The key to recovery

by Ross DeVol ([email protected]) 754 views 

As Northwest Arkansas starts to reopen its economy, local leaders must address an important question: What is the best way to recover and rebuild? The answer will determine the region’s economic prospects not just in the immediate aftermath of the COVID-19 pandemic, but for decades. To put our area on the path to economic recovery and a strong future, local leaders must double down on supporting and nurturing the region’s startup community, many of whom are people of color.

Recent research from think tank Heartland Forward draws a clear link between strong entrepreneurial ecosystems and economic success. Cities with a higher share of employment at young firms, and particularly where employees at those young firms have a bachelor’s degree or higher, saw notably faster employment growth over the past decade. While many young firms ultimately fail, a portion of them go on to be highly successful entities — a future source of gazelle firms and our country’s large employers.

Put simply, entrepreneurs are critical to economic success. Luring large firms from other locations might play well in headlines, but it is not an efficient or sustainable job growth strategy. Entrepreneurship is the true job creation engine, and cities must focus on creating environments where new, growing firms can thrive.

Unfortunately, entrepreneurial driven job growth in the Heartland region was declining even before COVID-19. Heartland Forward ranked U.S. cities based on the strength of their entrepreneurial ecosystems, and only five of the top 50 are in the Heartland. Despite being a strong job generator in recent years, Northwest Arkansas was 180th out of 371 metros in this measure of entrepreneurial ecosystems.

Recent police brutality in Minneapolis and its aftermath demonstrate that there is also a lack of equal economic opportunity for communities of color. A forthcoming study by Heartland Forward will demonstrate that upward mobility among low income children is declining for many from minority communities. Northwest Arkansas has huge earnings gaps by age 35 for low income children.

Greater engagement in entrepreneurship among minority communities can circumvent lingering systemic discrimination in the workplace and improve the likelihood of upward mobility. Private and public sector programs to improve access to capital must target entrepreneurs of color. With communities of color more engaged in entrepreneurship, job creation can be more inclusive and occur at a higher rate.

In order to get the NWA economy firing on all cylinders and elevate its overall rate of job creation in the post-pandemic era, more emphasis must be placed on supporting entrepreneurs. The University of Arkansas is a key asset for the region. It is churning out more graduates, but more must be done to increase research and support faculty and students in starting new enterprises. The University of Arkansas should expand its programs in entrepreneurial training.

A four-year medical school in the region would expand medical research and provide a partner for UA to translate medical innovations into the marketplace. Philanthropy could assist in providing financial support to jump-start a four-year medical school. In addition to improving well-being and healthcare, it will increase the knowledge intensiveness of local enterprises and retain more graduates in the region.

Establishing and providing resources to entrepreneurial support organizations, whether they are called networks, connectors, enablers or ecosystem builders, are a necessary part of the process for creating the social capital that is required for success in NWA. They must be linked to communities of color. More investments in boosting NWA’s quality of place, including arts, recreation and culture, will improve the image of the region and assist in making a stronger case for attracting entrepreneurs. With an inclusive commitment to entrepreneurs, Northwest Arkansas can create an even stronger economy.

Ross DeVol is president and CEO of Heartland Forward, a “think and do tank” in Bentonville focused on improving economic performance in the center of the United States. He is former chief research officer for the Milken Institute, where he spent nearly 20 years overseeing research on regional growth performance and health-related topics. The opinions expressed are those of the author.