The Aspen Institute
Economies in Rural Regions:
Lessons from Kentucky and Appalachia
Many in the economic development field believe that entrepreneurship is the key to improving long-term economic strength and quality of life in rural areas. They believe that traditional approaches to economic development-- public investment in infrastructure, business services, and relocation incentives for out-of-state firms--have their place, but only as they help create the conditions needed for dynamic, indigenous economic activity.
In June 1996, the Kentucky Science and Technology Council, Inc., in cooperation with The Aspen Institute and the TVA Rural Studies Program gathered a group of development professionals to discuss ways to create entrepreneurial economies in rural areas of Kentucky and the rest of the United States.
According to the group, an entrepreneurial economy does not simply create a few high-performing companies or even a lot of prosperous small businesses. Rather, it encourages people to seek opportunity and embrace creative approaches to exploiting it—to say, “I can see things that don’t exist and make them exist.” Thus, entrepreneurship is defined by how firms and people behave, not by what they produce. And it is concerned as much with the environment within which they operate as it is with entrepreneurs and companies themselves.
Having thus defined entrepreneurial economies, participants laid out a clear picture of what it takes to build them. The elements fall, more or less, into supply and demand categories.
On the supply side are efforts to provide the tools and resources that entrepreneurs need.
- Widespread availability of capital in the hands of investors and financiers who know what they’re doing. While capital is generally available, the challenge is to ensure that it stokes entrepreneurship. Thus, members of the financial system need to be better prepared to deal with entrepreneurs and the higher risk that they represent. They need to understand the state’s financial infrastructure so they can refer entrepreneurs to other sources of funds. Also needed are points of entry into the financial network for ventures too small to capture the interest of most venture capitalists; needed are brokers with financial sophistication and resources as well as local expertise. Financial fitness of entrepreneurs also needs improvement, so that they can qualify for funding. Banks and utilities must recognize their dependence on the health and growth of their communities and proactively seek out opportunities to encourage entrepreneurship. And finally, government must become more efficient and more transparent so that its programs can be easily understood and used by entrepreneurs.
- Support structure of accountants, lawyers, and other professional service providers who are sophisticated enough to help forward-thinking entrepreneurs. The private sector support system is critical to the success of entrepreneurs. It must have providers that can deal with the higher risk, unusual ventures of entrepreneurs as well as the more mundane ventures. For example, accountants are needed who can help manage cash flow, lawyers who can launch initial public offerings, and marketing specialists who can do sophisticated analysis. And it means having all those capabilities locally.
On the demand side are steps to boost the number of entrepreneurs in the first place:
- Environment that encourages spin-offs from established businesses and research institutions. Setting out to encourage spin-offs requires addressing three issues: 1) the ability of employees to start their own companies, 2) the willingness of employers to help employees spin off, and 3) the role that universities play in turning research into marketable commodities.
- Educational system (from elementary to post-secondary) that stimulates and prepares entrepreneurs. Entrepreneurial skills can be taught. Such skills go beyond business and apply to community and public life as well. Such skills include the ability to manage change and risk, creative problem solving, and the ability to see opportunities in problems.
- Culture that values and celebrates entrepreneurship. Creating such a culture is difficult but possible. Its ingredients are: respect and faith in the people around you, microenterprises that act as role models for future entrepreneurs, savings with which to finance ventures, and information that alerts people to opportunities and the value of entrepreneurship.
For a copy of the report, please contact:
Aspen Institute Rural Economic Policy Program
1333 New Hampshire Ave. NW
Washington, DC 20036
$10.00 single copies, bulk discounts
Please send any comments or
questions about this site to email@example.com.