Dean's Perspective
Region needs to nurture, develop innovative businesses
Dr. Mohammed Khayum
Article taken from Evansville Business Journal, February 2009 (Go to EBJ.biz)
Dr. Mohammed F. Khayum is dean of the business school and professor of economics. He conducts the Business Conditions and Outlook Survey, a quarterly survey of businesses in the Evansville area.
Successful entrepreneurs take risks and organize resources to deliver a product or service demanded by the market. According to the Global Entrepreneurship Monitor, entrepreneurship includes various phases, from the very early stage when the business is in gestation to the established phase and possibly the discontinuation of the business.
At the Regional Economic Summit held in Evansville in November 2008, six economic drivers of the 26-county area* were identified on the basis of sales and employment data. Further identified were five critical determinants of regional wealth creation.
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Forbes publisher and the keynote speaker Rich Karlgaard, left, and Bix Branson with Old National Bank were among those who attended November's Regional economic Summit at the The Centre in Evansville.Entrepreneurs
This analysis is based on a list of small- and medium-sized businesses within a sample of 29,647 establishments located in the area identified in the ReferenceUSA database (www.referenceusa.com).
According to the definitions used by Reference USA, there were 9,380 small-businesses entrepreneurs (one to nine employees) and 2,185 medium-sized business entrepreneurs (10 to 99 employees) in the region in 2008. Entrepreneurs account for employment of 78,371 and sales of $19.4 billion.
This represents approximately 19 percent and 27 percent respectively of the 26-county annual employment and sales statistics.
The vast majority of small- and medium-sized business entrepreneurs were started before 2005. Two percent started in 2008, four percent in 2007, four percent in 2006 and five percent in 2005.
Analysis of the employment data from our region indicates that 23 percent of the small- and medium-sized business entrepreneurs had no employees, 50 percent employed one to five individuals, 19 percent employed six to 18 employees, and 8 percent employed 20 or more employees.
In comparison, within the United States in 2007, 38.1 percent reported having no employees, 39.3 percent employed one to five people, 13.1 percent employed six to 19 people, and 9.2 percent employed 20 people or more.
Considering early-stage entrepreneurial activity, that is, businesses in existence up to 42 months, approximately 21.3 percent of our region's early-stage small business entrepreneurs are work-at-home businesses.
Areas of concentration
Top areas of economic activity in our region
Critical determinants of wealth creation
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The industry activity within this group is distributed as follows: 4 percent in extraction, 41 percent in transformation, 28 percent in business services, and 26 percent in consumer-oriented activities. In 2997, the U.S. early-stage entrepreneurs were the most active in consumer-oriented industries with 42.1 percent, followed by business service industries at 34.8 percent.
When compared to national patterns a number of similarities and differences are evident.
The primary activity of new startups in the United States is consumer-oriented based at 42 percent, followed by business service then transformation activities.
In our region, the primary activity of startups is in transformation activities followed by business services.
Most regional businesses are relatively small measured in terms of sales, the number of employees, number of computers and their square footage.
Most of our businesses are located in city limits across the region, and the majority of these businesses (67 percent) were established before 2000, indicating that they are beyond the failure stage.
Early-stage entrepreneurs are 20 percent of the number of established businesses in the region compared to 180 percent for the United States in 2007, resulting in a relatively low level of entrepreneurial dynamism when compared to the nation.
In addition, the mix of urban-rural locations indicates that the majority of the regional small- and medium-sized business entrepreneurs are located in cities, with approximately 11.5 percent located in areas with populations less than 25,000.
Fostering growth
Regional industries The industry mix of businesses across
indicates the following:
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A number of steps can be undertaken to facilitate entrepreneurship.
These include a greater focus on providing digital tools that make it easy to start a new business, identifying next generation industries and market opportunities based on emerging demographic and technological changes, supporting angel capital networks, and linking information resources for entrepreneurs.
With an increased focus on the link between entrepreneurship and innovation, the measurement of entrepreneurial dynamism is likely to be another area of interest in future regional analyses.
Finally, entrepreneurial activities and the entrepreneurial process involve identification, development and creation of innovative ways for doing things in order to capture commercial opportunities.
Our region needs to continue to strive for capturing these opportunities.
