Thursday, May 26, 2011

Minority Entrepreneurship and Community Development

By Jonathan Miller, Project Associate. 

Ethnic enterprises constitute an important source of job creation, innovation, and economic growth in our economy. However, ethnic entrepreneurship (primarily pertaining to Asian-, Black-, and Hispanic-owned enterprises) is often omitted from development strategies, or simply subsumed by broader discussions of business creation. In a paper that has been submitted to the Journal of the American Planning Association, my coauthors and I argue that ethnic entrepreneurship impacts communities in specific economic and noneconomic ways that are often overlooked.

Most recent statistics from the Survey of Business Owners show that between 2002 and 2007, the number of Asian-owned businesses grew by 40.7 percent to 1.6 million and the number of Hispanic-owned businesses grew by 43.7 percent to 2.3 million, in comparison to an 18.0 percent growth rate of all businesses. According to a 2009 Minority Business Development Agency report, minority-owned firms, between 2002 and 2007, outpaced growth of non-minority businesses in gross receipts and number of employees. The 2010 Kauffman Index of Entrepreneurial Activity, Asian and Latino adults were more likely to begin businesses in 2010, with Latino rates of entrepreneurial activity especially robust.

Scholarly research has shown how communities impact entrepreneurship. For example, coethnic communities often endow ethnic entrepreneurs with social networks, workforce, and market resources, which may be integral to a successful venture. However, less is known about how entrepreneurship transforms places than how it changes the lives of people. By comparing three communities with sizeable ethnic and immigrant business sectors – Buford Highway in Atlanta, GA; Sunset Park in Brooklyn, NY; Monterey Park in Los Angeles, CA – we are able to analyze how communities benefit.

Ethnic enterprises in Sunset Park, Monterey Park, and along Buford Highway reflect a diversity of histories and local experiences. However, commonalities exist that these businesses can accrue economic, social, physical, and political benefits to their respective communities. For example, ethnic businesses serve unmet market needs of certain neighborhoods and households, provide ethnic goods and services that appeal to both ethnic and non-ethnic shoppers, create job opportunities and generate tax revenues, revitalize and fuel the commercial development of abandoned communities, organize and promote social life and cultural diversity, as well as organize and contribute collective interest and voice in local policy and planning. The following table is an abbreviated version of the one appearing in the paper, but illustrates specific noneconomic contributions of ethnic businesses to a community.

Several policies can be effective bridges for the needs of ethnic businesses. First of all, local governments can partner business assistance centers with local non-profit agencies who have cultural and linguistic capacities in ethnic communities and with whom ethnic businesses are willing to work. These partnerships can advise potential and existing business owners about their business plans and better communicate commercial rules and regulations. Second, microlending institutions and microfinance organizations represent a powerful intermediary for financing needs, especially as many ethnic businesses may fail to qualify for larger loans. Third, local governments can use land-use design and marketing to promote ethnic business districts, especially as shopping destinations. As well, local development efforts should identify and involve ethnic merchants in local planning processes. Local governments and chambers of commerce should work to involve ethnic businesses as they truly represent an important driver of prosperity.

Tuesday, May 24, 2011

Help Wanted

By Ellen Anderson, Director of Research. 

If you have never checked it out, I recommend the Upjohn Institute’s Employment Research Newsletter. Their researchers do a good job of synthesizing complex issues into short research briefs. In last month’s edition, Randall Eberts asks the question “when will the labor market recover” and asks readers to consider the following. During the first 16 months of economic recovery since the Great Recession, “Job openings increased from 2.3 million per month to 3.3 million per month. However, hiring has remained flat, increasing by only 3.6 percent. How can job openings be increasing so much faster than new hires? Obviously, new openings are going unfilled, but why?” 

Eberts discusses the mismatch between skills demanded by employers and skills held by jobless workers, particularly in industries like manufacturing and construction which have undergone significant regional restructuring, the mobility constraints placed on workers due to declining housing values, and the link between duration of unemployment and ability to find employment. What the brief misses is an issue recently raised by Time magazine: jobless discrimination. The article “Jobless Discrimination? When Firms Won't Even Consider Hiring Anyone Unemployed” notes that when Sony Ericsson moved its headquarters to Atlanta, its online recruitment materials noted that no unemployed candidates would be considered. The Equal Employment Opportunity Commission has stated that discriminating against those who are currently unemployed is becoming business as usual for many corporations. 

Refusing to hire people on the basis of race, religion, age or disability — among other categories — is illegal. But companies that turn away jobless people as a group are generally not breaking the law — at least for now. Job seekers have long known, of course, that it's easier to land a job when you are still working. There are no hard data on discrimination against the unemployed. But there have been reports from across the country of companies' making clear in job listings that they are not interested in people who are out of work. Employment experts say other companies have policies of hiring only people with jobs — but do not publicly acknowledge their bias.

This is an issue many economists, researchers, and Washington politicos have missed. However, just a few months ago New Jersey became the first state to outlaw discrimination based on employment status. With the proven persistent gap between job openings and hiring, more states will likely follow suit. We need to be honest about what is really going on, this issue is not simply due to worker skill mismatch. There are also other issues at play.

Friday, May 20, 2011

Le Corbusier, Rejoice

By Matthew Tester, Project Associate. 

The big news out of Atlanta last week was the unveiling of Porsche North America’s plans to relocate their headquarters from Sandy Springs (north of City of Atlanta) to a site adjacent to Hartsfield-Jackson International Airport (south of the City). The move turned heads not only because such southward migration is extremely rare in Atlanta’s office scene, but because it marked a watershed moment for Aerotropolis, the mixed-use redevelopment project on the old Hapeville Ford factory site. Aerotropolis is the next landmark project of the Jacoby Group, developer of the nationally recognized Atlantic Station in midtown Atlanta, and carries the nameplate of a development pattern that some urban theorists expect to shape the future.

The aerotropolis concept was developed over two decades a go by John Kasarda, a business professor at UNC-Chapel Hill. It is a place planned around an airport, where the functions and flows of global commerce are manifest, and is rooted in the historical notion that transportation shapes urban development. In a global economy increasingly connected by air travel, the airport becomes the center of location, infrastructural, and design considerations.  Detractors warn that it is the next iteration of Le Corbusier’s vision of the city as “a machine for living,” where human culture plays second fiddle to economic utility, and suggest that peak oil and climate change will undermine its economic viability anyway.  Proponents note that the realities of the global economy have already pushed air travel to the front lines of economic development and that competition dictates that maximizing efficiency is critical to a region’s prosperity.

Jacoby’s Aerotropolis is a bold vision for Atlanta’s airport zone – a mixed-use development with 2.1 million square feet of office space, a hotel, and retail on 130 acres. It will re-purpose the dormant Hapeville Ford site and bring jobs and prestige to Atlanta’s south side. Although the recession has put the project a year behind schedule, the Porsche announcement is a massive shot in the arm. In addition to the 300 employees from its Sandy Springs headquarters, Porsche is consolidating and relocating the 100 employees in its Chicago-based finance and insurance divisions. Their 26-acre campus will include a headquarters building, a 1.6-mile test track for visitors, and marketing attractions like a restoration shop and a restaurant. A powerful and prestigious brand like Porsche is expected to generate interest from other multinationals and add credibility to the concept.

While Memphis and Louisville have leveraged their status as FedEx and UPS hubs, respectively, to launch aerotropolis planning efforts, the Porsche announcement pushes Atlanta to the head of the pack (at least in the US). It suggests that airport noise and overhead flight paths are no longer deal-breakers for sophisticated office tenants. And, on a deeper level, it underscores the fierceness of global competition by demonstrating how it can shape urban form. Whether all that makes you nod your head in assent or shake it in lament, Le Corbusier told you so.

To read the announcement: Atlanta Business Chronicle story

To read an excellent interview with Aerotropolis co-author Greg Lindsay: BLDG BLOG interview

Tuesday, May 10, 2011

California – Where the Dream Went Wrong

By J. Mac Holladay, Market Street founder and CEO. 

This past week I traveled to beautiful Monterey, California to speak to the California Association of Councils of Governments. The drive from San Francisco passes Silicon Valley and Stanford University and is beautiful all the way to the waterfront in downtown Monterey. No state has suffered greater job loss during the Great Recession than California. Every MSA in the state has an unemployment rate above the US average. Many have lost over 40% of their home values. The state’s budget disaster is well known across the country.

Interestingly, as I was preparing talk on economic development in these difficult times, The Economist magazine featured California on its cover and with a 15 page special section called “The People’s Will.”As it always does, when The Economist dedicates the time and effort to produce a special section, the report is complete and thoughtful. That is certainly the case with this report.

The clear blame for California’s problem lies directly with the long history of “direct democracy.” Yes, the beginning of the end of the California miracle was Proposition 13. The magazine chronicles the wave of ballot initiatives over the past 30+ years that have made the state unmanageable. It has gotten so ridiculous that neither the Governor nor the Legislature has any power to set things right. In fact, they have little control over serious budget or policy matters. America was created to be a representative democracy not an extreme direct democracy. The mutation began with Proposition 13 in 1978 and has continued unabated until now. Every successful initiative is irreversible. No one can change it. An entire “initiative culture” has been created over time. As The Economist states, “more than 100 initiatives of the past two decades promised something for nothing or, such as cutting a tax or expanding a service.” More than two thirds of those passed and now the Legislature has control over only 10% of the budget. 

Sadly, one key victim of all this is California’s world class education system. Once the nation’s finest (and one of the lowest cost) university system is being ripped apart and its K-12 system is now 47th in per pupil funding. It ranks last in pupils per teacher and 42nd in graduation rates.

John Fund of The Wall Street Journal wrote a recent column about jobs in California and Texas that completely misses the point. I guess Mr. Fund is too busy to understand California’s governance problem or to read The Economist. He blames everything on regulation and the tax structure. Not only is his answer too simplistic, he apparently has no idea how it got that way. 

While a constitutional convention may work in a perfect world, it is probably too risky in this environment. So what California has begun to do is to turn the system on itself. The Think Long Committee for California is on the right track. They are working on a coherent set of initiatives for 2012 and beyond that will reverse the damage a step at a time.

In spite of all its problems, California remains our largest and most populous state. Its economy is rebounding with 90,600 net new jobs in the first quarter of 2011. Employment went up 1.2% faster than the US average of 1.0%. The unemployment rate dropped to 12% and technology jobs went up 5.3% and outpaced all other sectors. The nation needs a prosperous and proactive California. Let’s hope the dream can become reality again.

Tuesday, May 3, 2011

The Many Faces of Incubation in Durham, North Carolina

By Matthew Tarleton, Project Manager.  

Oh, Durham, home to Duke University. If you’re a college basketball fan and you didn’t attend Duke, then a string of curse words are probably running through your mind right now. If you’re a college football fan, well, you may have never heard of Duke University.  

Raised as a Tar Heel that attended school in Durham, I will always jump on an opportunity to take a shot at Duke. And I couldn’t possibly write anything glowing about Durham without first getting that out of my system. So with that behind us, I must say that Durham has come a long, long way since my last days as a resident of the Research Triangle around the turn of the millennium.  

Over the course of the last ten years, a lot has changed in Durham. In the late 1990s, Downtown Durham was dead. D.E.A.D. My best friend owned and operated a deli in the first floor of the largest building in Downtown Durham. He ran a great business and had many loyal customers, but (no offense, John) I think that was partly due to the fact that his deli was the only place to buy lunch downtown. Today, he’d have a lot more competition.  

Since the mid-1990s, a number of new developments have reshaped Durham as young people continue to flock to the Research Triangle. The new Durham Bulls Athletic Park opened in 1995, a catalytic development that supported the redevelopment of Durham’s many abandoned tobacco warehouses (The American Tobacco Project) and the emergence of new entertainment options such as the Durham Performing Arts Center, the largest performing arts center in the Carolinas. Downtown still has its challenges, many born from the recent financial crisis and its affect on the development community. That building that my friend’s deli once occupied has been vacant for years now as a developer attempt to convert the 17-story art-deco tower into a hotel and spa. Like most other urban cores, office vacancy has risen. But entrepreneurs, like my friend John, are finding that these challenges have given rise to many new opportunities in and around Downtown Durham.  

If The Cookery had been established in the late 1990s, I’m rather confident that my friend John would have found a way into the facility. Today, John runs the kitchen for New York City’s most successful and celebrated wine bar. He’s worked in Michelin-starred establishments and built an enviable career for himself in a City where even the most driven and talented individuals fail on a daily basis. But a decade ago, he was running his deli, operating another small restaurant on the edge of downtown, and constantly looking for new and exciting business opportunities, from property management to event promotion to owning a record store. And all of this came before the age of 25. He was the type of young entrepreneur that every community craves. And while the Big Apple came calling, I can’t help but wonder if he might have stayed in Durham if The Cookery and other incubators were established at the turn of the millennium.  

The Cookery is one of many new incubators that have emerged in Durham in recent years. It is a self-described “commercial food production facility with a small food-business incubation program.” Its primary goal: to lower the risk threshold for opening a culinary business. The Cookery provides a state of the art kitchen and bakery to “members” who rent low-cost space to experiment with ideas, launch their catering business, and support food truck operation. Beginning this fall, The Cookery will start offering courses in culinary technique and restaurant management, as well as hands-on design and marketing services to help entrepreneurs launch their business.  

American Underground is shared office space that is home to multiple tenants which have access to low-cost space, shared conference rooms, and a shared break room and arcade. It is not a traditional incubator, but rather, it is envisioned as a new corporate campus that enhances networking opportunities and connects entrepreneurs to other forms of assistance. Many of its tenants are small technology companies that are developing new concepts for mobile and web-based applications. However, American Underground is also home to the Council for Entrepreneurial Development(CED), Joystick Labs, and LaunchBox Digital.  

CED provides “education, mentoring and capital formation resources to new and existing high-growth entrepreneurs through conferences, forums, and workshops on entrepreneurial management and finance.”  Joystick Labs seeks to “identify, seed, accelerate, and launch the next generation of best and brightest digitally distributed video game entrepreneurs” by providing early-stage seed funding, mentorship, and education. There are currently five companies operating with Joystick Labs’ assistance.  LaunchBox Digital is a “seed-state investment program” that provides hands on mentorship and capital to launch new startups. Each year the accelerator program selects 7-10 companies out of hundreds of applicants and provides them each with $20,000 in seed capital, three months of intensive mentorship, and the opportunity to pitch their ideas to more than 100 venture capitalists and angel investors at the end of the program. The program has been tremendously successful with participating companies receiving millions of dollars in additional capital after completing the program.  

Bull City Forward, another new and visionary initiative, is a public-private partnership with numerous founding funders. Unlike most incubators which focus on technology companies, Bull City Forward is a social entrepreneurship incubator, supporting social entrepreneurs develop solutions to social problems through “peer networking, enhanced collaboration, mentorship, skill-building, support services, access to talent, and access to capital.” Bull City Forward operates on a membership model with a tired structure providing a variety of benefits to social entrepreneurs from a simple support service membership ($25/month) to low-cost office space ($250/month).  

And last but not least, the Durham Chamber of Commerce and Downtown Durham, Inc. have recently launched their Bull City Startup Stampede initiative. The initiative invited startups from Durham and across the country to apply for two months of free downtown office space, a business “boot camp,” free high-speed wireless, and many other benefits. Eleven startups were chosen from over seventy applicants. Thanks to contributions from partners throughout the community, the initiative will only cost the Chamber $8,000 over the two month period. Participating companies were selected in late March, and Durham hopes that all eleven can be steered to one of the many aforementioned incubators for hands-on assistance and access to capital following completion of the two month program.  

Each of the aforementioned incubation initiatives have been launched in the last three years. And while many communities are beginning to finally recognize the role and impact of small businesses in their community, and aggressively invest in them, few are doing it at the scale and scope seen in Durham. And few are doing it in such creative ways. A social entrepreneurship incubator? An incubator for food trucks? There’s a lot that other communities can learn from Durham. And for my friend John – if you’re reading – maybe a culinary incubator is your next foray. Atlanta is calling you!