Create a community climate that grows businesses
By Michael O'Hair
December 19, 2004
Look through the headlines of Indiana newspapers over the last few years, and you'll see a recurring story: layoffs and plant closings, factories shutting their doors. Even as the economic recovery slowly takes hold, this trend continues. In the second and third quarters of 2004, Indiana has seen 46 mass layoffs, ranking 12th among states in this dismal category.
These events hit many of Indiana's mid-sized and smaller communities with the force of a natural disaster, wreaking havoc on the economic landscape. Large manufacturing facilities are the cornerstone of many Indiana cities and towns, and losing the jobs and revenues they provide can be devastating.
Even worse, there's little hope for returning to the way things used to be. Federal Reserve economists estimate that 80 percent of job displacement during the last recession is permanent -- many of yesterday's manufacturing jobs won't be coming back. And for the large manufacturers still based in Indiana, productivity gains and austerity measures mean limited opportunities for future job creation.
Indiana's manufacturing communities must find a new way to rebuild.
The first step is recognizing that entrepreneurship and small business growth are important economic development strategies. Nationally, small businesses are responsible for the creation of seven of every 10 new jobs in today's economy. Since 1980, while Fortune 500 companies have gradually cut more than 5 million positions, entrepreneurs and small businesses have created more than 34 million jobs.
A town may be better off with 20 small businesses with 25 employees each than one large 500-employee factory; small firms bring greater economic diversity, growth potential and stronger local ties.
To encourage entrepreneurship, many communities are taking advantage of the state of Indiana's Certified Technology Park program. Through this initiative, local partners can seek Certified Technology Park designation for business parks that support high-tech activity, academic-industry partnerships and new business formation. Communities can apply special tax credits to businesses in the park and are eligible for state grants for construction and operating expenses. Currently, 14 such parks are in development across the state.
Indiana's higher education institutions are also playing an important role in encouraging entrepreneurship. Purdue University, for example, is a partner in several Certified Technology Parks across Indiana. Through its Burton Morgan Center for Entrepreneurship, Purdue also sponsors a statewide series of seminars on starting a business and coordinates several business plan competitions that award seed capital to promising entrepreneurs.
But communities also need a strategy for how to focus their entrepreneurial energies. They must understand what unique economic assets exist in their own back yards, and how they can be matched with emerging opportunities.
The Kokomo/Howard County area is making progress using this strategy. Local private and public sector partners earned Certified Technology Park support for a business incubator, Inventrek Technology Park. The Inventrek initiative has focused on Kokomo's strengths, emphasizing the expertise in advanced electronics found in local corporations such as Delphi. Inventrek's leadership reached out to Purdue to provide research and technical resources for its client companies, as well as educational programs through the College of Technology. Inventrek is already home to growing firms like Foresite, a product testing company that serves the electronics manufacturing industry. The park is in the process of developing on-site research and development "hotel" labs to serve other companies in the electronics field.
A similar process is playing out in Anderson. The community has focused on power electronics, which dovetails with work being done at Remy International, a global leader in electrical systems and engine component manufacturing.
Power electronics technologies help convert energy from alternative sources -- fuel cells, solar and wind power -- into a usable form for vehicles and other applications.
Anderson's Certified Technology Park, the Flagship Enterprise Center, has formed a partnership with Purdue and Anderson University to create a Power Electronics Center to capitalize on the many business opportunities in power electronics and electrical conversion technologies.
Kokomo, Anderson and others are pioneers, exploring a new economic model for Indiana's smaller cities and towns. In the past, much of our economic development activity has been based on "smokestack chasing" -- using incentives to lure business to the area. But as we've found, these companies can just as easily relocate to cheaper labor markets or close their doors based on the vagaries of the global economy.
Today's best route to economic prosperity is a more strategic approach: finding what the community does best and creating a climate where businesses in those fields can grow. It takes a partnership between government, industry and academia to set the right priorities, and entrepreneurship by definition is risky. But in the long term, building diverse economies based on regional assets and collaboration is the best cure for the sudden shock of plant closings that have decimated so many Indiana communities.
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