Original published on Linked In January 19, 2016
Babson College is an acknowledged leader in entrepreneurship education. What is less well known is that Babson, for example via the Babson Entrepreneurship Ecosystem Project (BEEP), has been innovating the use of entrepreneurship for economic development, but with a twist: Rather than increasing the growth of new firms, BEEP has been focusing on increasing new growth in firms, new and existing. The results of several years of work in Manizales-Mas and Scale Up Milwaukee have been very encouraging.
The background. Until recently, regional strategies for economic development have included encouraging direct investment, attracting new business and retaining existing business. Last week’s headlines of General Electric’s move to Boston are testimony to the fact that these strategies are alive and well [AND EXPENSIVE. See Richard Florida’s piece here]. More recently the role of entrepreneurship has been added to the policy tool kit, with policy makers and civic leaders extrapolating from reports that startups create a lot of new jobs to launch literally hundreds of startup encouragement programs (e.g. Startup America and Startup Chile). The rapid rise of the entrepreneurship ecosystem metaphor, for which I am partly responsible, (see HBR, Forbes, OECD), has further fueled the belief that not only are startups important for economic development, but they can and should be systematically encouraged and supported.
The problem. Surprisingly, given the public visibility of the startup movements (see Startup Nations) the leap from “startups create jobs” to “let’s create more startups” is more of an abyss than terra firma. First, very few startups create jobs, the jobs tend to be of lower quality and disappear steadily after the first year, and many of the jobs “created” in local startups come at the expense of jobs lost elsewhere in the region.
Second, there is little evidence that increasing the numbers of startups stimulates job creation or any other indices of economic growth. To the contrary, the return on investment in startup encouragement, when measurable, is not strong (e.g. Startup New York; Startup Chile). There is evidence that startup activity in a country or state is negatively correlated with firm survival, negatively correlated with national competitiveness, and negatively correlated with the proximity of mid-market firms. Startup policy makers are beginning to feel frustrated.
Fostering higher growth firms. BEEP’s premise is that regional prosperity is fostered when a critical mass of indigenous local companies grow more and more rapidly, and that an ecosystem (in the broader sense) aligned with this objective can accelerate reaching this tipping point. The modus operandi of BEEP has been to demonstrate how this can happen in specific regions. To this end, BEEP has developed concepts and methodologies to stimulate a broad range of ecosystem actors to recognize and support new growth, each in ways which are specific to those stakeholders, and each of which addresses those stakeholders’ idiosyncratic needs.
Learning the lessons of growth. BEEP’s mission is to go beyond demonstrating that good ideas and good methods work. BEEP is further committed to codifying those methods and then disseminating them to regional leaders in the most practical way possible. To this end in 2014 we launched a three-day intensive program, Driving Economic Growth through Entrepreneurship Ecosystems (#DEGBabson), published a series of detailed practical cases from around the world, and recruited a world class faculty team of practitioners to help teach (e.g. Sherry Coutu, Anders Hoffman, Bill Kerr). After two cohorts from over a dozen countries, we are getting ready to launch #DEGBabson number three, from February 29-March 2. If you are a practitioner, policy maker or doer, or civic leader who is interested in driving your region’s economic prosperity, we invite you to join us in this important event.
We use the term “region” specifically to refer to a populated area including and adjacent to an urban center of at least 250,000 people within which it is reasonable to assume there are relatively unrestricted flows of goods, services and labor.