Rural Entrepreneurship
Through much of its history, rural North Carolina has been home to small-town merchants, talented craftspeople and progressive farmers, all willing to take the risks necessary to build their businesses and live the life of their choosing. It is a legacy of entrepreneurship and small business ownership of which rural people and the state of North Carolina can be proud.
Yet, the contributions of these entrepreneurs have often been obscured by the manufacturing empires that emerged around textiles, tobacco and furniture in the early 1900s. By the middle of the 20th century, North Carolina had become the most industrialized state in the Southeast and, as a result, was able to provide jobs for thousands of its people in both urban and rural parts of the state.
Changing Economy
During the 1980s, however, the economy built around traditional manufacturing began to undergo massive changes. First, new technologies allowed companies to increase productivity while employing fewer workers. Individual plants sometimes remained important contributors to the local tax base, but represented a far smaller employment base. Other plants closed altogether.
By the 1990s, economic globalization was becoming a reality. As predicted, it brought winners and losers. Domestic companies that could identify new markets, create new value-added products and respond rapidly to changing conditions prospered and grew. Many farmers and entrepreneurs benefited from expanding into new markets. Among the losers, however, were people employed in low-skill, low-wage manufacturing that made up a large portion of the rural economy. As federal policies lowered trade barriers, those workers could no longer compete successfully with workers in developing countries, where labor costs a fraction of even the most modest U.S. wages and environmental laws are often less stringent. Jobs in textiles and furniture, once North Carolina mainstays, themselves became exports: to China, Mexico, Indonesia and the Caribbean Basin.
The national recession that began in 2001 compounded the effects of these structural job losses, resulting in another round of plant closings. This time, urban technology workers felt the blow as well.
The combined effects of these forces cost North Carolina more than 200,000 manufacturing jobs in five years alone. Tens of thousands of these dislocated workers have exhausted their unemployment benefits without finding a new job that approximates their previous earnings.
Changing Perspectives
Although the state's manufacturing sector has taken hard hits, it is expected to remain a critical part of the economy for the foreseeable future, especially manufacturing tied to growth industries such as industrial machinery, chemicals, electronic equipment and biotechnology. But many of these industries are choosing to locate near urban areas, where educational levels are higher and university research support is more readily available. The days when nearly every small town could expect to have two or three plants providing jobs for local residents without a college education -- and economic developers could expect a steady supply of new industrial prospects -- are gone.
The ability of rural communities to rebound is hampered further by an ongoing brain drain. Small towns lose what might be their best assets as the college-educated children of rural families build their futures in urban areas, attracted by better jobs, higher wages and broader lifestyle opportunities.
Armed with this knowledge, the Rural Center has been investigating entrepreneurship and small business development as a means of creating jobs, building wealth and reversing brain drain in rural communities. In the spring of 2003, the center took a close look at the status of entrepreneurship in rural North Carolina. A vital partner in this examination was the national Center for Rural Entrepreneurship. Together, the two organizations held focus group sessions with entrepreneurs in every region of the state and interviewed dozens of business and economic development specialists. The results, summarized below, are detailed in the report Understanding the Environment for Entrepreneurship in Rural North Carolina.
In addition, the Rural Center conducted an in-depth analysis of business and economic data. The North Carolina Business Data Sourcebook presents a statistical picture of business activity in each of the state's 100 counties, in the state as a whole, and in urban and rural areas separately.
Defining Entrepreneurship
While entrepreneurship is being discussed in the academic community and in state and national policy circles, definitions of the term vary widely. The Rural Center embraces various categories of entrepreneurs and recognizes that each type of entrepreneur may need different types and levels of services.
- Startups -- exploring and planning a new business or within the first three years of operation.
- Small businesses -- in operation three or more years, trying to survive or expand.
- Growth entrepreneurs -- commercializing new technology and/or expanding rapidly to capitalize on major opportunities.
- Social entrepreneurs -- creating and growing enterprises that are primarily for public and community purposes.
The Impact of Entrepreneurship and Small Business
While most businesses in rural North Carolina are small to medium in size, their combined economic impact is substantial.
- There are 98,000 establishments in North Carolina's 85 rural counties.
- 95 percent of these establishments employ fewer than 50 people. In fact, more than 75 percent employ fewer than 10 people.
- Establishments with fewer than 50 employees generate $14.5 billion in wages and provide jobs for 614,000 people.
- While the largest establishments (100 employees or more) reduced their payrolls by 42,000 jobs between 1998 and 2002, establishments with fewer than 50 employees created 26,760 new jobs and added $2.3 billion to their payrolls.
- All of this is in addition to rural North Carolina's 230,000 self-employed individuals, who generated more than $8 billion in receipts in 2002.
What Rural Entrepreneurs Say They Need
The Rural Center conducted 22 focus groups across the state in 2003 to take the pulse of rural entrepreneurship in North Carolina and to hear from entrepreneurs about their business challenges and what they need to succeed in starting and growing new businesses.
Entrepreneurs in Eastern North Carolina talked about the need to overcome the converging problems caused by tobacco cutbacks, the collapse of local manufacturing and the after-effects of Hurricane Floyd. Their counterparts in the Piedmont saw new opportunities in tourism, wineries and outdoor recreation but sought increased support from the economic development community. Western entrepreneurs cited isolation from service providers and markets as barriers to success.
Despite such regional differences, entrepreneurs had much in common. In every focus group across the state, they cited:
- A sense of isolation, both from other entrepreneurs and from the larger business and political community. Many felt ignored and unappreciated by local economic development agencies and chambers of commerce that focus on larger employers.
- Lack of knowledge about emerging markets.
- Lack of access to capital.
- Limited understanding about available business support services and how to use them. They weren't sure where to go for help or could not find services relevant to their needs.
- Need for more training and education programs tailored for different levels of entrepreneurial experience.
Among the challenges, however, were signs of optimism. Certain sectors, such as agri-tourism, appear to be poised for growth. And both individuals and communities remain committed to rebuilding regions hit hard by plant closings, farm losses and other economic problems.
Current Support System
North Carolina is fortunate to have a support system for small business development that has evolved through the efforts of the state university systems, community colleges, foundations and local non-profit organizations. Yet, this support system is uneven, fragmented, underfunded and, most important, sometimes confusing to the people it's supposed to serve.
The new statewide Business Resource Alliance has begun to address these deficiencies. Organized in November 2003, the alliance includes more than 50 business resource providers who have committed themselves to developing a comprehensive, integrated network of business services and to identifying and filling unmet needs. Their work has been accelerated by a grant from the W.K. Kellogg Foundation.
Summary
Clearly, rural communities will depend increasingly on dynamic and forward-looking "homegrown" ventures for their future prosperity. It is also clear that North Carolina must take steps now to put a system in place to ensure a full range of support for rural North Carolinians who desire to create and grow their own businesses -- and who can become a critical part of revitalizing the state's economy.
But services alone are not enough. With the establishment of the Institute for Rural Entrepreneurship, the Rural Center seeks to lead the way in creating a vibrant culture of entrepreneurship. A culture that respects and values those who create and grow their own businesses. One that encourages innovation and risk-taking. And one that recognizes the critical role entrepreneurs can play in revitalizing the rural economy.
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