Entrepreneurship Based Economic Development

Research & Engagement, 2013


 

 

Summary

The viability of rural communities in Nebraska depends upon economic growth. Economic development is a policy objective of local governments. Business recruitment has been the primary strategy for most government officials and economic development professionals since at least the 1950s. This study looks at an alternative strategy that has been successful for some communities.

The Entrepreneurship Based Economic Development research project was designed to determine if an alternative form of economic development could be successful. The alternative form would continue to recognize the importance of primary employment but it would suggest that branch plants are not the only path to primary employment. It would also assert that secondary businesses are important to the health and quality of life of a community. In an Internet age, communities will come to rely on attractive secondary businesses to keep a community together by contributing to its quality of life.

Entrepreneurship Based Economic Development (EBED) is a study of 16 Nebraska communities. Six micropolitan communities (10,000 to 50,000 population) were studied and 10 smaller communities. These communities are distributed across Nebraska so that they represent similar communities in Nebraska and in other high plains states. The study sought to determine the differences in success of communities in encouraging employer small businesses in both primary and secondary industries. Employer small businesses were defined in the study to be businesses with at least five but fewer than 50 employees.
 

Impacts

Seven communities were found to have statistically significant success in encouraging the growth of employer small businesses. These included three micropolitan communities (Columbus, Kearney and North Platte) and four small communities (Hartington, Holdrege, Imperial and O’Neill). It is widely believed that location near Interstate 80 is necessary for economic development success but Columbus, Hartington, Imperial and O’Neill are not near Interstate 80.

All 16 of the communities studied were found to have similar taxation levels, utility costs, professional resources, bank branches, labor costs and real estate costs. The available resources and costs of doing business, then, could not explain variance in the success of encouraging employer small businesses.

Those communities that did not have a robust and growing base of employer small businesses were found to have lost the dynamic of local land use speculators and local economic growth-dependent ownership. Many communities have the problem of absentee ownership as a result of inheritance of commercial buildings. These owners are necessarily not as involved in promoting the growth of the community. Successful communities have occupancy rules that require periodic reinvestment in the physical infrastructure or that encourage new developments that move the commercial core of the community.

Communities with at least one bank headquartered in the local market did better than other communities. It is presumed that this is because commercial lending is important to employer small businesses. Commercial lending is not a central concern of most banks. Commercial borrowers at multi-state banks are competing for funding with other businesses over a wide geography.

Communities that used LB 840 specifically to support employer small business development did better in encouraging those kinds of businesses than did communities that used LB 840 funds for business recruitment.

Owners of employer small businesses were most likely to have developed their interest in business ownership as a career choice because of the influence of a parent or mentor. Many of the most successful and stable small business employers were in the second generation of ownership. The second generation owners may be but are not always within a family. Some businesses were passed down to employees or persons looking to invest in a small enterprise. Communities need to facilitate business transition.

Based on the findings of this research, the U.S. Small Business Administration provided funding of $58,416 to conduct an on-site business consultation project in Lexington, Nebraska. The on-site project occurred in October 2016. It involved nine businesses in Lexington. A report and strategic plan was provided to each participating business. A final report was provided to the Dawson Economic Development Corporation, the Lexington Chamber of Commerce and the City of Lexington.
 

Project Team

 

Partners

  • Alexis Winder, Main Street Beatrice
  • Cheryl Burkhart-Kriesel, University of Nebraska–Lincoln, Nebraska Extension
  • Connie Hancock, University of Nebraska–Lincoln, Nebraska Extension
  • Marilyn Schlake, University of Nebraska–Lincoln, Nebraska Extension
  • Travis Haggard, Ogallala Economic Development
 

  • Sharon Hueftle, South Central Economic Development District
  • Rose Jasperson, Nebraska Enterprise Fund
  • Glenna Phelps Aurich, Cheyenne County Chamber of Commerce
  • Rex Nelson, McCook Economic Development Corporation
  • Michael Burge, Valentine/Cherry County Economic Development Board

Publications

 

Presentations

Contact: Robert Bernier, rbernier@unomaha.edu