Entrepreneurship exercise in Indiana is sluggish, Brookings report finds

0
264

The housekeeper Shamekka Stark from 3-year-old Faith Filled Hands helps client Ray Garcia learn to use his computer. Indiana has fewer new businesses than the US average. (IBJ Photo / Eric Learned)

When Indianapolis-based Glenna Taylor founded her personal care agency Faith Filled Hands in 2017, it was the fulfillment of a longstanding dream.

“I always thought, ‘Why work for someone else and make them millions when I can work for myself and make millions?'” Taylor said.

She had worked as a medical assistant for three years, then as a certified nursing assistant for 14 years before taking the step of opening her own business. The company, which provides home assistance such as cooking, housework and personal hygiene at home, employs 20 people (down from 32 before the pandemic).

Taylor

Taylor has bigger ambitions too – she is working to open a continuum of care facility that will provide both assisted living and nursing care to residents and hopes to start building this project within two years.

Indiana lacks entrepreneurs like Taylor – and that fact is having a bigger impact on the Indian economy, according to a new report from the Brookings Institution, a public policy think tank.

The Indiana GPS: Strategies for Resilience report found that new business creation activity in Indiana is lower than in many other states. As a result, the state is not as well positioned as it could be to recover from the economic downturn.

Wall

“New business creation and entrepreneurship are a source of agility,” said Mark Muro, co-author of the report and senior fellow of the Brookings Institution’s Metropolitan Policy Program. “This problem shouldn’t be ruled out. This is a way to move through a difficult time. “

Rick Proctor, Executive Director, Entrepreneur Services and Business Ownership Initiative at the Indy Chamber, said entrepreneurs help an economy adapt quickly when conditions change. “Small businesses spin like no other. … you don’t have the luxury of waiting. “

As an example, Proctor said, his office was helping a small business start a home grocery delivery service when the pandemic hit last year.

proctor

However, more people work for older, established companies in Indiana than in many parts of the country.

Almost 40% of Indian companies are at least 16 years old and these companies employ around 80% of the state’s workforce.

By comparison, 31% of the country’s companies are 16 years or older and employ around 75% of the country’s workforce.

At the same time, only 30% of Indian companies are 5 years old or under and employ 8% of the state workforce. Nationwide, 36% of companies are 5 years old or younger, and only more than 10% of the workforce are employed in these companies.

Maxim

Entrepreneurship is even lower in the minority population of the state. According to the report, minorities make up 21% of the state’s population, but they only own 12% of Hoosier businesses that are under 2 years old.

“People of color in Indiana don’t start businesses at the rate expected, even given their proportion of the population,” said Robert Maxim, a Brookings research associate who co-authored the Indiana GPS report.

Challenges

And it’s not just Brookings who sees Indiana’s lack of entrepreneurship.

“The ecosystem here, the entrepreneurial climate, exists, but I find it hard to say it’s booming,” said Nick Mmbaga, assistant professor of entrepreneurship and innovation at Butler University.

Mmbaga

Mmbaga, who lived in the Tennessee cities of Nashville and Knoxville before moving to Indianapolis in mid-2019, offered several possible reasons for Indiana’s sluggish entrepreneurship.

One cause, he believes, is cultural. “We can think of Silicon Valley and Palo Alto and San Francisco and these [entrepreneurial] puts. These are places with actors and systems that tolerate risk and failure. They celebrate it to some extent, and I’m not sure if that’s the case here. “

Indiana’s relative lack of immigrants could also be a factor, Mmbaga said. According to the American Immigration Council, only about 5% of the state’s population were born outside the country. Nationally, 14% of US citizens are born overseas.

Access to capital can also be challenging.

Indiana has less seed capital – critical to new businesses but considered risky by banks – than many states, said David Johnson, CEO of the Central Indiana Corporate Partnership. The group commissioned Washington, DC-based Brookings, with the assistance of Lilly Endowment Inc., to compile the Indiana GPS report.

New businesses also play other important roles that go beyond just economic resilience, Johnson said.

Johnson

They can be a major source of job creation, especially for people facing employment barriers such as lack of transportation or a history of incarceration.

“More people have more access to small business jobs than large companies,” said Johnson.

Small business owners, he added, tend to hire people through face-to-face networking. This means that the path to employment with a startup may be easier than with a large company with a more complex hiring process.

“It may be easier for people to get into a smaller setting with people they know,” Johnson said.

Startup activities can also benefit Indiana’s larger, more established companies, he said. “The bigger companies will have more vitality when they are in a more active landscape.”

According to Johnson, a mix of larger and smaller companies in a given industry helps build a strong industry ecosystem, including a skilled workforce. The startups can also act as local suppliers for the established companies and build a local supply chain that makes it more attractive for the big companies to keep doing business here.

“Proximity is still important in the virtual world,” he said.

Try to help

Numerous companies are working to promote Hoosier’s entrepreneurship.

The Indy Chamber stopped its business coaching activities at the beginning of the pandemic and instead turned to a fast-reacting loan program for companies affected by COVID-19.

The board resumed coaching earlier than expected, Proctor said, as people showed renewed interest in starting new businesses in April and May. “Dozens of people have taken these courses in the past nine months.”

The chamber is also working on a pilot program in conjunction with Indiana University’s Kelley School of Business that will allow the chamber to increase its coaching capacity, Proctor said.

In 2019, the Chamber’s Business Ownership Initiative became a government-certified community development financial institution, giving the organization access to more sources of funding and enabling it to receive larger grants for its work.

The organization has also partnered with local banks to improve business access to capital, especially for minority entrepreneurs, Proctor said.

At CICP, the BioCrossroads life sciences initiative and TechPoint technology initiative actively promote entrepreneurship in their respective industries, Johnson said.

Larger companies are also a source of entrepreneurship, both within their walls and through creating related startups, he said. He cited Eli Lilly and Co. as a prime example. “Much of the innovation comes from spin-out opportunities, spin-out molecules from Lilly.”

Johnson also pointed to the Indiana Economic Development Corp.’s entrepreneurship initiatives. and the university’s technology transfer programs, which help entrepreneurs find commercial applications for their innovations.

“I think there are a number of deliberate efforts going on right now,” he said. “We need more such efforts.”