Entrepreneurship Conversation Leads to High Impact Recommendations

By Garry Powers

Director of Economic Development Initiatives
CTC Public Benefit Corporation

New Carolina’s High Impact Entrepreneurship conference was held on April 7.  About 125 participants from both urban and rural counties throughout the state met to have a conversation on how we can work together to build a stronger base of homegrown firms.

Our goals for the conference were to:

• Learn more about the types of homegrown firms that are creating most of the jobs and wealth in the state.
• Understand the factors that can help high impact firms expand in our state.
• Obtain information about the entrepreneurship strategies that work in other regions of the country.
• Discuss some specific steps that we can take in South Carolina to promote high impact entrepreneurship.

1. Who is Creating Jobs?
Research presented by USC professor Dr. Doug Woodward indicated that:

• Small businesses with fewer than 20 employees are creating a disproportionately large share of South Carolina’s jobs.
• In any four-year period during the last 10 years, 2.5 percent of all South Carolina-based “high impact” firms created almost all of the net new jobs in the state.
• “High impact” firms are spread across industry sectors. 
• High-impact firms are highly urban. 
• About half are in traded sectors of the economy. 
• South Carolina is not growing as many small firms into big firms as our neighboring states.

2. What are the Needs of High Impact Companies?
Based on interviews with South Carolina’s high growth firms and economic developers in the state, six of the most critical constraints to growth fall into the following categories:

•  Lack of Access to Affordable Financing
• Lack of High-level Management Talent 
• High Business-related Taxes in Some Areas 
• Need for more Collaboration Related to Innovation 
• A Less than Robust Entrepreneurial Culture 
• Difficulties in Attracting and Retaining High-level Professional and Technical Workers.

3. What Strategies Work in Other Regions?
Kurt Dassell with the Monitor Group, a global economic development consulting firm, indicated that many regions have difficulties implementing entrepreneurship strategies because: (1) they try and fail to become the next Silicon Valley, and (2) they do not understand their particular region’s strengths and weaknesses and - consequently - they do not pursue solutions that are tailored to their regions.  He recommended that South Carolina should focus on a small number of initiatives designed to increase the base of management talent and to improve access to financing.  

4. What are the Next Steps?
In collaboration with the economic development community and the organizations that provide services to entrepreneurs, New Carolina has pledged to identify three or four recommendations on strategies that can help to build a stronger base of homegrown firms.   Stay tuned.  We are still digesting the information from the conference.  
There was one clear message from conference participants, though.  They identified a strong need for a highly visible statewide “portal” that is recognized as the one place that entrepreneurs and service providers can go to find resources and information.  That is an idea that will be explored further.

5. One Other Success Story
During the conference, representatives from the organizations that currently operate or plan to open an incubator met to form the South Carolina Incubator Association.  Thanks to Joel Stevenson, the Executive Director of the USC/Columbia Technology Incubator, for taking the lead on this initiative. 

How do we gain more ground, faster

By C. Grant Jackson

Senior Vice President/Community Development
The Greater Columbia Chamber of Commerce and New Carolina Partner

Per Capita Income in South Carolina continues to head in the right direction. That was part of the story out of the data released late last month by the U.S. Bureau of Economic Analysis. Just not fast enough. That was the rest of the story hidden in the mass of BEA data.

South Carolina’s per capita income, a metric that has been tied to New Carolina since its beginning nearly 10 years ago as South Carolina’s Council on Competitiveness, is now $33,163. That compares to $26,132 in 2003 when Harvard professor Michael Porter came to South Carolina to present his economic analysis and recommended South Carolina form a public-private partnership to tackle a cluster strategy for moving the state’s economy forward. That led to New Carolina.

Since Porter’s study and the creation of New Carolina, per capita income has increased, just not enough and just not quickly enough. It has continued to hover around 81-82% of the national average – $33,163 is 81.7% of the current national average of $40,584. We also currently rank 45 in per capita income among the states. Those lower than us: Arkansas 46 at $33,150, West Virginia 47 at $32,641, Utah 48 at $32,595, Idaho 49 at $32,257, and (I won’t say it) Mississippi 50 at $31,186. By the way, we’ve actually ranked higher – in 2003 we were 42^nd at $33,041 and 83% of the national average of $31,632.

If you notice that 2003 national average is actually less than our state’s current per capita income. And that is the problem: as we gain ground, others are gaining a lot more. That is the real message: if we want South Carolina to break out of the 81-82% of the national average, we’ve got to find a way to grow quicker. 

We often quote Michael Porter as saying, “It’s a marathon, not a sprint.” But to win a marathon at some point you’ve got to run faster and overtake the other guy. So as New Carolina moves toward closing its first decade I’d like to start a race strategy conversation: how do we move up in the pack?

2010 Economic Outlook Conference, by guest blogger and New Carolina Intern, William Raffety

The 2010 Annual Economic Outlook Conference was a great success. Dr. Douglas Woodward, Dr. Joseph Von Nessen, and Zoltan J. Acs gave insightful presentations on the current status of the United States and South Carolinian economy, as well as predictions for this upcoming year and beyond. After giving an informative overview of the current fiscal and monetary policy, Dr. Woodward concluded that the United States will continue to slowly recover from the recession using both these policies as temporary crutches. However, he also reassured the conference that the fear of hyper-inflation is misguided and the long term cost of the bailouts is misinterpreted.

Relative to other historical United States recessions, the recent recession has seen a slow improvement in the recovering employment rates. The conference took an interesting approach to a possible solution to this problem: entrepreneurship and small businesses. A three member panel, consisting of Garry Powers, John Denise, and George Fletcher, discussed the issue of small businesses and the economic recovery in South Carolina. Zoltan J. Acs expanded on their thoughts by presenting on Entrepreneurship and “gazelle” firms. He believes these quickly growing firms are largely created by entrepreneurs fueled by innovation, improved efficiency, and re-allocated factors. In order to create these strong entrepreneurial firms, Mr. Acs suggested we focus on the 3 A’s: the attitude of the population, the activity of the entrepreneurs, and the aspirations of the few. With those ingredients, new companies can create jobs and opportunities while expanding and improving markets.

As I have learned while working with the New Carolina clusters, this entrepreneurial energy truly is the fuel for growth and expansion. However, it is not possible if the population, government, and markets do not support the proposed ideas. It is also not possible without setting long term goals. New Carolina’s clusters are working to do just that; focusing on possibilities and narrowing their vision to expanding firms’ strategies, creating a sustainable market for innovative ideas and investments, and setting achievable goals that will provide results and significant accomplishments.

The final consensus of the conference was that the economy will continue to recover at a steady, but slow, pace in 2011. Dr. Von Nessen predicted the state unemployment rate to decrease about 1.2% in 2011. If that rate remains constant, allowing for some fluctuation, it will take 3-6 years to get South Carolina back to normal rates. In my opinion, the short term key to increasing the rate of unemployment reduction is entrepreneurship and a focus on fast growing firms. I believe the recession brought out the flaws of some companies while highlighting efficient strategies of others. It also provided a sobering realization of corrections that need to be made in certain industries as well as the potential found in underrepresented, expanding industries. Now that the recession is over and recovery is under way, opportunities are opening up once again, and innovative ideas are being demanded. New Carolina’s cluster initiative is working to focus on these expanding industries and help their expansion while providing a catalyst for innovative ideas to branch out throughout an entire industry. By connecting ideas from growing firms to struggling firms, New Carolina is providing a support system that allows the state to grow as a whole without leaving certain distressed areas behind or underrepresented.

William Raffety
student, University of South Carolina Honors College
major, International Business and Economics

Dr. Patrick Moore

Dr. Patrick Moore was in the Upstate during the week beginning November 28.  Dr. Moore was one of the founders of Greenpeace, and is now a Co-Founded with former EPA Administrator and former Governor of New Jersey, Christie Todd Whitman.  Their organization is CASE, Clean and Safe Energy.  It is a nuclear power advocate.

Dr. Moore spoke to a group in the Fluor cafeteria in Greenville.  He said that nuclear power is the only safe and clean renewable that can provide carbonless baseload power for the next 1000 years.  Its safety record is unmatched in almost any industry.  He called solar power and wind power "pipe dreams."  Their intermittant nature and inherent cost will not make them competitive.  He said that future technologies for nuclear power will reduce the capital costs and the consume the waste in the reactor itself. 

Dr. Moore has recently written a book called "Confessions of a Greenpeace Dropout."  It can be pre-ordered on the website http://www.sensibleenvironmentalist.com/.

Liberty Fellows Summit

One of the most dynamic programs in SC is the Liberty Fellows.  Founded by Hayne Hipp, the Liberty Fellows take 20 to 25 of the best and brightest young South Carolinians (ages 30 to 45) each year, and put them through an intensive two year leadership program.  Partners include the Aspen Institute and Wofford College.  I am happy to say that Amy Love was selected for the Class of 2012, the 7th class of Fellows.

On November 30, the Liberty Fellows held their first summit.  It was in Columbia and 750 people attended.  The keynote speaker was Dan Heath, co-author of the book "Switch."  The book provides a method of implementing change.  After his lecture, each table of 10 was asked to apply the methodology to specific problems in one of four areas:  Economic Development, Health and Environment, Public Policy and Education. 

My table discussed Economic Development, and specific the structure for Economic Development in the State.  The major conclusion was that we need a Comprehensive Economic Development Strategy in SC.  Governor Haley talked about a 10 year plan during her campaign.  Milliken CEO Joe Salley (also a Liberty Fellow) has called for a comprehensive strategy. 

The Monitor Group in 2005 produced a document called "A Strategic Plan for South Carolina."  It was built around clusters and task forces.  The problem with the plan was that it did not recognize the major economic development effort in the state which has been and is recruiting new industry.  SC has been very good at this for a long time.  It also did not recognize the role of the other partners such as Regional Alliances, the Power Team, SCRA, technical colleges, public utilities, local economic developers and others.  It did, however, recognize that Education and Workforce, Research, Distressed Areas and Entrepreneurhsip should be included in such a plan.

I hope the Liberty Fellows and the new Governor will take the opportunity to organize a way to produce one overall long term comprehensive economic development strategy for the State.

SC Rural Development Council Strategic Plan

The Annual Meeting of the SC Rural Development Council was to identify elements of existing strategic plans that the group might wish to pursue.  An intern at Clemson reviewed plans from the I-95 Corridor Study, New Carolina, the Palmetto Institute, the Palmetto Agribusiness Council, the Forestry Commission, the McNulty Strategic Plan for Tourism and the I05 Rejuvenation Paper by SCRA.  Co-Chairs David Hughes and Vernita Dore believed that direction could be obtained from existing plans.  The group subsequently identified some 26 issues from the reports. 

After much discussion, the group identified two areas:  Entreprenuership and Education/Workforce.  Entrpeneurship would include a borad range of issues, including various funding models, public policy, renewable energy and entrepreneurship education.  Education and workforce will work with existing groups to identify problems and seek solutions for the lack of trained workforce in rural areas.

The Council recognized and thanked Walter Harris for his service as coordinator of the Rural Development Council.  Walter was retiring on November 23 after many years of service to Clemson and the State of SC.

Harvard Business School

On November 17, the project team for the EDA Cluster Mapping project assembled at the Harvard Business School.  The team members are Harvard's Institute for Strategy and Competitiveness (Michael Porter), MIT, Temple, the Monitor Group and the states of Massachusetts, Minnesota, Oregon and SC.  The meeting began with Michael Porter summarizing the last 10 years of his work with Regional Innovation Clusters.  He contends that the data is overwhelming that robust clusters are the best way to generate innovation and entreprenuership within regions.  The federal government has adopted his approach, and this $3.5 million grant will be the way to get those ideas into the mainstream of economic development thinking. 

We also had a presentation from the MIT Entrepreneurship Center.  This organization spits out 200 to 400 technology companies a year.  Their ways of identifying technologies arfe fairly unique, and I will try to get the Head, Bill Aulet, to come as a speaker for our High Impact Entreprenuership Conference on April 7th, 2011