Exploring Economic Development Opportunities for Rural Areas: Its Not More of the Same

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Exploring Economic Development Opportunities for
Rural AreasIts Not More of the Same

• Bo Beaulieu
• Southern Rural Development Center
• Mississippi State University
• CARET/AHS Southern Region Meeting
• August 8, 2005
• Clemson University

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Focus of thisSession

• The changing face of the rural economy
• What are the options for capturing rural jobs?
• Is industrial attraction/recruitment the only
  game in town?
• Economic development strategies that make sense
  for rural areas
• Some concluding comments on the key opportunities
  for the Souths Land-Grant Universities

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Reality Check ! The Changing Rural Economy
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Type of Industries Classified by Each Sector

• Goods Producing
• Farm
• Agricultural Services
• Mining
• Manufacturing
• Construction

• Service Producing
• Transportation and Public Utilities
• Wholesale Trade
• Retail Trade
• Finance, Insurance and Real Estate
• Services
• Government and Government Enterprises

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Employment Composition in the Nonmetro U.S., 1990
- 2003
Source Bureau of Economic Analysis, Regional
Economic Information Systems
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Defining metro-nonmetro

• Metropolitan area a county or a group of
  counties having at least one central city of
  50,000 or more inhabitants, or containing a
  census-bureau defined urbanized area of at least
  50,000 residents with a total metro population of
  at least 100,000
• Nonmetropolitan everything else

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Percent of Jobs Generated by Each Sectorin the
Nonmetro U.S.,1990-2000
10.1
89.9
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Nonmetro Job Growth in the U.S. Between 2001-2003
. . .

• Net employment up by 127,753 jobs (full
  and part-time)
• The goods producing sector lost 375,869 jobs,
  most in the manufacturing sector
• The service producing sector created nearly
  504,000 jobs
• Thus, over this period of time, virtually every
  net job gain in rural America was linked to the
  service producing sector

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According to Michael Porter . . .

• Not only is the performance of rural areas
  lagging, but the gap in performance levels
  between rural and urban areas seems to be
  widening.
• Competitiveness in Rural U.S. Regions Learning
  and Research Agenda, February 2004

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Average Earnings Per Job in the Goods Producing
Sector
NM 60.8 of Metro
NM 66.5 of Metro
Metro
Metro
NM
NM
1990
2000
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Average Earnings Per Job in the Service Producing
Sector
NM 65 of Metro
NM 70.7 of Metro
Metro
Metro
NM
NM
1990
2000
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Why the Increasing Gap in Average Earnings?
60 of employment growth in the nonmetro U.S.
between 1990-2000 was linked to the Retail
Trade and Services industries
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1990-2001
Source Porter et al., February 2004
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Finding Work An Increasing Headache for Rural
Areas

• The Rural South as a Case in Point

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Place of Work in the South of the Expanded
Workforce over the1990-2000 Period
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Theres A Need to Find New Ways to Build the
Rural Economy
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Old Habits are Hard to Break . . .

• Our nation continues with policies,
  organizational structures, and investment
  strategies built for a past era.
• Report of the Strengthening Americas Communities
  Advisory Committee, July 2005

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Changing our Economic Development Orientation
Entrepreneurship
TODAY
Retention
THE FUTURE
Recruitment/ Attraction
Source Brian Dabson, RUPRI
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Keys to Rural Economic Development Success

• Building and strengthening regional capacity and
  competitiveness
• Promoting and harnessing innovation
• Expanding the knowledge economy
• Expanding e-commerce capacity
• Building the creative economy
• Fueling the engines of entrepreneurship

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Building and Strengthening Regional Capacity and
Competitiveness
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Strengthening Americas Communities Report . . .

• In the 21st century, Americas communities will
  derive economic strength by acting and partnering
  regionally to compete globally.
• To reach their full potential, communities must
  collaborate with other communities and with
  private and public partners.

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Determining Regional Competitiveness

• Regions must determine their unique regional
  assets
• Figure out ways to strengthen and expand on these
  assets
• Work to remove barriers that facilitate
  multi-jurisdictional and inter-institutional
  regional cooperation

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Source Porter et al., February 2004
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Source Porter et al., February 2004
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Important elements of regional success

• Regional partnerships involving
• Private
• Public
• Philanthropic
• Higher education institutions
• Non-government organizations
• Bottom line . . . Multiple voices

Source Report of the Strengthening Americas
Communities Advisory Committee, July 2005
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Higher Education is at the Table. . .
Source Report of the Strengthening Americas
Communities Advisory Committee, July 2005
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2005 Report on the Future of the South

• Calls for the establishment of Regional
  Prosperity Alliances
• Key role of these alliances?
• Convene
• Plan
• Help fund
• Coordinate
• Measure progress (benchmarks, impacts)

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Expanding theKnowledge Economy
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Knowledge Economy in Rural America

• Knowledge powers the U.S. economy by generating
  new ideas and innovations that boost productivity
  and create new products
• Derives from peoples ability to combine
  education, experience and ingenuity to power
  growth
• Proxy measure is the number of people in
  occupations requiring high levels of knowledge to
  perform their tasks.
• Defined as management, professional and technical
  occupations
• Source Henderson and Abraham, May 2005

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What the dataare saying

• Metro areas have a higher concentration of
  knowledge-based activities
• In 2000, knowledge-based jobs as percent of all
  jobs
• Metro 20.2
• Nonmetro 14.8
• Source Henderson and Abraham, May 2005

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Expanding the Rural Knowledge Economy

• Create high quality workforce
• Tap the capabilities of higher
  education institutions
• Attract knowledge workers through scenic
  amenities
• Build 21st century infrastructure
• Build partnerships
• Source Henderson and Abraham, May 2005

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Source Rural Education at a Glance, Economic
Research Service, November 2003
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E-Commerce A New Piece of the Economic
Development Puzzle
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Growing Importance of e-Commerce

• Online buying on the part of consumers nearly
  tripled over the 2001 to 2004 period (Digital
  Future Report 2004).
• Recent Census Bureau (2005) report revealed that
  e-commerce retail sales for the first quarter of
  2005 were in excess of 19 billion, a 24 percent
  increase from that recorded the year earlier.

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U.S. Retail E-commerce Sales, 1999-2005
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e-Stats for 2003

• Over 94 percent of all e-commerce activities are
  associated with B2B transactions
• Only 5.7 percent linked to B2C
• Over one-fifth of the value of manufacturing
  shipments in 2003 due to e-commerce (843
  billion) activities, a 12 percent expansion in
  just one year.
• E-commerce sales only 1.7 percent of all retail
  trade activities barely 1 percent of selected
  service industry revenues

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e-Commerce Not a Downfall for Local Businesses

• "2005 Web2Store Benchmark Survey" found that for
  every dollar spent online, the average W2S
  shopper spends 1.60 offline at local stores.
• Among affluent shoppers, the disparity is even
  more acute, with W2S shoppers spending 1.98
  offline at locals stores for every dollar spent
  online.

Web-to-Store Consumers Spend, Shop More at Local
, by Rob McGann, January 19, 2005
www.clickz.com/stats/sectors/demographics/article.
php/3461611
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Four Factors that Will Impact Use of E-Commerce
in Rural Areas

• Do rural areas have the technological
  infrastructure in place?
• Do local governments understand the vital role
  that e-commerce can play for local firms?
• Do rural small businesses understand how
  e-commerce can improve their business and
  customer activities?
• Are resources and education support systems in
  place to help rural businesses?

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Building the Creative Economy
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Building a Creative Economy

• Richard Floridas, Rise of the Creative Class,
  has been instrumental in alerting us to the
  importance of building creative communities and
  regions
• The focus is on workers who produce artistic or
  designer goods and services
• The intent is to nurture the arts, cultural,
  historical and other creative activities. Why?
• Attracts tourists
• Builds on local cultural/historical resources and
  amenities
• Serves as a magnet for other talented people and
  creative enterprises

Source Rosenfeld, March 2005
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Fueling the Engines of Entrepreneurship
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Developing Entrepreneurs

• A key determinant of a regions economic vitality
  is the quantity and quality of its entrepreneurs
• Dynamic communities dont focus only on
  attracting entrepreneurs they develop them !!
• Must focus our energies on developing
  entrepreneurs.

Source The Entrepreneurial Development System,
by G.A. Lichtenstein and T.S. Lyons, Economic
Development Quarterly (February), 2001.
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Firms with payrolls (in 2002)

• Nearly 65 percent of all firms in the U.S. employ
  less than 10 persons
• If you include firms with no employees, the
  figure exceeds 78

Source Small Business Administration
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Examining the Breadth of Entrepreneurship in
Rural America

• Taps how extensive entrepreneurs are found in an
  area
• Good measure is ratio of self-employment to total
  employment in an area
• Results show that the breadth of entrepreneurs is
  widest in rural America
• This is less so in the South !!

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The Breadth of Rural Entrepreneurship
Source Regional Asset Indicators, by Sarah Law,
The Main Street Economist Center for the Study
of Rural America (September 2004)
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The Depth of Rural Americas Entrepreneurship

• It examines the value of entrepreneurial
  activities rather than the number of
  entrepreneurs (as is the case with the measure of
  breadth)
• One measure is the ratio of self-employment
  income to the number of self-employed workers
• Average self-employment annual incomes are lower
  in rural areas higher in metro areas

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The Depth of Entrepreneurship
Source Regional Asset Indicators, by Sarah Law,
The Main Street Economist Center for the Study
of Rural America (September 2004)
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Nonfarm Proprietor Jobs and Income as a Percent
of All Jobs and Income in Nonmetro Areas,
1969-2000
Source Goetz, 2005
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Two Key Systems for Supporting Entrepreneurs(Lich
tenstein and Lyons, 2001)

• Developing Entrepreneurs
• Scout identifies and recruits entrepreneurs
• Diagnostician assesses needs and skill levels of
  entrepreneurs
• Mentor/Coach provides guidance on skills and
  performance improvements
• Team manager helps build ties and coordination
  among a cluster of entrepreneurs
• Alliance broker identifies market opportunities
• General manager integrates these activities into
  a cohesive entrepreneurship system

• Providing Assistance
• Organize providers to avoid duplication of
  efforts
• Help providers identify their unique niche what
  they can do better than other providers
• Determine which providers can serve particular
  needs of entrepreneurs
• That is, match assistance with the level that the
  entrepreneur is located

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Lichtenstein and Lyons Entrepreneurship Ladder
Skill Levels
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Four Dimensions of Entrepreneurial Skills

• Technical can perform key operations of the
  business
• Managerial ability to organize and manage the
  operations
• Entrepreneurial ability to identify market
  opportunities and create solutions
• Personal Maturity self-awareness, maturity,
  accountability, creative/emotional development

Source Lichtenstein and Lyons, 2001
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Lichtenstein and Lyons Entrepreneurship Ladder
Skill Levels
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Entrepreneurship Development Ladder Assistance
Needed (Lichtenstein and Lyons, 2001)
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Where are rural areas on the entrepreneurship
ladder?

• In most cases, rural areas place
  at the lower end of the entrepreneurship ladder
  (Double A, Single A, Rookies)
• Thus, developing and delivering entrepreneurship
  activities that best address the unique needs of
  rural people and communities are critical

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Creating an Entrepreneurial Environment Key
Ingredients

• A Seamless Educational/Information System for
  Rural Entrepreneurs
• Access to Key Institutional Resources
• Networks that Support Entrepreneurs
• Entrepreneurial Friendly Communities
• Supportive Entrepreneurship Policies

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Opportunities for The Souths Land-Grant
Universities
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Challenges are Greatest in the Rural South

• The recent Strengthening Americas Communities
  Report states
• Federal economic and community development
  resources should be focused on communities/regions
  of greatest need
• The rural South is the headliner when it comes
  to the challenges facing its communities and
  people

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The Rural South LGU Rural/Economic Development
Capacity is Critical

• Essential that we expand our energies and
  resources to build a strong rural/economic
  development presence in our LGUs.
• Why? Because . . .
• Rural residents represent 25 of the Souths
  population -- 25 million persons
• Over 45 of our nations rural population are
  Southerners
• The health of the farm sector cannot be decoupled
  from the well-being of the rural South

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Address Regional Competitiveness

• The SAC report notes that higher education must
  be a full partner in formulating and implementing
  regional competitiveness strategies
• LGUs in the South can
• Generate the research needed to identify current
  and emerging areas of regional opportunities
  measure impacts of regional clusters
• Serve as the conduit for building regional
  dialogues with key regional players
• Provide unbiased input on public policy
  strategies
• Work hand in hand with rural communities to help
  build inter-jurisdictional partnerships

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Help Turn thePyramid Upside Down

• Too many of our states and rural communities
  remain focused on economic development strategies
  of the past (i.e., recruitment/attraction)
• LGUs through their teaching, research, and
  extension activities can help rural communities
  (their leaders, organizations, and citizens)
  build sustainable community economic
  development strategies

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Some Specifics ?

• Work with community colleges and other
  educational institutions to strengthen the human
  capital needs of rural areas
• Assist communities in uncovering their unique
  assets (creative economy opportunities)
• Improve the e-commerce capacity of farmers,
  rural small businesses, and rural communities
• Build an effective entrepreneurship system for
  the rural South

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Entrepreneurship Development System LGUs Are Key
Players

• Build an integrated outreach education program
  that address the various levels of entrepreneurs
• Conduct applied research on the economic and
  social impacts of entrepreneurship
• Inform the policy communities on strategies for
  creating entrepreneur friendly communities
• Help create entrepreneurship
  support networks (along the lines
  of farmer cooperatives)

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Thank You ! !