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Week of May 29 - June 4, 2006

Welcome to the National Dialogue on Entrepreneurship, an initiative of the Public Forum Institute made possible by a grant from the Kauffman Foundation of Kansas City. Through NDE-news, we bring you short summaries and analyses of various trends driving the innovation economy. Subscribe now to receive your weekly copy. Archived issues are available online. Links to the day's entrepreneurship stories from across the nation and around the world are posted each weekday on the NDE main page - bookmark it and stay informed about the latest entrepreneurship news.

New Kauffman Index Presents State of Entrepreneurship in America

A national assessment of entrepreneurial activity by the Ewing Marion Kauffman Foundation provides some eye-popping numbers. The new report shows that there were 464,000 people creating new business each month in 2005 – a rate of 0.29 percent of the total adult population. Besides year-to-year changes in entrepreneurship activity, the Kauffman Index -- defined as the percent of the adult U.S. population of non-business owners who start a business as their main job each month -- captures long-term trends. While the 2005 figure is actually down slightly from the previous year, it is equal to the average rate for the past ten years. Other highlights include: immigrants outpace native-born Americans (0.35 percent to 0.28 percent); African-Americans were the only major ethnic or racial group to experience an increase over 2004 levels (0.24 percent to 0.21 percent); and, increases in the Northeast and Midwest coupled with decreases in the West and South are closing regional gaps.

Conducted by Robert Fairlie of the University of California at Santa Cruz, the Kauffman Index of Entrepreneurial Activity is the only study to measure business start-up activity for the entire U.S. adult population at the individual owner level. Further information about the Index report can be downloaded at
http://www.kauffman.org/items.cfm?itemID=703 

The Latest on State Economic Development Initiatives

The nation’s governors are getting serious about promoting innovation and entrepreneurship. That’s one important message in a new issue brief from the National Governors’ Association (NGA). The report summarizes recent trends in state-led economic development initiatives. A diverse set of program offerings can be expected from fifty different states, but a couple of key themes do emerge. Most of the new initiatives focus on supporting “clusters of innovation,” i.e., “fast growing groups of businesses that share markets, labor, new ideas and products.” Because of an improving economy, governors have had more funds to invest in economic development. Tax revenues were up in every state, and forty-five states increased expenditures in 2005. The report highlights dozens of new initiatives such as efforts to create state entrepreneurship centers (e.g., Illinois, Wisconsin), to provide tax credits to angel investors (e.g., Arizona), or to streamline regulations for small businesses (e.g., Arkansas, Virginia). The report’s appendix includes short descriptions and web links to dozens of programs.

To access the May 2006 National Governors’ Association Issue Brief, Enhancing Competitiveness: A Review of Recent State Economic Development Initiatives—2005, visit http://www.nga.org/files/pdf/0604ENHANCECOMPIB.pdf.

Entrepreneurial Communities in North Carolina

North Carolina is one of the states where much of this innovative economic development activity is underway. A new study from the North Carolina Rural Center provides an update on ten community-based projects designed to nurture entrepreneurship in the state’s smaller towns. In 2004, the state provided grants for a variety of innovative demonstration projects. For example, in North Carolina’s coastal Carteret County, the program supported training for entrepreneurs with interest in boat-building or aquaculture. In Surry County (northwest North Carolina), local leaders sought to expand on the region’s legacy of local crafts people and an emerging wine industry. Overall, the pilot projects were quite successful—they helped create 49 new businesses and 75 jobs in very rural parts of the state. The report details these accomplishments, and offers a set of useful “lessons learned” for effective rural entrepreneurship strategies.

To access the 2006 North Carolina Rural Economic Development Center report, “Creating Entrepreneurial Communities: Lessons from Ten Rural Demonstrations in North Carolina,” visit
http://www.ncruralcenter.org/pubs/comm_demo_report.pdf.

Building Global Innovation Networks

As innovation becomes a more global phenomenon, the ability to build successful global innovation networks becomes more important. New research from Booz Allen Hamilton and INSEAD, the international business school, offers tips on how to construct and sustain these networks. The researchers surveyed R&D leaders from 186 companies in 17 industrial sectors and 19 different countries. The survey confirms the internationalization of corporate R&D. Since 1975, the share of R&D facilities based outside of a firm’s home country has risen from 45% to 66%. This number is expected to rise to 77% within the next few years, as new sites in China and India begin operations. Managing these far-flung networks is hard work. The most effective networks are those that focus on appropriate incentives for research staff. These researchers should be rewarded for working in different locations. By gaining this understanding of local customs and markets, the researchers then serve as links in the global network and strengthen the firms’ overall innovation culture.

To access “The Well Designed Global R&D Network,” by Thomas Goldbruner, Yves Doz, Keeley Wilson, and Steven Veldhoen, visit http://www.strategy-business.com/resiliencereport/resilience/rr00032.

Innovation in Low-Tech Sectors

Innovation is not just the province of high technology businesses; low technology businesses can innovate, too. A new study from the Germany-based PILOT (Policy and Innovation in Low-Tech) research consortium reviews what it takes for “old economy” industries to be innovative and entrepreneurial. The PILOT project included researchers from nine European countries who sought to better understand the needs and economic impact of non-research intensive industries. Not surprisingly, their final report notes that government policies are often too weighed in favor of science-based innovation and high-technology industries. This bias occurs even though most growth and employment is still generated by low-tech sectors. They note that much innovation occurs not through classic R&D activity, but through a unique confluence of organizational practices, knowledge management and human resources. The researchers note that a region’s “innovativeness” is dependent on its ability to support interrelationships between mature low-technology sectors and emerging high technology sectors. Finally, they predict that Europe’s future economy will not emerge via a replacement of low-tech sectors with new high-technology industries. Instead, a complex blend of “technologies of various vintages” will emerge, with change being driven by internal transformations as opposed to external competitive pressures.

To access the 2006 PILOT Consortium report, Peculiarities and Relevance on Non-Research Intensive Industries in the Knowledge Economy, by Gerd Bender, visit
http://www.pilot-project.org/publications/finalreport.pdf. 

Report on Youth Science Achievements

Various proposals to improve the quality of math and science education in the US have been highlighted in the past several months by NDE-news. The latest data on science education from the National Assessment of Educational Progress (NAEP) indicates why these bills are needed. This latest report notes that, since 1996, American middle and high school students have shown no improvements in their knowledge of science. Younger students are performing better, but this improvement stops at grade 8 and never resumes. Overall, nearly half (46%) of high school seniors scored below the level of basic competency in science. The NAEP results are only one measure of science education, but the study does raise important concerns. The causes of this poor performance are complex. One potential factor cited by experts is the 2001 “No Child Left Behind” law that has, in their view, emphasized reading and math at the expense of science. Few states include science in their educational testing efforts. However, those states that do use such science education testing (e.g., Kentucky, South Carolina, Virginia) did show improvements in their performance on the NAEP assessments.

To view the 2005 National Assessment of Educational Progress National and State Science Report Cards, visit http://nationsreportcard.gov/science_2005/.

National Supporter of Entrepreneurship Award

The Ewing Marion Kauffman Foundation is accepting nominations for the Supporter of Entrepreneurship award, presented each year during the national Ernst & Young Entrepreneur of the Year awards ceremony. Past winners are individuals who have made outstanding contributions to America's entrepreneurial spirit or helped entrepreneurs become more successful. Eligible nominees are individuals who have consistently contributed time, money, encouragement, and/or skill development to further the cause of entrepreneurship. Nominees need not have founded a company (or organization) and may come from the corporate world, non-profit organizations, or any level of academia.

Nominations for 2006 are due on or before June 30, 2006. For additional information, download a copy of the nomination form for the Supporter of Entrepreneurship award at http://www.kauffman.org/item.cfm?item=676.

Correction: Last week’s story titled ‘Sarbanes-Oxley, Round ???’ correctly noted that the SEC recently rejected exemptions for smaller public companies. However, the third sentence should have read, “The SEC plans to implement a number of steps to improve Sarbanes-Oxley implementation but will not support sweeping exemptions for smaller public companies.”
The correction has been made in the NDE-news archives available at www.publicforuminstitute.org/nde.

Kauffman Foundation    The Public Forum Institute

National Dialogue on Entrepreneurship
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Mark Marich, Editor

All stories © 2006 The Public Forum Institute
Content from this newsletter may be reproduced for non-commercial purposes with proper attribution to the National Dialogue on Entrepreneurship and a link to www.publicforuminstitute.org/nde. 

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