The Higher ED Blog: What’s new in economic development research
Michelle Madden / March 30, 2015
The goal of the Higher ED Blog is to put cutting-edge economic development research into the hands of practitioners. We typically do that by giving our graduate and professional students an opportunity to publish short-and-sweet versions of their academic papers but for this article, we’re doing something a little different. We went right to the source and reviewed the latest issue of Economic Development Quarterly, arguably the most relevant academic journal to North American economic development practitioners. Here are some of the highlights from 95 page volume (you’re welcome).
University spinoffs are more successful if the entrepreneur has a broad social network of non-academic contacts
Universities have been placing more focus on entrepreneurship education and support in recent years, which has been welcomed by their host communities. This study was inspired by research showing that social networks are critical to the entrepreneurial process, and wanted to see if this applied to university spinoffs founded by faculty entrepreneurs.
They found that spinoffs success (in terms of employment generation) is dependent on the entrepreneur having non-academic contacts from outside of their region. Non-academics include investors, researchers from other companies, advisors, and others who can provide non-academic knowledge and resources. That one variable accounted for the spinoffs having 16-19 more employees, compared to spinoffs with founders only connected to other academics or to local nonacademics. To put this in perspective, the sample’s mean level of employment was just 7.3 employees.
In practice, this means entrepreneurship programs and services (like incubators) need to incorporate extra-regional network-building into their toolboxes, in order to get the maximum employment benefits of university spinoffs.
If your community is only looking at gross small firm entry (rather than net entry), you’re missing an important part of the picture
We all like to celebrate new businesses but we need to pay more attention to whether those new businesses are harming or displacing old ones.
Using data from metropolitan U.S. labor market areas, this study looked at a range of possible impacts from net and gross firm entry. It found that increases in net entry had positive impacts across the board, resulting in slightly faster growth of per capita income and employment, higher average levels of per capita income and employment, more stable rates of employment, and lower volatility in the economy. In contrast, increases in gross entry had mixed results. It did lead to growth of employment, but it was also associated with lower and more volatile employment rates.
The authors suggest that their findings should encourage economic developers to think beyond simple growth rates and shift to the more nuanced ‘net’ measurement. From a policy perspective, this study adds to past research that underlines the importance of business retention and expansion (BRE) efforts alongside attraction initiatives, while keeping an eye on the impact of new businesses on current ones.
Recent university graduates in Iowa ranked overall cost of living and a strong local economy as the most important features in their migration decisions
There have been many studies on the migration patterns of university graduates but this one distinguishes itself by focusing on a largely rural state (Iowa). The hypothesis was that students in a rural state may have different motivators than those from a more urban state.
Their results were somewhat surprising, with overall cost of living ranking as the number one most important feature in their migration decision. The number two feature, a strong local economy, was more in line with the expectation that graduates are most interested in finding employment. Interestingly, safety, access to basic consumer goods, and access to health facilities ranked third through fifth, showing that quality of life factors are also important.
The authors also compared their findings to Richard Florida’s research on the creative class and found a notable difference. Where Florida found that tolerance and diversity were important to the creative class (which overlaps heavily with university graduates), few of the study’s respondents considered racial diversity or the presence of gays and lesbians in their migration decision. The authors suggest that people from rural areas are less likely to seek out a ‘bohemian lifestyle’.
Based on these findings, policy makers in rural and remote areas may want to focus their graduate retention programs primarily on economic considerations, and have quality of life messaging in a supporting role.
About the author
Michelle Madden is the editor of Higher ED. She is also the Outreach Manager for the Economic Development Program and a graduate of the LED master’s program. She has authored a number of the articles in this series on behalf of the students, and has published several of her own blogs on economicdevelopment.org as well.
About the series
Higher ED: Insights for the Next Economy is a platform for students, guest speakers, staff and faculty of the University of Waterloo’s professional and graduate economic development programs to share knowledge with the field at large. The series takes works destined for an academic audience and reworks them into a fresh, easy-to-digest blog article.
Established in 1988, the Local Economic Development program is the only master’s program in Canada devoted solely to local economic development. It offers a balance between theory and practice by combining coursework, a major research paper, an internship, and weekly seminars featuring guest speakers. Students are prepared for careers in local, community, or regional economic development.
The Economic Development Program is a nationally-accredited provider of professional training. It delivers certification programs and seminars that offer a deep understanding of the Canadian context in a convenient block format. Peer learning is combined with informative lectures and practical case studies to provide dynamic instruction that is beneficial for junior and senior-level practitioners.