Endeavor Report Calls for Focus on High-Growth Companies to Grow Southeast Michigan’s Economy
This article originally appeared on Endeavor Detroit’s website on 05/30/2019.
Endeavor Insight recently published a report identifying Southeast Michigan’s fastest-growing companies, and what those companies suggest about our region’s competitive advantages. The report calls upon regional leaders to direct more attention and resources to “growing our own” larger, high-value, entrepreneurial companies, which have been identified as key drivers for improving our region’s economy.
With support from the William Davidson Foundation, the report—entitled “Southeast Michigan’s Competitive Advantages in Entrepreneurship”—is one of the largest studies on local entrepreneurship ever conducted by Endeavor, and includes an analysis of more than 10,000 companies across the seven local counties surrounding the cities of Detroit and Ann Arbor.
The results presented in the report revealed four key conclusions:
Southeast Michigan needs new strategies to diversify its economy and create higher-paying jobs in growing industries.
Endeavor’s research found that a significant portion of Southeast Michigan’s economy lies in industries that have low or negative projected growth over the next several years. The region also remains overly dependent on a single sector, automotive manufacturing, which exposes residents to greater economic volatility than those in a more diversified economy.
Regional leaders should dedicate more resources to “growing their own” larger, high-value, entrepreneurial companies.
According to the report, U.S. metropolitan areas with the greatest income and productivity share a common trait—they all generate more of a specific type of business: local, entrepreneurial companies with 50 or more employees in high-value industries. However, during the last 15 years, Southeast Michigan has generated fewer of these valuable businesses than the most productive metropolitan areas. The report points out that about 10% of the enterprises operating in Southeast Michigan have 50 or more employees, but they have created more than 74% of the jobs in the community.
Southeast Michigan has a set of competitive advantages in entrepreneurship that can be found in six types of larger, high value, entrepreneurial companies.
The report recommends that the region leverage its existing strengths by targeting six types of firms. They include consulting firms, software companies, lending-based businesses and financial service firms, shipping and logistics businesses, marketing and branding agencies, and specialty food and beverage manufacturers. Endeavor found that these industries offer, on average, wages in excess of $76,500—much greater than the typical personal income of Southeast Michigan residents. Additionally, the study points out that high-growth entrepreneurial businesses, especially those that are younger, are more likely to hire underrepresented workers such as those without a college degree or formerly unemployed individuals.
Decision makers should use “Entrepreneur-Led Economic Development” to support the growth of existing larger, high-value, entrepreneurial companies and increase the number of new ones.
National data suggests that if Southeast Michigan could create 60 new larger, high-value, entrepreneurial companies, it would increase local GDP by over $5 billion annually. This growth would also increase average incomes of local residents by more than $1,200 per person. Endeavor’s report recommends decision makers support the growth of these companies by (1) avoiding being overly focused on increasing the quantity of relocation incentives, or new and small businesses; (2) dedicating more resources to support the founders of growing and scaling companies; (3) working to better understand the needs of experienced entrepreneurs who are leading larger, high-value companies; and (4) building stronger networks where those experienced founders are encouraged to share knowledge, social connections, and financial capital with upcoming entrepreneurs in the region.
Additional compelling data, detail on the criteria used to identify the region’s competitive advantages, as well as examples of local entrepreneurs working in each of the recommended industries can be found within the report.
Download the full report here.