developing a regional plan for economic ... - innovation...

Developing a regional plan for Economic Development in

Newfoundland: Innovation and Entrepreneurship: Unlocking Regional

Potential

Benson HonigTeresca Cascioli Chair in Entrepreneurial Leadership

McMaster University, Hamilton, Ontario Canada

[email protected]

http://www.degroote.mcmaster.ca/about/accredits.html


A successful economic development strategy must focus on improving the skills of the area's workforce, reducing the cost of doing business and making available the resources business needs to compete and thrive in today's global economy.

Rod BlagojevichFormer Governor of Illinois



Canada's working-aged population per senior citizen over time, and the same ratio by province

Canada’s working age population per senior citizen over time, and the same ratio by province



Provides half of all net new job creation

Contribution to improved sector productivity

Major source of economic innovation

Associated with economic growth

Significant work career option for many

Mechanism for immigrant social integration

Universal route for upward social mobility

3

Why care about new

firms?



What is Entrepreneurship?

• The entrepreneur

• Innovation

• Organization creation (my own view)

• Creating value

• Profit or non-profit

• Growth

• Uniqueness

• The owner-manager

3



What is driving the field of entrepreneurship?

•Public Policy actors seeking economic development and job creation (Silicon permafrost)

•Community Organizers seeking legitimacy and resources (includes consultants, advisors, etc…) as well as planners (e.g. Richard Florida).

•Entrepreneurs seeking assistance and markets

•Business schools and professors of entrepreneurship seeking reputation, resources, etc..



The $10,000 Question

•How to create more “silicon valley” engines of growth?

•This is the WRONG $10,000 question!



Silicon Atlantic/Eastern Canada is an unlikely prospect

•Silicon valley grew organically, not with government support

•There was no “venture capital” when SV began

•Industry associations did play a role

•Failure is OK – even expected (failure Con)

•Universities in region played a key role

•Huge impact of immigrant labour on valley development



Start-Up Nation• First time I visited in 1978. Hyperinflation of 400% p.a.

• Mostly exporting agriculture, textiles to Europe

• Labor Fed. Wanted labour intensive manufacturing

• Liberalization of market – reduced gov’t role

• Wars tax economy – but immigration supports it

• Moved from lowest income inequality to highest in dc

• BIRD fund, Incubation, use of immigrant HC for Hi Tec

• Joins OECD

• TEVA, Intel, IBM, Motorola, IAF, Rafel, etc..

• BUT culture unique: Military service



Approximation of Hamilton’s labour market transition: 1861-present

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1861

Apr-09

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Future prospects

•Economists predict future wage declines in next 15 years

•Within 30 years, only 2% of the world’s current labour market may be needed to produce the goods we use.

•Disappearance of labour a key factor of production, and a key social issue



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Grass roots entrepreneurship is alive and well in Canada



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http://www.gemconsortium.org/

Economic development drives entrepreneurship's role in the economy

Innovation-driven(advanced)economies

Factor-driven(undeveloped)

economies

Efficiency-driven(developing)economies




Entrepreneurial Employee Activity vs Total Early Stage TEA

JapanItaly

GermanyFrance

BelgiumSpain DenmarkFinland Norway

Slovenia IrelandSweden

SwitzerlandLuxembourg

GreeceTaiwanAustriaEstonia

Netherlands

PortugalPuerto Rico

United KingdomSlovakiaSingapore

Canada AustraliaUnited States

Trinidad & Tobago

Qatar

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Employee Entrepreneurial Activity (EEA)Percentage of Adult Population (18-64)

EEA Average 6.01%

TEA Averate 8.54%



Across 34 GEM countries in 2004, 66% of capital required for new ventures was provided by the entrepreneurs themselves.Most of the rest was provided by “love money” – relatives and friends.

Exp. Exp

From GEM 2004 Global Finance Report

© 2008 The Global Entrepreneurship Research Association.



For Inc. 500 firms

16% started with less than $1000

42% started with less than $10,000

58% started with less than $20,000

12% of them received financing from business angels somewhere along the way

88% never received angel financing!

33% raised startup capital from family and friends



Business Discontinuance: Part Of The Entrepreneurial Process

• For those who discontinued a business in the past 12 months, what is the main reason?

• Exits need not be failures: reasons could be positive, negative or personal

• People who have discontinued a business in the past year will often be involved in new entrepreneurial activities

© 2008 The Global Entrepreneurship Research Association.

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Middle & Low Income

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Personal reasons

Retirement

Exit was planned inadvance

Problems gettingfinance

Business not profitable

Other job or businessopportunity

Opportunity to sell



Cultural components of Entrepreneurship

• Canada is historically a commodities driven country, founded by a large firm (Hudson’s Bay)

• Canadian cultural norms are to get a good job in an insurance company, a summer cottage, and go golfing

• Silicon Valley is NOT bulging with golf courses (Scotland is!)

• Entrepreneurship requires a cultural transition: think of Xerox park, nearly “giving away” the shop!



Perceived Opportunities for Start-up is an Issue for Seniors

0%

10%

20%

30%

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Opportunities Available Personal Capabilities Fear of Failure Prevents

Entrepreneurship Perceptions

DevelopedAverage

18-54

55-64

65-99



Population and immigration While Canada has grown by over 10% in the last decade,

Newfoundland has grown by 3%, and is well under its

peak of 1992 (580,000 vs 527,000).

Trend in net out-migration for 2014, only St. Johns

growing; Projections show steady for 20 years.

Not to worry: estimates show 515 left province, but a

whopping 253 international migrants arrived this year!

Oil production down 5.7%$ in 2014, further reductions this

year.

Hazard of oil’s curse



Where are immigrants going?2010 2011 2012 2013 2014

NF .3 .3 .3 .3 .3

PEI .9 .7 .4 .4 .6

N.S. .9 .9 .9 1 1

NB .8 .8 .9 .8 1.1

Quebec 19.2 20.8 21.4 20.1 19.3

Ontario 42.1 40.0 38.4 40.0 36.8

Alberta 11.6 12.4 14 14.1 16.3

BC 15.7 14 14.1 14 13.5

SAS 2.7 3.6 4.3 4.1 4.5

Manitoba 5.6 6.4 5.2 5.1 6.2



Where do they go?

0 5 10 15 20 25 30 35 40 45

NF

PEI

N.S.

NB

Quebec

Ontario

Alberta

BC

SAS

Manitoba

Immigrants Canada 2010-2014

2014 2013 2012 2011 2010



Click to edit Master title style

Only 10% of population growth will

be due to births



Entrepreneurial participation varies by age around the

world


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Latin

America &

Caribbean

Middle East

& North

Africa

Sub-Saharan

Africa

Asia Pacific

& South AsiaEurope –

EU28

Europe – Non

EU28

North

America

18 - 24 years

25 - 35 years

35 - 44 years

45 - 54 years

55 - 64 years





High growth - .9% pa; medium - .75%




Toronto

Mars

Founders

2014



Toronto




Income 2010 Business Class

Immigrants by region, date of arrival,

1986-2010



Comparative data: Canada Canadian immigrants have a higher tendency to

launch new ventures than natives - .35% vs. .20%

(BDC)

Almost half of self employed male immigrants work in

3 industries: Construction, Professional scientific and

technical services, and tansportation and

warehousing.

Home ownership increases probablity of self

employment 3.1-4% for immigrants, only 1.6-2.6% for

natives



Immigrants by category: Halifax and

Saint John’s

Halifax Saint John’s



Long Term Community Strategic Contingency

Planning

.



THE UNTOLD STORY OF BUSINESS PLANNING IN NEW ORGANIZATIONS *• Why plan?

• Who plans?

• Who doesn’t plan?

• Who should plan?

• Who should not plan?

• *Honig, B.(2004) Entrepreneurship education: Toward a model of contingency-based business planning. Academy of Management Learning and Education 3(3) 258-273

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Questions for consideration

• The “Holy Grail” question: How can we most successfully enhance entrepreneurship regionally?

39



Some successful communities

• Taiwan and Israel were peripheral economies after WWII

• By 1990, there was more hi-tech from each of them than from Germany or France

• China and India are rising hi-tech nations

• Foreign born Transnational Entrepreneurs established these environments: brain circulation (not brain drain)

• Carefully selected government assistance helped facilitate certain technologies



Why Eastern Canada is a good place for entrepreneurship

•Great location; close to Europe

•A few very good Universities

•Excellent community colleges

•High quality of life – low cost of living

41



Obstacles regarding entrepreneurship in Eastern Canada

Tradition of large firms & government Lack of vision and coordinated community activity

Poor transportation infrastructure

Weather



Possible methods of enhancing entrepreneurship in E. Canada

Programs that provide role models

Programs that provide mentors

Networking facilitation

Entrepreneurship-friendly community

Attract entrepreneurial immigrants: make E.Canada a “welcoming community” (immigrants in key positions)

Encourage entrepreneurial students to attend your institutions and start new businesses

Improve transportation infrastructure- from bike lanes to easy transit to major cities



We have no reasonable choice –Entrepreneurship is our best

option!!Large Manufacturing firms will NOT be attracted to

E. Canada!

Your population will continue to age without significant immigration

Your labour market expectations, city management, and political processes need to

reflect current and future conditions



Where is the growth?

•Small firms now generate most employment growth, not large firms.

•Small businesses (firms with less than 100) are generating 4 out of every 5 new jobs

•Community banks a possible solution to lend money to small businesses (BDC)

•Entrepreneurship critical to community development!!



Neighbourhood Renewal

• Even the bleakest of neighbourhoods possess networks of community groups and resident leaders with local pride

• Examples of my research in Jamaica – community groups were through store-front churches

• Many community groups focus on surviving – trying to get them to join a provincial or national framework may be difficult



Process for Community Renewal

• Identify disadvantaged communities, neighbourhoods, or individuals

• Institutional support varies according to circumstances, as does timing of intervention

• Objective to enable high levels of interaction between essential networks

• Create a coalition of interest within communities and mutual agreement with key players regarding involvement in a common enterprise




•Define criteria for communities

•Establish implementation measures

•Evaluation measures (yardsticks) are essential

•Encourage synergy between different organizations, provincial, federal, NGO…




• Community planning is how government comes together with other organizations to plan and provide for the well being of a community being served – to provide a strategic framework for activities of organizations engaged in capacity building and regeneration

• Empower local government

• Generate economic regeneration

• Maximize social inclusion

• Create environmental sustainability




• Partnerships between organizations:• Defensive partnerships when you need to secure

cooperation in order to continue operation• Offensive partnerships when an agency wishes to

achieve things beyond their own competence• Coercive (Shotgun) relationships when a funding

body imposes the partnership as a condition of funding



Scottish Community Turn-Around

• community “dis- entrepreneurship

• Strong patron-client relations were found to negatively impact the formation of diversity and meritocracy necessary for entrepreneurial environments to thrive.

• inward orientation that negatively influenced investments in infrastructure

• Path dependent processes were found to hold sway regarding the stability of political/social norms.



Scottish Community Turn-Around

• New Mayor takes activist approach

• Avoids traditional community council and organizes community redevelopment network

• Brings in wide variety of stake-holders

• Sells vacant city hall to consortium of artists to set up lofts, studios, and galleries

• Supports a former contractor/entrepreneur to reinvigorate and re-create a historical industry in an ecologically sustainable manner



What we can learn from others?• Spend smarter, and strategically• Get the mayor and government officials committed

and make their commitment known to public agencies• Get public agencies to cooperate• Get neighbourhood residents and business people to

take ownership of program• Leverage public money by spending money and time• Private investment necessary – both for profit and

not-for-profit• Think comprehensively – address every aspect of the

neighbourhood life – not just a single aspect



developing a regional plan for economic ... - innovation...

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