Having had the opportunity this week to fully digest the “Growing State Economies” report which sets out the priorities for such a strategy, it was heartening to note that the message was clear to those involved in economic development at a state level that they should stop competing against each other to attract investment from larger companies and move towards a more bottom-up approach to start and develop their own local businesses.
This is not going to be easy.
Data shows that individual states are, on average, still looking to spend twenty seven per cent more next year on strategic business attraction. And this is despite statistics that demonstrate that only two per cent of annual job gains across the individual states can be attributed to business relocations. Fortunately, for those keen to promote entrepreneurship at a local level in the USA, the message is slowly getting through to politicians and policymakers.
Indeed, the evidence suggests that in addition to attracting firms to a region, there is also an increasing focus by state policymakers on launching new companies and supporting existing businesses, with a growing appreciation that helping entrepreneurs start, grow, and renew businesses is one of the most important things a state or regional government can do to create jobs and raise living standards. In fact, funds for entrepreneurial development programmes by individual states will have grown by almost thirty per cent between 2012 and 2013 and, in the last year alone, over a third of US governors have introduced legislation or started specific programmes that are focused on boosting the numbers of startup companies.
So are there other lessons from the report for regional governments on this side of the Atlantic?
Are there key questions that need to be asked in relation to developing a clear policy agenda towards creating an entrepreneurially led economic recovery?
First of all, policymakers need to ask themselves whether their resources and attention are focused towards bringing in firms from elsewhere or towards growing their own entrepreneurs? Of course, this is a debate that has been going on for at least twenty years in Wales and yet we are no closer to the answer when it comes understanding the priorities of our Government.
For example, has the new office recently opened in London been established as a location to attract in new investment into Wales or as a place where Welsh firms can link in with potential clients based in one of the most prosperous and dynamic cities in the World?
Secondly, do policymakers have an agreed view of what they define as entrepreneurship and, more importantly, do they distinguish between the various types of entrepreneurs that can contribute to the economy? It is generally recognised that working with startups, where the focus is on developing products and finding customers, is very different to working with growing firms that struggle with quite different issues such as such as strategic planning, market diversification, and operational efficiencies. Yet, there is generally a lack of appreciation by policymakers of the different needs of business as they grow and develop with a more generalised approach to business support being the norm.
Thirdly, do politicians and their civil servants make use of insights gained directly from entrepreneurs and those who work with them? This is the one area in which it could be argued that Wales has made great strides recently with the creation of various industry panels to advise the Minister on key sectoral developments, as well as specific groups to develop policies in areas such as microbusinesses, business rates and city regions. Yet whilst such strategies are important, the real value is when they are put into action and that, as policymakers in the US have discovered, is not as simple as it sounds given that the imperatives of entrepreneurs may be in contrast to those of government officials.
Finally, do all the economic initiatives developed to support entrepreneurs take advantage of the complementarities between policies? This is a particular challenge for Wales where, historically, we have seen a very tribal approach to economic and business development, driven by a silo mentality where individuals “protect their patch” in terms of policy developments.
For example, we have a range of different programmes to support innovative businesses across Wales and to link them into the university sector. Yet, there seems to be little co-ordination between these programmes, resulting in the unacceptable situation where organisations are competing with each other for clients using the same pot of public funding.
Therefore, as the report from the governors of the different American states has shown, there are key challenges in developing a coherent policy framework to support entrepreneurship. One can only hope that regional governments in the UK, and indeed Europe, are up to this challenge in creating a more enterprise focused approached to economic development.