Entrepreneurship has been seen as a way to foster local development by both business leaders and policymakers for a long time.
Many programs revive local economies through entrepreneurial training, investment, and accelerators. However, these initiatives often fail to address urgent local issues. In addition, high-tech growth in poor regions tends to enlarge income gaps rather than creating much-anticipated trickle-down effects.
What makes entrepreneurship-driven efforts to boost regional prosperity booming in some places but unsuccessful in others? Are there any other ways of stimulating local community growth that is more successful than entrepreneurship?
The founder of the venture we shadowed initially been intended to empower Detroit’s brick-and-mortar fashion retailers by building an online portal for local boutiques. However, ACCEL mentors pressured her to drop some of her venture’s original features, including its online inventory system for Detroit retailers and strategy of collaborating with retailers to host local fashion events.
The local impact of their actions was explosive, but it only lasted for a short time.
They left Detroit because they could not find the larger rounds of funding necessary to keep their businesses running.
The founders had rich relationships with local partners and sought out creative ways to leverage the resources available in their local environments to address urgent, local problems. Reflecting on this decision, the founder expressed his commitment to a philosophy he called ‘Growth in-depth’: ‘We will not be flying all over the country anytime soon,’ he explained, ‘Because community work is very localized.’ Similarly, another founder joined GREEN hoping to build a plant to recycle waste tires but ultimately created a platform that mobilized residents to collect waste tires in their neighborhoods and worked with local design schools to upcycle the tires into art projects.
A company has alleviated local unemployment by providing more than 200 disadvantaged culinary entrepreneurs access to local churches’ licensed kitchen spaces, fresh ingredients from urban farmers, and local customers through a local farmers’ market.
The city’s food desert problem by turning corner stores, community centers, local schools, and gas stations into new food distribution hubs.
While the ventures that focused on deepening local embeddedness instead of rapid expansion were able to raise investment in their next rounds, those that rapidly expanded beyond Detroit were not as successful. Our research illustrates that venture-capital-backed expansion is not the only way to grow – ventures can also grow by deepening their local relationships and leveraging local resources.
Suppose we want to use entrepreneurship to revitalize impoverished places. In that case, we need to consider entrepreneurial ventures not as investment vehicles but as collaborative platforms that leverage local resources in creative ways to address urgent local problems.
When it comes to job creation and economic development, accelerators often pursue strategies that are less beneficial for local economies. For example, they may encourage founders to adopt large-scale automation tools rather than hiring locals. This is done to secure a return on their investments.
To prevent this, policymakers should focus explicitly on supporting ventures that create novel solutions to local problems using only local resources – meaning ventures that scale deep.
Rather than fetishizing blitz scaling in entrepreneurship, more attention should be paid to ‘scaling deep,’ which addresses local problems in a sustained manner, as Joel Bothello, Concordia University Research Chair in Resilience and Institutions briefly summarized.
There is a lot that business leaders and policymakers can do to help foster a mindset of scaling deep, which means supporting the ventures that offer solid returns and those that lift poorer places to achieve sustained self-reliance.
