By Paul Wolf:
David Robinson in this Sunday's Buffalo News business had an interesting article titled Think Small to Plant Seeds of Job Growth.
The point of Robinson's article is that the biggest source of job growth locally and statewide comes from businesses that are already here. Yet we spend significant time and resources trying to entice out of state companies to locate in Western New York.
I agree that we should focus more effort and attention on helping local companies grow. Research shows that companies go through several different stages of growth and certain stages produce more good paying jobs than others.
The Edward Lowe Foundation, a Michigan based non-profit that focuses on assisting entrepreneurs has developed a great interactive resource that allows users to explore economic activity in their own region at www.YourEconomy.org. According to YourEconomy, the Buffalo-Niagara metropolitan statistical area had the following types of businesses in 2008:
Type of Company # of Businesses # of Jobs
Self Employed 21,787 21,787
Stage 1 Companies (2-9 employees) 33,594 105,445
Stage 2 Companies (10-99 employees) 6,540 160,926
Stage 3 Companies (100-499 employees) 435 77,398
Stage 4 Companies (500 + employees) 54 53,453
Stage 2 companies represent 11% of area businesses, but Stage 2 companies create more jobs. From 2006-2008, Stage 2 companies created 38.8% of area jobs. Stage 1 companies created 24.2%, Stage 3 created 18.3%, Stage 4 created 13.9%, and self-employed companies created 4.8% of all jobs from 2006-2008.
Our economic development efforts are too focused on attracting out of town silver bullet businesses. Buffalo has plenty of companies with the ability to grow additional jobs. Many communities are focusing their economic development efforts on a concept commonly referred to as "Economic Gardening" developed in 1989 by the city of Littleton, Colorado. Instead of hunting outside the area for new businesses to create jobs, the focus of Economic Gardening is to grow jobs through existing local businesses.
Economic gardening focuses on helping so-called second-stage companies with 10 to 99 employees and revenue of $1 million to $25 million -- local businesses that have survived at least five years and are growing revenue and adding employees.
Robinson and others advocate for providing more support to companies with fewer than 10 employees. There are programs available to help start-up businesses but more focus and support needs to be placed on helping "second-stage" companies grow. Startups have a high failure rate, meaning many of the jobs they generate quickly disappear in the churn of business formation and failure. Second-stage firms have demonstrated staying power and also tend to pay higher wages than startups.
Supporters of the Economic Gardening believe that:
(1) This approach is soundly based on economic growth principles, (2) requires fewer public resources than traditional recruitment initiatives, (3) is more focused on where rapid growth occurs--in second- and third-stage companies--and (4) does not require "picking winner industries," but rather recognizes the critical role played by growth companies of all sizes across diverse sectors.
What do you think about the Economic Gardening approach of focusing on Second Stage companies to create jobs?
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David Robinson in this Sunday's Buffalo News business had an interesting article titled Think Small to Plant Seeds of Job Growth.
The point of Robinson's article is that the biggest source of job growth locally and statewide comes from businesses that are already here. Yet we spend significant time and resources trying to entice out of state companies to locate in Western New York.
I agree that we should focus more effort and attention on helping local companies grow. Research shows that companies go through several different stages of growth and certain stages produce more good paying jobs than others.
The Edward Lowe Foundation, a Michigan based non-profit that focuses on assisting entrepreneurs has developed a great interactive resource that allows users to explore economic activity in their own region at www.YourEconomy.org. According to YourEconomy, the Buffalo-Niagara metropolitan statistical area had the following types of businesses in 2008:
Type of Company # of Businesses # of Jobs
Self Employed 21,787 21,787
Stage 1 Companies (2-9 employees) 33,594 105,445
Stage 2 Companies (10-99 employees) 6,540 160,926
Stage 3 Companies (100-499 employees) 435 77,398
Stage 4 Companies (500 + employees) 54 53,453
Stage 2 companies represent 11% of area businesses, but Stage 2 companies create more jobs. From 2006-2008, Stage 2 companies created 38.8% of area jobs. Stage 1 companies created 24.2%, Stage 3 created 18.3%, Stage 4 created 13.9%, and self-employed companies created 4.8% of all jobs from 2006-2008.
Our economic development efforts are too focused on attracting out of town silver bullet businesses. Buffalo has plenty of companies with the ability to grow additional jobs. Many communities are focusing their economic development efforts on a concept commonly referred to as "Economic Gardening" developed in 1989 by the city of Littleton, Colorado. Instead of hunting outside the area for new businesses to create jobs, the focus of Economic Gardening is to grow jobs through existing local businesses.
Economic gardening focuses on helping so-called second-stage companies with 10 to 99 employees and revenue of $1 million to $25 million -- local businesses that have survived at least five years and are growing revenue and adding employees.
Robinson and others advocate for providing more support to companies with fewer than 10 employees. There are programs available to help start-up businesses but more focus and support needs to be placed on helping "second-stage" companies grow. Startups have a high failure rate, meaning many of the jobs they generate quickly disappear in the churn of business formation and failure. Second-stage firms have demonstrated staying power and also tend to pay higher wages than startups.
Supporters of the Economic Gardening believe that:
(1) This approach is soundly based on economic growth principles, (2) requires fewer public resources than traditional recruitment initiatives, (3) is more focused on where rapid growth occurs--in second- and third-stage companies--and (4) does not require "picking winner industries," but rather recognizes the critical role played by growth companies of all sizes across diverse sectors.
What do you think about the Economic Gardening approach of focusing on Second Stage companies to create jobs?
I guess it makes sense, but why not focus on Stage 1's and help them become Stage 2's?