Endeavor Insight found that supporting businesses that have four key traits can make a big impact.
How can cities identify the best businesses that drive local economic growth? A new report from Endeavor Insight addresses this question and offers evidence-based recommendations to help drive job creation and productivity in cities.
The analysis indicates traditional economic development strategies alone are not enough to increase local GDP and incomes. Instead, policymakers and decision-makers should complement those initiatives with a focus on certain types of entrepreneurial businesses: those that are Big, Entrepreneurial, Super-Productive and Tech-Enabled (BEST). Companies that possess these traits benefit communities in substantial ways.
- Big: Companies that grow to have 50 or more employees create the majority of new jobs and pay workers higher salaries on average.
- Entrepreneurial: Businesses led by local entrepreneurs reinvest more in their communities and help other local companies to grow.
- Super-Productive: Businesses in industries such as advanced manufacturing, specialty research and consulting, and software generate more productivity per employee.
- Tech-Enabled: Companies with more technology workers are projected to grow faster in future years.
New data compiled and analyzed for the report shows that the more BEST businesses that a city has, the more productive it is. If the typical city had a small increase in the number of BEST local businesses — usually just five to ten more — it would see significant GDP growth. In addition, cities that consistently generate the BEST local businesses have more diverse economic foundations and are better protected from risk.
This report provides practical recommendations for city leaders wishing to support more of their BEST businesses:
- Identify the entrepreneurial businesses that have been growing in the region and the local strengths they represent.
- Encourage successful entrepreneurs to build effective networks of support for local businesses that can grow.
- Partner with the leaders of growing businesses to increase the supply of the resources that local entrepreneurs need most.
- Measure data on growing entrepreneurial businesses to track results and regularly share findings with the community.
This approach requires no changes in the way existing initiatives are conducted. Since the successful entrepreneurs it empowers are already living and working in their communities, each of these four components can be implemented very quickly and at a relatively low cost.