Minnesota's entrepreneurial spirit?
Posted at 12:08 PM on June 24, 2010
by Paul Tosto
(3 Comments)
Filed under: Jobs & unemployment
When Minnesota ends up near the bottom of a list, a few clicks from Mississippi, we should take note.
That's where the state finds itself in a new index of entrepreneurial activity produced by the Kauffman Foundation.
There are limitations to the data, no doubt.
Still, the report opens the door to what could be a good conversation: Is the Great Recession generating new entrepreneurs and self-employed careers?
Post something below or share a story here about what you're seeing.
We'll also get some good data in a few weeks when the Federal Reserve Bank of Minneapolis releases its survey and research on small businesses start-ups in the Upper Midwest during the recession.
For now, though, two questions. 1.) How's the recession affecting entrepreneurial activity and 2.) Why isn't Minnesota more entrepreneurial?
In decades past, this question would have been a joke. This is the region that helped create the medical device industry, develop super computers and other cool stuff. But, arguably, we're in kind of a rut and the debate seems to be stuck in a political battle over taxes.
In the Kauffman report, the states with the lowest rates of entrepreneurial activity were Mississippi, Nebraska, Pennsylvania, Alabama and Minnesota, which showed a rate of 220 new business owners per 100,000 adult population in 2009. (Check the bottom of the post for Kauffman's methodology.)
Generally, the Midwest states track lower. The main reason is that there is less population and economic growth in the Midwest, says Rob Fairlie, the study's author. "Areas that are faster growing with lots of construction typically have a lot of new businesses. Construction has the highest rate of business creation of all major industries."
Here's a map of of the Kauffman index. Oklahoma and Montana were tops with 470 new business owners per 100,000.
We speculated last year that the recession was spawning entrepreneurs.
We've profiled a Mankato entrepreneur with a business creating clothing from bamboo fibers.
We've also worried aloud about Minnesota's ability to keep its best and brightest in-state.
Together, the work we've done created more questions for us than answers on recession, entrepreneurs and Minnesota, which is why we need your help.
Please add to the discussion. Tell us your experiences being self-employed or starting a business in the recession.
We plan to talk in-depth with Fairlie, the Kauffman author. We'll add your stories, his comments and new data to future posts and we'll all get smarter about what's happening.
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Here's the boilerplate on how Kauffman creates the index: The index seeks to measure the "the rate of business creation at the individual owner level."
Presenting the percentage of the adult, non-businessowner population that starts a business each month, the Kauffman Index captures all new business owners, including those who own incorporated or unincorporated businesses, and those who are employers or non-employers.The Kauffman Index is calculated from matched data from the Current Population Survey (CPS), a monthly survey conducted by the U.S. Bureau of the Census and the Bureau of Labor Statistics.
Comments (3)
This is a great question, Paul. I hope you get some input from people with various points of view.
As a U faculty member with some experience at 3M here are my thoughts. Most of my students have gone to work in industry and I try to inculcate them with a little bit of the industrial way of doing research.
I think that a large part of the barrier to new entrepreneurs is the huge amount of money and fancy equipment they think they need to get started. Also the search for venture capital. This mindset has, unfortunately been inculcated by some of the folks at the U of M who are trying - in good faith - to encourage new businesses.
There are more businesses than high tech! Even our vaunted computer businesses started in somebody's garage. The mantra at 3M used to be "make a little, sell a little." Many very entrepreneurial folks left 3M to go out on their own, either full or part time. I've consulted - gratis - for a couple of small would be start ups and tried to give them some advice about how to do things on a shoestring.
In summary: Not all new small businesses have to be high tech. Let's not forget this.
Bill, thanks. I agree re: entrepreneurs and high tech.
I can't help but think about April Femrite, the Mankato woman with the bamboo fiber clothing business. Seems like she's received more attention nationally than she has in Minnesota.
What happens to th rankings if you take construction out of the index?
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