How To Help Rural People In The United States

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1 Entrepreneurial Policy Inventory An Environmental Scan of Entrepreneurial Policy in Kentucky, Ohio, Tennessee, Virginia and West Virginia April 2004 Prepared by: Voinovich Center for Leadership & Public Affairs at Ohio University Ann Davis Weber, Graduate Public Service Associate Contact information: Robin Stewart

2 Entrepreneurial Policy Inventory Page 2 of 20

3 Summary The purpose of this document is to provide a quick summary and reference for those who are interested in state policies regarding economic development and entrepreneurship. The lists contained here by no means represent the scope of activity taking place within a particular state. Rather, it is hoped that the reader will be able to use these lists as a starting point for further research. This piece was prepared for the members of the (CAN), and therefore focuses on those states in which CAN member organizations are located. It is intended to facilitate a discussion between the members about the important policies and programs that are operating in each state. We have tried to capture the overall philosophy behind each state s economic development strategy. What we have found is that these states on the whole are promoting two general strategies for economic development, the traditional and the new economy approaches. The first is referred to as traditional because it has the longest history within the field of economic development. The traditional strategy concentrates resources on attracting large manufacturing firms to locate within a state or region. This usually involves the extensive use of tax credits/abatements and direct financing through large loans. Entrepreneurship does not appear as critical investment under this model. The second strategy can be characterized by the phrase new economy. The new economy is made up of high-tech, high-growth businesses that have unique needs. These ventures are developed in close relationship with university-based research and usually require some form of venture capital financing to become successful. Many states define this type of enterprise as entrepreneurial, to the exclusion of other senses of the term. In contrast to these two official economic development strategies, many universities and nonprofit organizations have focused on micro-enterprise development. Micro-enterprises are businesses of five employees or less, one of which owns the business. Micro-enterprise is often viewed as the opposite of entrepreneurship, as defined under the new economy model. However, in makes more sense to view new economy entrepreneurship and micro-enterprise as two ends of a continuum of small business development. The research used to write this report was gathered from Internet publications and interviews with economic development practitioners in each state. For each state, a brief summary of the overall approach to economic development is presented, along with a few words about any policies directed specifically at entrepreneurship or rural entrepreneurship. The next section lists a few examples of programs that are operating in the state that target entrepreneurs. The inventory concludes with a list of Internet links that can provide more detailed information. Entrepreneurial Policy Inventory Page 3 of 20

4 Kentucky Overall Economic Development Strategy The Commonwealth of Kentucky employs a highly traditional economic development strategy 1 focused on recruitment. The Cabinet for Economic Development, the main state agency for development, offers a variety of tax incentives and direct loan programs to businesses. One division of the Cabinet, the Department for Regional Development, is exclusively devoted to developing industrial parks. Entrepreneurship is not emphasized in these programs. What is unique about Kentucky s approach to economic development is its emphasis on the importance of education. In recent years, Kentucky has concentrated its efforts on both improving its public education system and encouraging its residents to pursue post-secondary degrees. Entrepreneurial Initiatives The recent creation of the Office for the New Economy (ONE) represents the newest paradigm in the field of economic development. As have many states, Kentucky has begun to focus on the creation and recruitment of technology-focused firms. Under this new model of economic development, entrepreneurs are scientists and inventors who need assistance in commercializing the results of high-tech research. The centerpiece of this effort is the creation of Innovation and Commercialization Centers (ICCs) throughout the state. The ONE has developed a statewide strategic plan, which includes one area of rural policy priority, called the Rural New Economy Business Building Initiative, described below. The Cabinet for Economic Development provides access to the national Access to Capital Electronic Network (ACE-Net), which provides venture capital funding to small businesses. In addition, general technical business assistance is provided by the Commonwealth s network of Small Business Development Centers. Rural Entrepreneurship Focus In Kentucky, most efforts to encourage rural entrepreneurship are being initiated and supported at the local level. Universities and nonprofit organizations are using state and federal dollars to provide services to entrepreneurs. 1 For an overview of department programs see: Entrepreneurial Policy Inventory Page 4 of 20

5 Kentucky Innovative Programs and Policies Office for the New Economy Created by the Kentucky Innovation Act of 2000 and reporting directly to the Governor, the Office for the New Economy (ONE) facilitated development of Kentucky Innovation, the statewide strategic plan for development of the technology-centered economy in the Commonwealth. This office is one of the few of its kind and the only one located within the study area. Rural New Economy Business Building Initiative (proposed) This ONE-sponsored initiative will 1) help existing rural tech-based firms grow and at the same time maintain ownership in the community, and 2) encourage graduate students to return to their rural communities and create new businesses. Kentucky Science and Technology Corporation KSTC runs a variety of programs focused on rural development. For example, its Rural Innovation Fund provides grants for business plan development and patent creation for Kentucky-based technology start-ups. EntreSchools Initiative The goal of the EntreSchools Initiative, sponsored by the Kentucky Science and Technology Corporation, is to bring a culture of ideation and creation into the classroom. Students and teachers are given tools to explore entrepreneurship and to create studentrun enterprises. Through this program, students have created enterprises, such as printing companies and school gift shops, as well as become involved in local environmental issues. The Initiative provides resources and funding for these projects in three Kentucky school districts. Entrepreneurial Policy Inventory Page 5 of 20

6 Kentucky Innovative Programs and Policies (continued) Kentucky Highlands Investment Coalition The Kentucky Highlands Investment Coalition (KHIC) was created to stimulate growth and create employment opportunities in a nine-county region of southeastern Kentucky. KHIC operates by locating aspiring entrepreneurs, choosing the most promising and then financing their new business as long as it is located within one of the target communities and promises to hire unemployed residents. In return for offering start-up capital, KHIC takes an ownership position. This process is known as development venture capital. Kentucky Entrepreneurial Accelerator Network Housed at Southeast Community College, KEAN is a network of the state s service providers (e.g. Small Business Development Centers, the state s Center for Rural Development) who meet regularly to share best practices, coordinate services, and introduce new types of technologies and services into the region. Mountain Association for Community Economic Development (CAN Member Organization) Mountain Association for Community Economic Development, Inc. (MACED) serves Central Appalachia through three programs: business development, sustainable communities, and land and resources. As a unifying strategy, all programs consider the long-term economy, ecology and equity of the region and work with citizens to better understand these dynamics. MACED provides loans and technical assistance to new businesses in 51 counties of Eastern Kentucky. MACED is also a collaborative partner in the Appalachian Development Alliance. Entrepreneurial Policy Inventory Page 6 of 20

7 Ohio Overall Economic Development Strategy Ohio concentrates its economic development efforts on business recruitment and infrastructure improvements. The Ohio Department of Development is the lead agency in Ohio responsible for managing the state s economic development activities. The Department emphasizes Ohio s success in recruiting and expanding businesses, its transportation infrastructure and access to large markets. Governor Taft recently announced his plan for the creation of a Jobs Cabinet. The Jobs Cabinet, chaired by the Ohio Department of Development Director, will work to help those who have lost jobs, enable companies to find the skilled workers they need to succeed, and cut red tape through regulatory reform. Entrepreneurial Initiatives Entrepreneurship in Ohio s state-level economic development policy is focused on technology companies. The Third Frontier initiative provides funds for research and development, as well as product commercialization. Developing close relationships between university research centers and entrepreneurs is also highlighted in this initiative. Outside of Third Frontier, the Small Business Development Center network is the primary source of technical assistance to small business owners and entrepreneurs, as is the case in most states. Often, these Centers also provide business incubation programs, in addition to traditional business counseling. The SBDC s also provide referrals for the various direct loan and financing programs offered by the Ohio Department of Development. Rural Entrepreneurship Focus Rural entrepreneurship is not currently the focus of any state-sponsored initiatives or policies. As in many states, programs that foster rural entrepreneurship are created and administered by nonprofit organizations or networks of organizations. Entrepreneurial Policy Inventory Page 7 of 20

8 Ohio Innovative Programs and Policies Microenterprise Business Development Program Office of Housing and Community Partnerships ODOD The Microenterprise Business Development Program provides grants to cities and counties and nonprofit organizations to assist in the development of local microenterprise businesses and to create and retain long-term jobs in the private sector. Microenterprises are defined as for-profit entities with five or fewer employees, one of whom owns the business. Appalachian Ohio Regional Investment Coalition The Appalachian Ohio Regional Investment Coalition (AORIC) is a partnership among practioners, universities, policy makers and entrepreneurs who work to catalyze a better future for families and communities in the 29-county region. AORIC is building a regional entrepreneurship network for the purpose of sharing information, developing and influencing policy, and supporting entrepreneurs in the Appalachian region of Ohio. AORIC is unique in that if focuses on sectors that are strengths in the region, namely tourism, arts and cultural heritage, and field and forest. This pilot initiative represents a grassroots and outreach-oriented approach aimed at providing services directly in the entrepreneur s hometowns. CAN members Rural Action, ACEnet and ILGARD are all collaborative partners in the Coalition. Appalachian Center for Economic Networks (CAN Member Organization) The Appalachian Center for Economic Networks (ACEnet) is a community economic development organization located in rural southeastern Ohio. The mission of ACEnet is to build the capacity of local communities to network, innovate, and work together to create a strong, sustainable regional economy that has opportunities for all. ACEnet uses a sectoral strategy, currently focusing on the food and technology sectors of the economy. Entrepreneurial Policy Inventory Page 8 of 20

9 Ohio Innovative Programs and Policies (continued) Microenterprise Organization of Ohio The Microenterprise Organization of Ohio (MOO) is a statewide organization composed of microenterprise practitioners. Its mission is to provide a practitioner support network, facilitate resource sharing among microenterprise programs, provide for the free exchange of best practices, develop program standards and conduct advocacy on behalf of Ohio s microenterprise programs. Currently, MOO is working on the creation of a public policy/advocacy manual and the design of an economic impact study of microenterprise in Ohio. Adena Ventures Adena Ventures is a $34 million venture capital enterprise created to provide equity investments and technical assistance to small businesses operating in central Appalachia. The Fund s mission is to promote sustainable and shared economic development in the region while generating market-rate returns for its investors. Fund goals include: creating new companies, spurring new employment opportunities, commercializing new technologies and generating new sources of income and wealth in a region that has fallen behind the rest of the nation in these important economic categories. Appalachian Regional Entrepreneurial Initiative The Appalachian Regional Entrepreneurial Initiative (AREI) is comprised of several business assistance programs that provide technical assistance and training to business and community development professionals in Appalachian Ohio. AREI is partners with the Small Business Development Center, the Procurement Technical Assistance Center (PTAC), and the International Trade Assistance Center (ITAC) under the leadership of the Voinovich Center for Leadership and Public Affairs. AREI is also a partner in Adena Ventures and provides consulting services to Adena-funded businesses. Appalachian New Economy Partnership The Appalachian New Economy Partnership is a $2.5 million initiative funded by a line-item in the state budget. Led by Ohio University, the partnership concentrates efforts on creating valueadded research, specialized knowledge and technology services within four key areas essential to participating in the New Economy entrepreneurship, technology, education and management. Entrepreneurial Policy Inventory Page 9 of 20

10 Tennessee Overall Economic Development Strategy The economic development priorities of Tennessee are similar to those found in other states. The Department of Economic and Community Development recently participated in a strategic planning process, which outlined the mission and objectives of the ECD. The strategic Playbook emphasizes the importance of 1) revitalizing the state s rural communities, 2) creating a Jobs Cabinet within state government to better target job growth and retention, 3) bringing the state s incentive programs in line with the 21st-century economy, and 4) targeting high-growth industry jobs and encouraging business incubation opportunities. In general, Tennessee s strategy is focused on job creation and includes several methods for pursuing this goal. The state provides traditional incentive and recruitment programs, along with programs that foster interagency and regional cooperation. The Jobs Cabinet is made up of members from each of the executive agencies, with the goal of coordinating their efforts toward increasing employment. Entrepreneurial Initiatives In Tennessee, the concept of entrepreneurship has been overshadowed by a focus on technology. There are many programs and services available to encourage the development of technologyfocused firms, but very little specific reference to the importance of entrepreneurship. This emphasis on technology is accompanied by the standard network of small business development centers. Rural Entrepreneurship Focus The strategic plan, or Playbook, mentioned above did include the revitalization of rural communities as a priority area, however most of the support for rural communities comes from the nonprofit sector. Several of these programs are described below. Entrepreneurial Policy Inventory Page 10 of 20

11 Tennessee Innovative Programs and Policies Nine Counties, One Vision Since early 2000, Nine Counties, One Vision has been building a consensus around a comprehensive vision for the geographic area surrounding Knoxville, Tennessee. This vision covers every aspect of life in this area, from education and health care, to business development and entrepreneurship. In each area of focus, an action plan has been developed to implement the vision. Southern Appalachian Venture Capital Fund The Southern Appalachian Fund is an approved New Markets Venture Capital Company and operates a community development fund that provides equity for early-stage and growth companies in Tennessee, Kentucky and the Appalachian counties of Alabama, Georgia and Mississippi. The Fund was established through a partnership of Technology 2020, its finance affiliate, Southeast Community Capital, and the Kentucky Highlands Investment Corporation. Technology 2020 The Technology 2020 project was initiated in 1993 to capitalize on the unique resources of the East Tennessee region: the presence of the Oak Ridge National Lab, the University of Tennessee-Knoxville, the headquarters of the Tennessee Valley Authority, and a significant number of both large and small information technology companies in the region. Technology 2020 is home to business development and incubation services, the Center for Entrepreneurial Growth, Southeast Community Capital, the East Tennessee Technology Council, and The Digital Crossing, a data and telecommunications company. Jubilee Project, Inc. The Jubilee Project is a collection of programs sponsored by the United Methodist Church. Located in east Tennessee, the Jubilee Project provides incubator and business services to the craft, food and technology sectors. It also participates in regional economic development and planning and operates a Micro-enterprise Peer Cooperative. Entrepreneurial Policy Inventory Page 11 of 20

12 Virginia Overall Economic Development Strategy Virginia has implemented a three-pronged strategy for economic development. Under the leadership of the Department of Commerce and Trade, three separate agencies are focused on economic development. The Virginia Economic Development Partnership focuses on business recruitment, expansion assistance, and trade development for the Commonwealth. The Department of Business Assistance works with Virginia's small businesses and existing industries to strengthen their opportunities for growth. The Department of Housing and Community Development provides strategic planning and technical assistance for Virginia communities. Entrepreneurial Initiatives Governor Mark Warner has issued a strategic plan for economic development entitled, One Virginia, One Future, which includes several initiatives designed to increase entrepreneurship in the Commonwealth. The plan identifies high-tech, high-growth small businesses as being the primary targets of the strategy. In addition, the Department of Business Assistance provides a comprehensive clearinghouse for information related to small business development. Rural Entrepreneurship Focus Several programs operated out of the Department of Housing and Community Development specifically include a rural focus. First, the Appalachian Regional Commission s Entrepreneurial Initiative has been implemented successfully in Virginia, with strong support from the governor and DHCD. Secondly, the Virginia Enterprise Initiative provides financial support for organizations providing direct services to entrepreneurs and small business owners. Thirdly, the Virginia Individual Development Accounts match savings of qualified individuals when they save for a business start-up. All of these programs target distressed areas and lowincome individuals, particularly in rural areas. Entrepreneurial Policy Inventory Page 12 of 20

13 Virginia Innovative Programs and Policies People Incorporated of Southwest Virginia The services of People Incorporated are designed to move people toward increased self-reliance. Through a variety of innovative programs, this organization strives to help people increase the assets which will undergird their efforts in the future. These assets might be education, improved health, housing, savings, job skills, or business development skills. People, Inc. operates two main program directed at encouraging entrpreneurship. BusinesStart BusinesStart provides training, technical assistance and business loans to existing small businesses and to people starting up new businesses. Clinch Valley Eco-Loan People Inc. partners with the Nature Conservancy of Virginia to provide loan funds specifically designed to foster the growth of environmentally compatible businesses. This loan offers lower interest rates than typical private loan packages and can help finance project which conventional lenders are unwilling to completely underwrite. Tobacco Indemnification and Community Revitalization Commission The mission of the Tobacco Indemnification and Community Revitalization Commission is to help the tobacco farmers of Virginia, and to revitalize the economies of tobacco-dependent regions and communities. To support the economic revitalization effort, the Economic Development Grant program was created. A Virginia investment in tobacco dependent regions through this grant program was deemed essential to their continual growth and development. Among the types of projects eligible for funding are those that support new opportunities for economic diversification, such as entrepreneurial development. Virginia Coalfield Economic Development Authority VCEDA provides financial support for fixed assets at interest rates below prime, construction of buildings for sale or lease, installation of utilities and direct loans to private for-profit basic employers and industrial development authorities in the coal-producing region of Virginia. The VCEDA serves five coal-producing counties in western Virginia and is funded through a ½% severance tax on coal. Entrepreneurial Policy Inventory Page 13 of 20

14 Virginia Innovative Programs and Policies (continued) Appalachian Sustainable Development (CAN Member Organization) Appalachian Sustainable Development focuses on developing healthy, diverse and ecologically sound economic opportunities through education and training, and the development of cooperative networks and marketing systems. ASD's two main programs are in Sustainable Forestry and Wood Products and Sustainable Agriculture. Virginia Small Business Incubator Grant Program Virginia Department of Business Assistance The Department of Business Assistance administers the Virginia Small Business Incubator Grant Program, which provides assistance to local and regional sponsoring groups in determining if a small business incubator is feasible in their area. The program can also provide grants for construction or renovation of an incubator and operating support in the early years. Small business incubators can be sponsored by local governments, regional economic development organizations, Industrial Development Authorities, Chambers of Commerce or other non-profit organizations that promote economic development in the area. Entrepreneurial Policy Inventory Page 14 of 20

15 West Virginia Overall Economic Development Strategy West Virginia has recently embarked on a comprehensive process for developing an economic development strategic plan for the future of the state. This plan is called West Virginia: A Vision Shared! and includes the new economy as a core issue area. For West Virginia to fully exploit the opportunities of the new economy, the Vision Shared plan calls for the diversification of the economy, an increase in available capital, an increase in entrepreneurship, the integration of technology, and the restructuring of incentives. The Vision Shared project is currently in the third year of implementation. While these new initiatives are being put into action, the West Virginia Development Office is still offers traditional economic development incentives for recruitment and retention of large businesses. Certain areas maintain websites for site selectors, such as the Advantage Valley, located in western West Virginia, southern Ohio and eastern Kentucky. Entrepreneurial Initiatives The Entrepreneurship Committee of the Vision Shared plan has published a white paper on developing entrepreneurship. Entitled, Blueprint for Entrepreneurship, this piece outlines the specific changes in the tax and regulatory environment that will encourage further growth in entrepreneurial businesses. The Vision Shared project also included a focus on strengthening the nonprofit sector as a method of economic development. A white paper is entitled; Strengthening the State s Nonprofits - Enhancing the Sector s Contribution to Economic Development and outlines a method for achieving this goal. In addition, the state is considering creating a cabinet level Entrepreneurship Director to further focus its efforts on encouraging and facilitating the creation and growth of small businesses within West Virginia. The Director would oversee the Governor s Council on Entrepreneurship. Rural Entrepreneurship Focus With most of West Virginia considered rural, and all of the state is within the Appalachian region, the impact of these initiatives on rural areas has already been considered in their development. However, as in most states, there are several innovative programs being conducted by nonprofit organizations. Entrepreneurial Policy Inventory Page 15 of 20

16 West Virginia Innovative Programs and Policies West Virginia Entrepreneurship Initiative The West Virginia Entrepreneurship Initiative (WVEI) was established to promote networking and resources sharing among groups and practitioners involved in rural economic development. Although the Initiative has lapsed in recent years, efforts are underway to reestablish the WVEI as part of the University of Charleston s new Entrepreneurship Center. West Virginia Microenterprise Development Association The West Virginia Microenterprise Development Association works to assist individuals and organizations that promote, develop, and operate self-employment programs for underserved populations and to promote economic justice and increase community wealth. The association is made up of members who are either service providers or microenterprise business owners. Center for Economic Options (CAN Member Organization) The Center for Economic Options (CEO) is a nonprofit business that develops social-purpose enterprises to provide niche market access for a statewide network of small-scale, rural West Virginia manufacturers and artisans. CEO designs these enterprises to generate economic and social returns on investments while helping small-scale manufacturers and artisans grow their own businesses, provide jobs, and achieve higher levels of economic self-reliance. Lightstone Community Development Corporation Lightstone Community Development Corporation works to strengthen and sustain rural mountain communities by supporting sustainable enterprises and serving as a regional learning center. Lightstone concentrates its efforts on micro-lending, sustainable farming, and stewardship programs. Natural Capital Investment Fund (CAN Member Organization) The Natural Capital Investment Fund (NCIF) is a nonprofit certified Community Development Financial Institution that provides financing for natural resource-based businesses that will advance sustainable economic development throughout West Virginia. Entrepreneurial Policy Inventory Page 16 of 20

17 West Virginia Innovative Programs and Policies (continued) West Virginia High Technology Foundation The West Virginia High Technology Foundation is devoted to encouraging and facilitating the development of high-tech businesses in northern West Virginia. By combining business incubation services with an active mentoring program, the Foundation has experienced much success in recent years. In addition, the High Technology Foundation has recently created a division of Workforce Development, to train the people of West Virginia for high-tech careers and to make northern West Virginia an attractive location for technology companies. West Virginia REAL Enterprise The REAL Enterprise program is a curriculum and educational model designed to provide hands-on entrepreneurial experiences to middle school and high school youth. The representative organization in West Virginia is Hi-Y, part of the Ohio-West Virginia YMCA. The curriculum is part of the Hi-Y Leadership Center. Advantage Valley Advantage Valley is in the process of developing a pilot project with Dr. Thomas Lyons of the Center for Research on Entrepreneurship and Enterprise Development at University of Louisville. The project will create an Entrepreneurial League System within the area that will facilitate the development of entrepreneurs and coordinate the small business services offered within the region. West Virginia Community Development Partnership West Virginia Community Development Financial Institution The West Virginia Community Development Partnership (WVCDP) and the West Virginia Community Development Financial Institution (WVCDFI) were established in 2003 to provide capacity building services to nonprofits focused on community development in West Virginia. Entrepreneurial Policy Inventory Page 17 of 20

18 Links Kentucky Cabinet for Economic Development Department for Regional Development Office for the New Economy Innovation and Commercialization Centers ACE-Net Kentucky Innovation state strategic plan Rural New Economy Business Building Initiative Mountain Association for Community Economic Development Kentucky Science and Technology Corporation Southeast Community College Ohio Ohio Department of Development Third Frontier Small Business Development Centers Microenterprise Business Development Program Appalachian Center for Economic Networks Adena Ventures Appalachian Regional Entrepreneurial Initiative Appalachian New Economy Partnership Entrepreneurial Policy Inventory Page 18 of 20

19 Tennessee Department of Economic and Community Development Economic Development Playbook Nine Counties, One Vision Southern Appalachian Venture Capital Fund Technology Jubilee Project, Inc. Virginia Department of Commerce and Trade Virginia Economic Development Partnership Department of Business Assistance Department of Housing and Community Development ARC Entrepreneurship Initiative Virginia Enterprise Initiative Virginia Individual Development Accounts People Incorporated of Southwest Virginia Tobacco Indemnification and Community Revitalization Commission Virginia Coalfield Economic Development Authority Appalachian Sustainable Development Virginia Small Business Incubator Grant Program Entrepreneurial Policy Inventory Page 19 of 20

20 West Virginia A Vision Shared! West Virginia Development Office Blueprint for Entrepreneurship Strengthening the State s Nonprofits Advantage Valley West Virginia Rural Entrepreneurship Initiative Center for Economic Options Lightstone Community Development Corporation Natural Capital Investment Fund West Virginia High Technology Foundation West Virginia REAL Enterprise Entrepreneurial Policy Inventory Page 20 of 20