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Entrepreneurs as economic heroes

Posted: September 30, 2011 3:34 p.m.
Updated: October 3, 2011 5:00 a.m.

Last month’s column focused on South Carolina’s abysmal, fourth-highest in the nation unemployment rate. I have come across some information in the last couple of weeks that has given me a lot to think about as I look for ways the state can encourage job creation in South Carolina.

The Kauffman Foundation, which focuses on advancing entrepreneurship and improving the education of children and youth, ranked South Carolina ninth from the bottom in the nation in its March 2011 Kauffman Index of Entrepreneurial Activity. This is a condition that the state ought to try to improve.

The recent study by the Moore School of Business on high-impact firms showed that while we as a state are generating a fair number of start-ups, we have fewer firms that “scale-up” as compared to neighboring states. Why is this important? Jobs.

South Carolina can’t count on periodic big plant locations or expansions to provide all the jobs we need in our state. New small businesses and especially high-impact firms are necessary to create jobs and make South Carolina more competitive, innovative, and prosperous.

High-impact firms are defined as “in-state owned companies that double both sales and employment levels in a specific four-year period.” While these firms accounted for only 2 percent to 3 percent of all firms, they accounted for 67 percent of net new jobs in 2004-2008.

According to the Moore School of Business study on high-impact firms in South Carolina, our state is successful in generating small high-impact firms which have fewer than 20 employees, but not so successful in building larger high-impact firms which have annual sales of $25 million or more.

In fact, South Carolina only has 11 companies established in South Carolina that have annual sales of $100 million or more and only 42 with annual sales of $25 million or more. According to University of South Carolina economist Doug Woodward, that number is much lower than other states.

Some of the critical factors for the development of high-impact firms identified by the study were business climate, management talent, access to capital, and innovation.

New Carolina, South Carolina’s Council on Competitiveness, has done a lot of work on the subject of job creation. I attended its forum last week in Columbia where Dr. Michael Porter, Harvard Professor and internationally recognized economic development strategist, returned to Columbia to discuss the progress made since he first presented on South Carolina’s economy seven years ago. New Carolina was formed to act upon Dr. Porter’s recommendations on improving South Carolina’s economy.

There were many successes to recognize. Among them was the work of New Carolina’s Education and Workforce Development Task Force. The task force has developed and made progress in five strategies for preparing South Carolina’s knowledge workforce, including preparing children for success in school, connecting adults to education and training, and developing a culture of valuing education.

A presentation produced by the Monitor Group, “Driving Entrepreneurship in a Regional Economy,” provides groundwork information on entrepreneurism, including policy drivers such as financing, skills and talent, technology and infrastructure, support services, administrative burdens, and mindset. A few general ideas that the presentation suggested is that South Carolina should recruit good anchor firms, bolster the motivation to start companies, find and support local entrepreneurial heroes, and provide entrepreneurs with access to business skills. The report included a heavy emphasis on attitude and culture, which perhaps plays a larger role than we might realize.

Local firms are especially valuable because they have the community in which they locate in mind. These local firms invest in the community and the community invests in them, generating more and more success and wealth for that area. A constituent who is a local business owner remarked to me the other day that when he decided to take the leap and start a business in the county he was “‘all in’ -- on the business, the community, everything.” The attitude of this constituent was powerful and, I hope, infectious.

Winston Churchill once said that, “I am an optimist. It does not seem too much use being anything else.” We can find a way out of our employment problems. Local, high-impact firms appear to be one promising way. But we need the innovators, the risk-takers, the dreamers, and the optimists to lead the way. In other words, South Carolina needs entrepreneurs.

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