The Role of Community in Fostering Entrepreneurship By John C. Allen, Director Western Rural Development Center Utah State University for
The WRDC 2005 Spring Symposium
“Energizing Communities Through Entrepreneurism” March 30, 2005
PRESENTATION OVERVIEW: 1. Research Questions • What role does the community play in fostering entrepreneurial behavior? • Does community structure influence the number of new jobs and businesses? 2. Findings 3. Relevance to Community Leaders
Theory has lagged development and implementation of local programs providing technical assistance to entrepreneurs.
Limited work on the role of community.
Involvement in the effort by local organizations
Substantial investment of local resources
Local control of the resulting enterprises
The 5 Recognized Strategies of Economic Development 1. 2. 3. 4. 5.
Entrepreneurship Business Retention and Expansion Industrial Recruitment Workforce Development Tourism
Entrepreneurship – an economic development strategy embraced within broader concept of community development Community development – “….group of people in a locality initiating a social process (i.e., planned intervention) to change their economic, cultural, and/or environmental situation.” Development in the community vs. development of the community
Community Interaction Field Theory
Community field – a dynamic social field with actors, associations and activities that constantly change the structure yet maintain the identity of the community. The structure of the field is strengthened through linking and coordinating locality oriented actions that serve public rather than private interests.
Community development – purposive efforts to build the generalized structure that characterizes a community field.
Community structure building is facilitated by leaders who set aside their own interests and focus on achieving the interest of the larger community and improving the capacity of the community to address its problems. Unfortunately, rural communities lack resources needed to initiate and maintain sustained development. An effective strategy must consider the constraints to development and the need to access resources available externally while building on local resources and advantages.
EDGE Enhancing, Developing, and Growing Entrepreneurs
Nebraska rural entrepreneurial training program Hosted by local communities, organizations and associations Develops community capacity and grounded business skills Center for Applied Rural Innovation at the University of Nebraska-Lincoln provides administrative support and matching funds.
EDGE Program Principles Program structure places group of interested citizens representing cross section of the community as advocates. A local coalition is organized to host the program. Coalition roles:
Promote program and recruit participants Raise funds to match state grant and hire instructor Provide guidance to state administrator on needed curriculum development
Program does not simply focus on transfer of knowledge and technology. It is a community program that builds local capacity to address problems including mobilization of local resources around entrepreneurial efforts.
EDGE Program Objectives 1.
3. 4. 5.
Help entrepreneurs create and evaluate their business ideas through the use of instructional materials. Assist new and current small business owners to develop and implement their business plans and to plan for business growth and expansion. Provide program participants with follow-up support from their local community. Create and retain jobs through the start-up and expansion of small business. Facilitate community capacity building around entrepreneurial endeavors.
EDGE: A different outreach program EDGE is initiated in a community differently than many other outreach programs.
Many programs are “marketed” to individuals
EDGE requires the community request to be a partner
Building community capacity through facilitating new structural arrangements Increased entrepreneurial activity within the community and region The definition of entrepreneurial activity is expanded to include :
Civic entrepreneurship Social entrepreneurship Both enhance a community’s capacity to respond to change.
First Research Question:
What role does community play?
Approach – To examine the degree to which the theory behind EDGE actually is supported by the action and accomplishments of participating communities, we are conducting in-depth research in a sample of the program communities.
First stage, reported today, involved in-depth interviews with local program leaders and knowledgeables to obtain their insight and assessment on the program history, organization, funding, leadership, successes, and failures.
Eight communities selected, based on:
Geographic dispersion across the state Variation in community size but with a focus on rural/small city Differences in perceived success of the programs Differences in organizational principles
Key informants in each community were selected for interviewing. The number varied by community from two through five, depending on how many had been heavily involved in the program. Altogether, 25 program leaders were interviewed.
RESEARCH METHODS Programs were classified as to their level of success.
Most successful – have held at least five classes, have a supportive and involved coalition, and have strong program leadership. Moderately successful – have held fewer classes and have deficiencies in coalition involvement and support and/or program leadership. Least successful – have held no more than two classes, have serious deficiencies in coalition involvement and support and/or program leadership, and have ceased to function.
Action Model Verification Wilkinson outlined five phases that arise in response to specific action problems in the action course:
Initiation and spread of interest (issue of awareness) Organization of sponsorship (issue of organization) Goal setting and strategy formulation (issue of decisionmaking) Recruitment (issue of resource mobilization) Implementation (issue of resource application)
Awareness and Interest
Research has shown that awareness of an innovation and acting upon that interest are conceptually and empirically distinct. The motivation to act does not necessarily follow awareness of a problem and a solution to the problem. Therefore our model of community action for the EDGE program separates awareness and interest into their own distinct phases.
Awareness addresses the issue of knowledge of the problem and that there is a solution to the problem. All respondents in the eight communities recognized some degree of economic problems their communities were suffering, especially in relation to being located in a rural or remote setting. They also perceived EDGE as having the potential to stimulate economic activity and thereby generate jobs and income.
Awareness and Interest
Interest addresses the issue of motivation to act upon the problem after awareness of the problem and a potential solution occurs. Although there was broad dissemination of information on EDGE through the extension system, a comparatively small number of communities in relation to the total number in the state actually became interested in and implemented the program.
The distinction between awareness and interest is demonstrated by two communities, one moderately successful and one least successful, which seemed to be building strong programs. When the founding coordinator in one and the founding lead organization representative in the other left the program, their replacements gave lower priority to EDGE and the programs suffered.
Organization addresses the issue of establishing the social structure for implementing the program. EDGE structure consists of two critical elements: 1.
A program coordinator to insure sufficient human resources for organizing and implementing the program. A broad-based coalition of local leaders and other interested individuals.
ORGANIZATION: Coordinator Attributes of position contributing to program success and longevity:
Committed and locally situated leadership Sufficient time and resources
ORGANIZATION: Coalition Attributes contributing to program success and longevity:
Large (25-30 members) Broad based representation “Macroentrepreneurs” Empowered
COALITIONS The most successful coalitions:
INITIATION addresses the issue of resource mobilization
Funding for the program comes from state grant, student tuition, coalition member contributions, and lead organization contributions. Large, committed coalition with rotating members helps sustain funding.
IMPLEMENTATION addresses the issue of resource application
This includes hiring the instructor, recruiting students, and teaching the classes.
Important instructor characteristics include academic credentials for teaching but also personal experience in operating a business or at least working in the business world. Coalition involvement is important in student recruitment. Local media representation on the coalition is important in student recruitment.
CONFIRMATION addresses the issue of institutionalization of the program in the local community
EDGE program communities decide on an annual basis whether or not to continue the program based on formal evaluations conducted with the participants, perceptions of impacts on the community, and availability of resources. Successful programs had initial successes sufficiently impressive to institutionalize the programs. Even with initial success, disenfranchisement can occur if coalition members do not perceive beneficial impacts for their organizations or the community.
SUCCESSION addresses the issue of program continuity This must be addressed when there is a loss or change in a local program’s leadership, such as the departure of the coordinator or the lead organization’s representatives. Programs need to establish some mechanism for continuity in leadership. In programs where the key leader has left, program activities have diminished and in some cases ceased completely.
SUMMARY of 1st Question: Structural elements critical for a successful program:
A locally based leader who believes in the program, understands the community, and has sufficient time and commitment to devote to the effort. An actively participating, empowered and contribution coalition with members of broad community representation who believe in and support the program.
SUMMARY of 1st Question (cont): Additional important structural elements that are more easily achieved if the above two elements are in place: 1.
A local funding base with broad community support.
A hired coordinator with commitment to the program and sufficient time and financial resources to carry out the task.
A committed instructor with experience in operating a business as well as academic business teaching credentials.
A plan for continuity should the coordinator leave the program.
Second Research Question: Does community structure influence the number of new jobs and businesses?
A Quantitative Look at Jobs and Businesses Created In-depth interviews used to identify macroentrepreneurs. Community selection was based on: 1. 2. 3.
geographic dispersion variation in community size differences in perceived success of entrepreneurial support
Mail Survey of Macroentrepreneurs
231 macro entrepreneurs identified in seven communities
125 completed surveys
Response rate =55%
State support activity Coordinator involvement Macroentrepreneurs
perceived jobs created and businesses started or expanded.
Trusted in the community? Community organization participation?
Represent diversity of community? Level of involvement of the community coalition.?
the availability of workers? the availability of skilled workers? job training for workers?
Community Generalizing Structure
Recognition of business scales Community support of risk taking Community variables of friendliness, tolerance and openminded?
FINDINGS Statistical analysis found: Associational structure of community is important in enhancing job creation and new business development. Coalition diversity were important variables in explaining increased job creation and business expansion Macroentrepreneurs play an important role in facilitating entrepreneurial activity at the community level.
What relevance is there to entrepreneurs and communities?
Entrepreneurial activity can be viewed as individual and community activity How and if a community organizes itself impacts number of jobs and businesses started and expanded Development of community impacts entrepreneurism
Korshing, Peter F. and John C. Allen. “Locality Based Entrepreneurship: A strategy for community economic vitality.” Community Development Journal Vol 39 No. 4, 2004 pp. 385-400. Korsching, Peter F. & John C. Allen. “Local Entrepreneurship: A Development Model Based on Community Interaction Field Theory.” Journal of the Community Development Society. Vol. 35, No. 1, 2004. pp. 25-43.