasons, pro-
moting entrepreneurship enjoys support from
governments at both ends of the political spec-
trum. Pro-entrepreneurship policies have been
embraced as a means of increasing economic
growth and diversity, ensuring competitive
markets, helping the unemployed to generate
additional jobs for themselves and others,
U.S. entrepreneurs, compared with their coun- countering poverty and welfare dependency,
terparts overseas, tend to be older – 36 percent encouraging labor market flexibility, and draw-
of entrepreneurs are in the 45 to 64 age brack- ing individuals out of informal economic activ-
et. Older Americans, the report asserts, are ity. In short, an enterprise initiative has been
more likely to have deep industry experience charged with addressing a broad array of eco-
and networks that help with identifying and nomic and social aspirations…However, given
financing opportunities. At the same time, the the widespread interest in promoting enter-
proportion of women entrepreneurs is increas- prise, it is perhaps surprising that few empiri-
ing. There is one female entrepreneur for every cal studies have systematically examined the
1.5 male entrepreneurs, with parity in the 45 to relationship between the birth of new firms and
64 age bracket. local economic change.”13
14 Mapping Rural Entrepreneurship
17. The following are some of the main conclusions Research on the impact of microenterprise
of Nolan’s analyses of 30 OECD countries: development in the United States by The Aspen
Institute14 provides some counter-evidence:
• There are many obstacles that hinder entre-
preneurship in disadvantaged areas, influ- • Low-income microentrepreneurs reduced
encing both the extent and form of entrepre- their reliance on government assistance by
neurial activity and its prospects for sur- 61 percent with the greatest reduction in the
vival. Such obstacles range from limited net- amount of cash benefits received. Average
works, low levels of effective local demand, benefits fell by $1,679 per year.
finance constraints, lack of role models, and
• Seventy-two percent of low-income
cultural barriers – all familiar to rural com-
microentrepreneurs experienced gains in
munities in the United States.
household income over five years. The aver-
• Efforts to stimulate self-employment can raise age gain was $8,485.
incomes and provide a cost-effective alterna-
• Fifty-three percent of low-income entrepre-
tive to paying unemployment insurance, but
neurs had large enough household gains to
only for the small sub-section of the unem-
move out of poverty, with the business being
ployed who are more motivated, have work
the major source of earnings.
experience, and some accumulated assets.
• Average household assets of low-income entre-
• Entrepreneurship strategies yield important
preneurs grew by $15,909 over five years.
benefits but do not constitute a panacea.
Such strategies inevitably favor those who
Earlier research conducted by CFED15 indicated
possess superior financial, human, and
that:
social assets. There may not be a significant
expansion in employment opportunities for • Forty-nine percent of microenterprises
the most disadvantaged. Entrepreneurship owned by low-income entrepreneurs sur-
strategies are long-term in their effects and vived after five years – a rate comparable to
therefore not appropriate to short-term the national average for all small businesses.
crises. There may be issues of displacement • On average, microenterprises create 1.5 full-
in local markets as new entrants cause losses and part-time jobs per business
in revenues or employment among existing
enterprises rather than create an expanded During field work in Kentucky, there was some
economy. suggestion that a significant number of emerg-
• Although every community hopes to ing entrepreneurs were in fact making the tran-
encourage fast-growing businesses that will sition from the informal to the formal economy.
generate wealth and good jobs, the reality is A recent literature review on the informal econ-
that in most cases, the direct employment omy by Institute for Social and Economic
effects will be modest – a reflection of the Development and The Aspen Institute,16 con-
small average size of start-ups, low survival firms that the informal economy – defined as
and growth rates, and displacement. individuals operating unregistered businesses
Moreover, employment in small enterprises or engaging in “under the table” work – is
does not necessarily translate into good jobs indeed especially important to rural residents:
with family-supporting wages and benefits. • Essential services are more likely to be
unavailable or deficient in less densely settled
areas, forcing people to develop and rely on
informal alternatives.
W.K. Kellogg Foundation • Corporation For Enterprise Development 15
18. • The extent to which informal activities around 10 percent of the gross domestic prod-
require access to land – crops, wood prod- uct. Those who work in some form of subcon-
ucts, game – increase their prevalence in tracting capacity, often outside the framework
rural areas. of regulation, benefits, and health and safety
protections. And those who work in odd jobs
• Austerity – in the form of lower wages and
for cash or operate microenterprises outside
declining demand for labor and less public
the realm of regulation and taxation. “In all
spending – promotes informal economies as
cases, the greatest competitive advantage that
an important survival strategy.
these workers bring to the market is a price
• Informal economies exist in part because of advantage built on lower labor and overhead
the social interdependence of community costs. While this creates access to income and
members, thus the “connected feeling” typi- employment for many, it also constrains earn-
cal of rural places makes them more con- ing power…and…for many microentrepreneurs
ducive to informal economic activity. it is not clear whether the benefits of formaliza-
tion would outweigh the costs involved. [It
The authors point to the fact that there are in would appear that] the desire to grow and a
fact two main components of the informal corresponding need for financing [are] the
economy – in total estimated to represent most compelling triggers.”17
Commentary
The conclusion to be drawn from these scope for income supplementation and a way
expert observations and research is that out of poverty. While this is undoubtedly
entrepreneurship development appears to be important for individual families, it is unlike-
a logical and appropriate counterpoint to ly that in the aggregate, such enterprises will
business recruitment strategies in rural have a significant transforming impact on
America. There are strong advocates and local economies. Nevertheless, in many hard-
arguments at the national level for lauding pressed communities, small improvements
and supporting opportunity-driven entrepre- can make the difference between community
neurs – those most likely to create jobs and survival and collapse. Moreover, there is the
wealth at any scale. compelling argument that creating an entre-
preneurial climate where all kinds of entre-
There are also benefits for encouraging preneurs can succeed, lays the groundwork
necessity-driven entrepreneurs and those for the five out of 100 small businesses that
with only modest aspirations for their small develop into the fast-growing drivers of the
enterprises. For some, microenterprise offers economy.
16 Mapping Rural Entrepreneurship
19. Rural Entrepreneurship
by the Numbers
Efforts to measure entrepreneurial activity and which generally accorded with expectations.
performance by geographical area are still in However, the authors observed, “Some results
their developmental stages. Progress is hampered are perplexing: Florida, Nebraska, and
by a lack of any agreed and coherent framework Kentucky do not make large investments in
for understanding the essential factors (and their entrepreneurial activity, but they perform far
interactions) that shape the entrepreneurial better than the model predicts…they get very
process and by the dearth of available data that strong returns.”19 As will be described later,
serve as meaningful proxies for these factors. this became one factor in the selection of
Nebraska and Kentucky for further assessment.
Goetz and Freshwater in a recent paper18 pre-
sented their framework for capturing state-level The strong technology and innovation bias in
determinants of entrepreneurship and for the Goetz and Freshwater analysis and the
measuring what they called “entrepreneurial absence of any differentiation between urban
climate.” They focused on states, recognizing and rural makes this less than ideal as a means
that although these are not functional econom- to measure entrepreneurship in rural America.
ic units, they do have the power to influence Nevertheless, the authors did draw some inter-
many of the factors important to economic esting preliminary conclusions, the most signifi-
development. Using a regression model that cant of which was that entrepreneurship activity
equated entrepreneurial activityi within a state can be expanded by improving the human capi-
with a set of inputs that related to ideas and tal base of a state – a better educated workforce
innovation, human capital, and financial capi- increases the effectiveness with which ideas are
tal, they derived a measure of entrepreneurial translated into entrepreneurial opportunities.
climate. If entrepreneurial activity exceeded the
level of inputs, that would suggest a positive In 2002, the National Commission on
entrepreneurial climate – a set of factors con- Entrepreneurship published the results of
ducive to or supportive of entrepreneurship. research20 on the location of the fastest growing
Conversely, if the level of entrepreneurial activ- companies across the United States. The
ity did not match the level of inputs, a poor research led to the creation of the Growth
entrepreneurial climate would be assumed. Company Index, which weighs the percentage
Goetz and Freshwater also thought it important of existing firms with high growth (at least 15
to distinguish entrepreneurial activity that percent per year over the period 1992-1997)
involves fundamental change in an economy and the percentage of firms that started in 1992
based on new products, combination of inputs, or 1993 and had at least 20 employees by 1997.
or production processes from that which is The data was presented at the level of Labor
driven by income and population growth. Market Areas as defined by the U.S.
Department of Agriculture.
The resultant entrepreneurial climate measures
ranked Colorado, California, Massachusetts, Map 2 shows the top-performing labor market
Virginia, and Maryland as the top five states, areas with populations between 100,000 and
i “Entrepreneurial activity” for the purposes of the model was measured by the number of Inc Magazine’s 500 fastest
growing firms in the state and the number of initial public offerings (IPOs) per million population. “Ideas and innova-
tion” was measured by the number of Small Buisness Innovation Grants and patents, “human capital” by the proportion
of college graduates in the population, and “financial capital” by the number of venture capital commitments and Small
Business Investment Companies. Goetz and Freshwater’s definition of “entrepreneurial climate” was based on the work
of David Birch on what constituted “entrepreneurial hotspots” – a series of intangibles relating to political engagement,
media interest, and supportive public policies.
W.K. Kellogg Foundation • Corporation For Enterprise Development 17
20. 150,000 (the smallest and assumed to be the tors are ranked and combined into indexes
most rural). Each of the nine labor market which in turn are ranked and graded. However,
areas shown on Map 2 had between 109 and the need to determine entrepreneurial activity
232 high-growth companies with their within rural areas raised a number of data
strongest business sectors being local market availability and methodological challenges.
(4), extractive (3), retail (2), distributive (1),
and manufacturing(1). The strengths of this The basic unit of measurement is the county
Index are that it uses the Census Bureau’s and for the purpose of this analysis, the focus
Business Information Tracking System database was on non-metropolitan counties – the gener-
that allows researchers to track the employ- ally accepted definition of rural, encompassing
ment growth of individual firms over time and as it does a wide range of economic and demo-
it seeks to measure the number of entrepre- graphic characteristics. But there are immediate
neurial companies rather than local economic limitations on the availability of key data at the
growth. Its weaknesses are that the data is county level. For instance, SBA data on new
somewhat out of date and it makes no distinc- firm starts is only available at the state level, as
tion between size of company. is information on small company payroll;
moreover, the level of analysis achieved by
CFED’s initial approach to the challenge of Goetz and Freshwater seems currently unat-
mapping rural entrepreneurship was heavily tainable for rural areas. The closest available
influenced by its Development Report Card for proxies for entrepreneurial activity were meas-
the States methodology where multiple indica- ures of self-employment and small firms:
Map 2: Top-performing Small Labor Market Areas for Fast Growing Companies
(Source: National Commission on Entrepreneurship)
18 Mapping Rural Entrepreneurship
21. • Number of firms with no paid employees, data, with all its limitations, in a separate and
annual business receipts of $1,000 or more, straightforward manner.
and subject to federal income taxes, by
county. (Source: Census Bureau, 2000 and Map 3 shows the distribution of self-employer
change 1997-2000) firms expressed as a proportion of jobs in each
• Number of companies that employ 20 county in 2000. The darkest green counties are
employees or less by county. (Source: those in the top third of counties nationwide.
Census Bureau’s County Business Patterns, These are concentrated in the Central Belt from
2000 and change 1997-2000) North Dakota to Texas, in the northern moun-
tain states, central Appalachia, and northern
• Number of private, non-farm jobs by county. New England.
(Source: Bureau of Economic Analysis, 2000)
Map 4 shows the change that counties have
At a special meeting on rural entrepreneurship
experienced in the number of self-employer
research convened by the RUPRI Center for
firms expressed as a proportion of jobs in each
Rural Entrepreneurship and the Farm
county from 1997 to 2000. Again, the darkest
Foundation in May 2003, CFED staff presented
green counties are those in the top third of
proposals for creating multi-factor indices that
counties nationwide. These are more broadly
included the above measures along with firm
scattered across the Southeast, Appalachian and
income data. However, it was the consensus of
mid-Atlantic states, the Western mountain
the academic researchers that it would be
states and across the Heartland.
advisable to avoid such indices and present the
Map 3: Self-Employer Firms 2000
(Source: Census Bureau, Bureau of Economic Analysis)
W.K. Kellogg Foundation • Corporation For Enterprise Development 19
22. Map 4: Growth in the Number of Self-Employer Firms 1997-2000
(Source: Census Bureau, Bureau of Economic Analysis)
Map 5: “Top-performing” Counties for Self-employer Firms, 2000
20 Mapping Rural Entrepreneurship
23. Map 6: “Top-performing” Counties for Growth in Self-employer Firms, 1997-2000
Maps 5 and 6 show the results of a Z-score In Map 6, the distribution is mainly to the east
analysis to identify those counties whose of the country with a few in the central states;
indices were positive two or more standard clusters are evident in Kentucky and Georgia.
deviations from the mean; in other words the
“top-performing” counties for self-employer The following maps begin a second series of simi-
firms in 2000 and growth from 1997-2000. lar presentation using data on small companies
that employ 20 or fewer people.
In Map 5, there is broad distribution across 17
states, with clusters of counties in Nebraska
and Kentucky.
W.K. Kellogg Foundation • Corporation For Enterprise Development 21
24. Map 7: Small Companies, 2000
(County Business Patterns, Bureau of Economic Analysis)
Map 8: Growth in the Number of Small Companies, 1997-2000
(Source: County Business Patterns, Bureau of Economic Analysis)
22 Mapping Rural Entrepreneurship
25. Map 9: “Top Performing” Counties for Small Companies, 2000
Map 7 shows the distribution of small firms Maps 9 and 10 show the results of a Z-score
expressed as a proportion of jobs in each coun- analysis to identify those counties whose
ty in 2000. The darkest green counties are indices were positive two or more standard
those in the top third of counties nationwide. deviations from the mean; in other words the
These are concentrated in the central and “top-performing” counties for small firms in
north-west states. 2000 and growth from 1997-2000.
Map 8 shows the change that counties have Map 9 shows a concentration in western states
experienced in the number of small firms with two outliers in the east and clusters of
expressed as a proportion of jobs in each coun- counties in Colorado and Nebraska.
ty from 1997 to 2000. Again, the darkest green
counties are those in the top third of counties Map 10 indicates a broader spread across the
nationwide. These more broadly scattered central and south-eastern states.
across the country.
W.K. Kellogg Foundation • Corporation For Enterprise Development 23
26. Map 10: “Top-performing” Counties for Growth in Small Companies, 1997-2000
Commentary
The data presented in this chapter provide necessity-driven, or what the underlying fac-
only glimpses of what constitutes entrepre- tors are that make one area more active than
neurial activity in rural America. It shows another. As mentioned previously, the chal-
that high-performing small labor markets are lenge is the lack of both data at the county
found widely distributed across the country – level that adequately captures entrepreneurial
there appears to be no obvious common loca- activity and of an accompanying framework
tional characteristics. Counties in the heart- of the kind developed by Goetz and
land and northern mountain states and in Freshwater. It is evident that some consider-
Appalachia appear consistently as being com- able intellectual and statistical resources need
paratively strong for both small business and to be invested so that entrepreneurship can
self-employment. But there is no sense of be measured with greater confidence.
how much of this activity is opportunity- or
24 Mapping Rural Entrepreneurship
27. Policy Context
National Policy
Ten years ago, CFED suggested that the notion
of rural development policy was misplaced.
“Because rural areas are evolving into distinctly
different economic entities…an off-the-rack fed-
eral strategy or state development policy based
on outmoded assumptions about rural areas is
likely to be ineffective…Instead, state and feder-
al policymakers should focus on building local
and regional capacity to use flexible programs
and tools, designing effective delivery systems,
and creating supportive development institu-
tions.”21 The report went on to recommend that
“Rural advocates must work to ensure that
mainstream programs are designed so that rural
people, as well as urbanites and suburbanites,
can benefit from them, and to ensure that rural
community leaders are well-equipped to be
active and equal participants in local and
regional development efforts. Effective urban
and rural development policies cannot be devel-
oped separately, but instead must recognize
their interrelationships. Thus regional strategies cy was narrowly defined as funding for agricul-
are increasingly important.”22 ture through programs supported by the United
States Department of Agriculture (USDA), but
In any event, many rural economic develop- the changing nature of the rural economy has
ment leaders regard America’s national rural spurred a broadening of the rural economic
policy as unfocused, if not non-existent. development policy framework. There appears
Organizations such as RUPRI note that federal to be a growing national, state, and local policy
rural development policies and programs “con- consciousness that rural communities matter
sist of a fragmented constellation of programs and that entrepreneurship development should
dispersed among several agencies… [and] a be a core component of economic development
comprehensive, goal-driven, community-based policy for rural America.
and regionally appropriate national rural policy
doesn’t exist.”23 Despite increased attention to non-farm rural
development issues, a national policy around
While fiscal crises have hit government fund- rural entrepreneurship still has a long way to
ing at all levels, including rural community go. A recent analysis by the USDA Economic
development in the federal policy agenda is Research Service found that the highest level
still a priority for rural advocates nationwide, of per capita business financial assistance from
including the Center for Rural Affairs, the federal government programs was concentrated
National Association of Development in the West, North Central, and New England
Organizations (NADO), National Rural regions of the country and that 332 non-metro
Development Partnership, National Association counties received no federal assistance at all.24
of Towns and Townships, and the National Additionally, numerous federal agencies invest
Association of Counties. In the past, rural poli- more resources in rural development than the
W.K. Kellogg Foundation • Corporation For Enterprise Development 25
28. USDA (when agricultural programs are exclud- contribute (either directly or indirectly) to
ed) – the agency congressionally mandated to promoting entrepreneurship development in
promote the economic interests of rural rural areas by creating incentives for private
America. investments in rural enterprises or building
the capacity of communities or institutions
Industry leaders note a vacuum in the field with to support rural entrepreneurs. Rural eco-
regard to organizations that promote federal nomic development advocates maintain that
rural entrepreneurship development policy. The rural community development is not getting
Ewing Marion Kauffman Foundation has signif- adequate support from the USDA and would
icantly scaled back the policy activities of the like to see it more involved in promoting
National Commission on Entrepreneurship, rural entrepreneurship. The good news is
once the primary champion for federal entre- that although there is a long way to go in
preneurship development policy. Other poten- equalizing support between entrepreneur-
tial champions for rural entrepreneurship are ship focused programs and agricultural sub-
either in their early stages of development (such sidies through the USDA, within the last few
as the newly formed rural subcommittee of the years the budgets for USDA business devel-
Association for Enterprise Opportunity [AEO]), opment programs have increased.
are not primarily focused on policy (such as the
RUPRI Center for Rural Entrepreneurship), or • The U.S. Small Business Administration’s
are not specifically focused on entrepreneurship (SBA) SBA 7(a) guaranteed lending program
development issues (such as the Congressional continues to be the largest single business
Rural Caucus or the National Rural assistance program. However, financing per
Development Partnership). capita data shows that non-metropolitan
areas receive less than three-quarters of their
Consequently, the majority of national rural counterparts in metropolitan areas, the result
development policies and programs still focus of both lower levels of economic activity and
on natural resource conservation and industrial fewer private lending institutions. The main
development, and very few resources support rural beneficiaries are counties specializing
entrepreneurs specifically and directly.25 The in services, retirement-destination counties,
following is not intended to be a comprehensive and non-metropolitan areas in Western
overview of every government program or poli- states.26 Other programs such as the 504
cy effort that contributes to rural entrepreneur- Certified Development Program, Microloan
ship development, but rather highlights some Program, Program for Investment in
key efforts that have recently emerged and/or Microentrepreneurs (PRIME), Women’s
have significant impact on rural America. Business Centers program, Service Corps of
Retired Executives program, and Small
• USDA business assistance programs primari- Business Development Center (SBDCs) pro-
ly function through loan guarantees or sup- gram, among others, are all elements of the
port to community entrepreneurship devel- national small business development infra-
opment initiatives and institutions. structure that can support entrepreneurship
Programs such as the Business and in low-income rural areas.
Industrial Guarantee and Direct Loan
Programs, Intermediary Re-lending The potential benefits of these programs,
Program, Rural Business Enterprise and however, have not been fully realized in
Opportunity Grants, Rural Economic rural areas, according to a 2001 report by
Development grants and loans and Rural the SBA Office of Advocacy, Advancing
Enterprise and Empowerment Zones all Rural America, as well as from feedback
26 Mapping Rural Entrepreneurship
29. from six rural roundtable meetings spon- status within the SBA is unclear. Funding
sored by the SBA in 2000. The roundtables for SBA programs that support disadvan-
and report revealed that rural communities taged (rural and urban) entrepreneurs is
face significant barriers in accessing SBA tenuous. Quoting the Administration’s 2003
programs. Specifically, there has been a budget rationale, “economically distressed
decline in SBA guaranteed rural lending and communities and individuals have access to
a lack of outreach by SBA programs such as a wide range of private for-profit and non-
the 504 and SBDCs to rural entrepreneurs. profit microenterprise organizations includ-
Participants in the rural roundtables cited ing federally supported CDFIs, which calls
the high cost of fees, lower guaranty levels, into question the necessity for separate SBA
centralization of servicing, lack of decision- programs.” SBA Microloan and PRIME pro-
making authority at the local level, high lev- grams, the only two supporting microenter-
els of paperwork, and difficulties obtaining prise development, are consistently under-
technical assistance as key reasons for inade- funded.
quate rural deal flow.27
• Other federal programs include the CDFI
Fund of the U.S. Department of Treasury,
Also of concern are the attempts by the cur-
which provides capital to community devel-
rent administration to cut SBA programs,
opment financial institutions (CDFIs) in dis-
particularly those that serve low-income
tressed areas and could potentially be a valu-
entrepreneurs such as the PRIME,
able source of funding for organizations that
Microloan, and New Markets Venture
promote and support rural entrepreneurship.
Capital Programs. Moreover, the SBA’s rural
However, in 2002, only 11 percent of these
initiative, created during the Clinton admin-
awards went to rural America, reflecting the
istration in response to the findings of the
relative lack of eligible rural CDFIs.
Rural Roundtable, has been stalled and its
According to NADO, the majority of rural
W.K. Kellogg Foundation • Corporation For Enterprise Development 27
30. and small metropolitan regional development initiative, charged with ensuring that all HHS
organizations are ineligible for CDFI certifica- programs and policies meet the needs of
tion and support due to their quasi-govern- HHS’s rural constituents.
mental status.28 Other agencies, such as the
Economic Development Administration and Although there have been significant shifts in
ARC have for years funded local and regional federal policy in recent years, the major focus
intermediaries (Economic Development remains on farming and on physical infrastruc-
Districts and Local Development Districts) ture investment. Rural entrepreneurship devel-
that support local economic development opment is still a new concept to many local,
across rural America. state, and federal policymakers. While, there is
no shortage of government programs that, in
In recent years, efforts have been made to various ways, provide some sort of small busi-
enable some of these regional development ness support, there is much that can be done to
organizations to play greater and more effec- increase the effectiveness and outreach of fed-
tive roles in entrepreneurship and business eral entrepreneurship programs in rural areas.
development. ARC’s Entrepreneurship Findings from the ARC initiative reveal that
Initiative is an example of a focused public effective rural entrepreneurship development
sector effort to promote entrepreneurial edu- policy needs to be brought to scale, sustained
cation and training, entrepreneurial net- over time, focused on enhancing the capacity
works and clusters, technology transfer, of local and regional intermediary institutions,
access to capital and financial assistance, and valued as a legitimate economic develop-
and technical and managerial assistance to ment strategy.
rural entrepreneurs. Through September
2001, ARC’s Entrepreneurship Initiative had
funded 237 projects, providing a total of State Policy
more than $20.1 million of support and
According to a 1999 report by the Kaufman
leveraging an additional $19.3 million.
Center for Entrepreneurship Leadership
Ninety-one projects had been completed,
(KCEL), State Entrepreneurship Policy and
creating 389 new businesses and retaining
Programs, state commitment in support of
1,283 jobs. One hundred forty-six ongoing
entrepreneurs is mixed. The report notes that,
programs were projected to create 859 new
“while state funding for entrepreneurship
businesses and create or retain 2,726 jobs.29
development lags behind other economic
The initiative, although clearly successful,
development activities, many states have creat-
has been constrained by the continuing lack
ed programs or adopted policies that have a
of local institutional capacity in rural
positive impact on entrepreneurs.”30 Some
Appalachia to support entrepreneurs.
states are intentionally providing direct or indi-
rect financing, promoting entrepreneurship
The Department of Health and Human
support services, and providing tax incentives
Services (HHS) also offers programs and
to emerging entrepreneurs, while other states
funding that support entrepreneurship devel-
are focused primarily on business recruitment,
opment in rural communities, such as the Job
which translates into resources for marketing
Opportunities for Low-Income Individuals
and incentives and continued expenditures on
Program, Office of Refugee Resettlement
basic physical infrastructure. In addition, many
Microenterprise Development Project, Asset
states lack a vehicle for entrepreneurs and
for Independence Demonstration Program
entrepreneurship development organizations to
and Community Services Block Grant fund-
network, share best practices, build new skills
ing. HHS also recently launched a new rural
28 Mapping Rural Entrepreneurship
31. ings from the USDA Economic Research
Service’s Rural Manufacturing Survey reveal
that state business assistance programs benefit-
ed three fifths of rural manufacturing establish-
ments. The national research notes, however,
that only a “modest” amount of state business
development services are targeted to small
manufacturing establishments in non-metro
distressed areas as compared to their larger
urban counterparts. To encourage states to
increase their funding for [rural] entrepreneur-
ial friendly policies and programs, a variety of
foundations and state policy stakeholders have
sponsored state entrepreneurship policy and
research initiatives:
and competencies, or pursue an agenda of poli- • NGA convened two State Entrepreneurship
cy advocacy. Overall, findings from the Policy Academies in 2000 and 2001 to
Kaufman study revealed that state entrepre- assist nine state economic development
neurship programs: teams (Idaho, Illinois, Maryland, Michigan,
Mississippi, Nevada, Utah, Washington, and
• Do not generally focus on the needs of
Wyoming). These teams learned about the
entrepreneurs during the start-up stage.
role that entrepreneurship plays in state eco-
• Provide debt, either through direct loans or nomic competitiveness and about develop-
loan guarantee programs, rather than equity ing strategic and implementation plans to
capital. promote a positive state entrepreneurial cli-
mate. The initiative provided state economic
• Support entrepreneurship education at the
development officials with exposure to the
post-secondary, rather than early education
leading thinking on entrepreneurship devel-
level.
opment strategies and individualized techni-
• Promote linkages to innovation and research cal assistance in the development of an
primarily through universities. implementation plan.
While these elements of support are important, While state budget crises retarded much of
they do not make up a comprehensive “pack- the potential impact of the academies, there
age” of services for emerging or established were some notable successes. Michigan
entrepreneurs. Yet, researchers and advocates integrated entrepreneurship development
agree that state support is critical to the success into the formal mission of the state eco-
of entrepreneurship development programs. A nomic development administration. Nevada
recent three-state study of Maine, Nevada, and linked networks of angel investors and
Pennsylvania by the National Commission on technology centers into formal economic
Entrepreneurship and ACCRA’s Center for development planning activities and inte-
Regional Competitiveness found that state grated entrepreneurship education into the
funding represents an important revenue state’s economic education standards.
source (between 37-42 percent of a program’s Washington is developing a statewide
budget) for entrepreneurship development entrepreneurship assistance portal managed
organizations in these states. In addition, find- by the governor’s office to serve as a central
W.K. Kellogg Foundation • Corporation For Enterprise Development 29
32. clearinghouse for all organizations serving – Missouri: The state team is building a
entrepreneurs. more focused and integrated support
system for Missouri’s small businesses
NGA’s Center for Best Practices is develop- and has launched an initiative to pro-
ing a Governor’s Guide to Entrepreneurial mote core skill development for recipi-
Policies and Programs drawing from the ents of public assistance.
findings of the research and the policy – Texas: Higher education institutions
academies. and nonprofit organizations are leading
• Rural Entrepreneurship Initiative was an effort to implement a statewide com-
launched in 1999 with support from the munity-focused entrepreneurial support
Ewing Marion Kauffman Foundation, system.
Partners for Rural America, the National – West Virginia: A public-private partner-
Rural Development Partnership, and the ship is working to develop a statewide
Nebraska Community Foundation. The ini- intermediary organization to build
tiative assisted six state teams (Colorado, entrepreneurial capacity and programs
Maine, Minnesota, Missouri, Texas, and among non-governmental organiza-
West Virginia) in enhancing their climate for tions, and promoting demonstration
entrepreneurship development in rural areas projects such as the Entrepreneurial
and was designed to provide a national League System and the Virtual
learning forum on rural entrepreneurship. Entrepreneur Network.
The state teams received guidance and cus-
tomized technical assistance in assessing Of the six states, only Colorado failed to
their state entrepreneurship climate and make progress. There, the rural develop-
developing a strategy and action plan for ment council folded due to federal and
implementing policies and programs that state budget cuts. The state’s SDBC system
benefit rural entrepreneurs: also has been defunded. Results of the ini-
– Maine: The Rural Development Council tiative thus far suggest that those efforts
launched a “prototype” rural entrepre- rooted outside state government have
neurial community and completed a proved to be the most robust and consis-
study on the needs of rural entrepre- tent over time. As Don Macke observed,
neurs in the state. The project grew into “While state governments tend to think in
a collaboration with the Ewing Marion terms of programs, comprehensive state
Kauffman Foundation and the Maine entrepreneurship policy development can-
governor’s office to develop a compre- not be a programmatic approach and the
hensive statewide entrepreneurship role of nonprofit organizations is crucial to
development plan. its success.”31
– Minnesota: Practitioners have expanded
the Minnesota Virtual Entrepreneurship
Network, linking entrepreneurs
throughout the state to resources, mar-
kets, and support services. A number of
other states, including North Dakota
and Nebraska have or are in the process
of adopting this approach.
30 Mapping Rural Entrepreneurship
33. The Components of
Entrepreneurship Development
The starting point for gathering information on cations were reviewed and 60 experts and prac-
entrepreneurship development efforts across titioners were interviewed. The result is not a
rural America was a framework developed by comprehensive directory of national, regional,
CFED for the Winthrop Rockefeller Foundation and local programs and initiatives, but a cross-
and published early in 2003.33 This framework section of efforts that currently have or poten-
has two main parts: creating a pipeline of entre- tially have a significant impact on stimulating
preneurs and enhancing business services for entrepreneurship in rural America in each of
entrepreneurs. The pipeline notion was that these four components.
“there should be an infrastructure of lifelong
learning from elementary school to the golden Entrepreneurship Education
age, based on the simple principle that it is
never too early or too late to be an entrepre- For the past two years, ARC in partnership
neur…The aim is to create a large and diverse with the U.S. Department of Education has
pool of people, across a spectrum of entrepre- held an awards competition – the Springboard
neurial motivations, out of which there will Awards – to recognize outstanding youth entre-
flow a steady stream of high achievers with an preneurship education programs targeted at
interest in creating jobs and wealth in their rural communities across the region. ARC’s
communities.”34 With business services, “the Federal Co-Chair, Ann Pope, captured the
aim is to “graduate” significant numbers of essence of this component when she com-
start-up enterprises into companies and organi- mended the 2003 winners, “The educators
zations that will provide quality jobs…”34 receiving this award are inspiring Appalachian
youth to reach as far as their imagination and
The key components of the pipeline are entre- energy can take them…By giving our young
preneurship education and entrepreneur net- people the confidence and know-how to initi-
works; for business services, the components ate their own business ventures, they are help-
are training and technical assistance and access ing to prepare the region for the challenges of
to capital. For this assessment, some 65 publi- the 21st century.”35
W.K. Kellogg Foundation • Corporation For Enterprise Development 31
34. The Consortium for Entrepreneurship target markets. Still others choose to provide
Education (CEE), an association of entrepre- broad support and development of tools for
neurship educators and advocates, reports that young entrepreneurs of all ages.
entrepreneurship education is becoming a prior-
ity within all systems of education beginning in
kindergarten and continuing through college as Elementary Through High School
well as for adults in continuing education and The following is a selection of efforts currently
entrepreneurship training programs. CEE has underway in the mainstream education systems
developed an on-line guide, with support from and through special initiatives.
ARC, which highlights model entrepreneurial
education initiatives and provides a clearing- • Public schools and vocational education
house of information on entrepreneurship edu- tracks traditionally have been closely linked
cation resources. This year in Seattle, CEE will to vocational education the majority of
sponsor its 21st annual Entrepreneurship entrepreneurship efforts within the public
Education Forum, bringing together hundreds school systems.38 The vocational tracks and
of practitioners from across the country.36 their corresponding associations such as
Distributive Education Clubs of America
In the mid-1990s, the Ewing Marion Kauffman (DECA) – an association of marketing stu-
Foundation commissioned Gallup to survey dents, Future Farmers of America (FFA),
youth on knowledge of and attitudes towards Business Professionals of America (BPA),
entrepreneurship and small business. One sig- Future Business Leaders of America (FBLA),
nificant finding was that 65 percent of youth and Family, Career, and Community Leaders
surveyed expressed interest in starting their of America (FCCLA) see entrepreneurship
own business. Walstead and Kourilsky noted, as a career opportunity for students who
“This interest in entrepreneurship is an may not go on to college. Neither the
untapped reservoir with the potential to direct- Department of Education nor these associa-
ly affect standards of living and the economy. If tions track penetration of their programs
just a third of the youth who expressed an into rural schools or encourage state depart-
interest in starting a business actually acted on ments of education or state affiliates to
their aspirations at some point over their life- reach out to rural students. That said, it was
times, such initiative could significantly reported that the education departments in
increase new business formation in the United Nebraska and New Mexico have model
States.”37 efforts underway.39
• Junior Achievement is distinguished by its
Additionally, recent conferences on rural devel- program design that links real world entre-
opment and interviews with rural economic preneurs with students and its strong part-
development leaders underline the importance nership with classroom instruction. Junior
of entrepreneurship and youth development in Achievement programs are offered in 120
any rural economic development strategy as a countries, all 50 states and reach 4 million
means to population retention, leadership U.S. high school and 2.8 million U.S. ele-
development, and economic growth. In mentary school students. Currently, Junior
response, an increasing number of programs, Achievement does not track its outreach into
both in-school and after school, are providing rural areas or gather demographic data from
entrepreneurship education to rural youth. individual students. There is no focused
Some programs cast a wide net and have small- effort at the national level to promote out-
er impact on a greater number of students, reach into rural communities, although there
while others focus more in-depth programs on
32 Mapping Rural Entrepreneurship
35. are efforts to develop a distance learning ini- active state organizations (Alabama, Georgia,
tiative for hard-to-reach areas. Examples of Mississippi, North Carolina, Upper Peninsula
model programs include Ft. Wayne, Indiana Michigan, Vermont, Virginia, Washington,
and Pueblo Colorado Springs.40 and West Virginia) and the curriculum is
being offered in over 20 additional states
• National Council for Economic Education
nationwide. There has been little sustained
(NCEE) offers Economics America, a class-
evaluation of REAL programming due to
room and standards-based curriculum,
lack of funding. The best example of a
which is focused on economics education,
statewide commitment to REAL is North
with entrepreneurship as one part of the
Carolina where REAL programming is repre-
broader curriculum. NCEE courses are inte-
sented in 84 out of 100 counties in the state.
grated into K-12 classroom curricula. NCEE
does not track its outreach into rural com- • National Foundation for Teaching
munities. Examples of model states include Entrepreneurship (NFTE) aims to teach
Virginia, Indiana, Illinois, and Washington.41 entrepreneurship to low-income youth (ages
11-18). Historically much of its work has
• Rural Entrepreneurship through Action been targeted to inner-city youth and has
Learning (REAL) Enterprise program began not had any targeted rural focus. Since 1987
in 1990 and was originally designed for NFTE has trained 1,200 teachers and more
school students in rural communities. than 30,000 youth in 43 states and 14 coun-
Whereas REAL Enterprises offers a full range tries. The most recent analysis of programs
of entrepreneurship development products found that NFTE graduates had improved
and teacher training services across the communications skills, increased interest in
country, it is the only national program starting a business, and started a business at
specifically developed for and targeted to a much higher rates than non-NFTE students.
rural target market. REAL currently has nine NFTE’s internet-based learning program,
W.K. Kellogg Foundation • Corporation For Enterprise Development 33