LANSING – In March 2005, the Small Business Foundation of Michigan published its inaugural Michigan Entrepreneurship Scorecard – a first in the nation entrepreneurial-based economic analysis of the Michigan economy. The overall purpose of the Scorecard is to use 116 distinct metrics to compare Michigan with the other 49 states with regard to entrepreneurial dynamism.
Entrepreneurial dynamism goes beyond static measures of small business activity and seeks instead to measure economic change. To evaluate entrepreneurial dynamism means assessing job growth and economic vitality, including growth in high-performing small firms, business churn, growth in self-employment and other changes in entrepreneurial activity. In addition, entrepreneurial dynamism is affected by five key factors in the broader economy: education and workforce development, business costs and productivity, government and regulatory environment, infrastructure, and quality of life. Factoring in all 116 metrics, our Scorecard gives Michigan an F ? a failing grade ? in entrepreneurial dynamism.
So, what exactly does it mean to be failing at entrepreneurial dynamism? First of all, an F does not mean that the many high-quality Michigan entrepreneurs, dedicated and hard-working economic development specialists, public servants, educators, champions, stakeholders and others are not trying hard to make things better. They are trying. What the F means is that, in comparison to other states, we are not doing good enough on those things that really matter. Running the race is not the same as winning the race! Given our historical over-dependence on large businesses and lack of economic diversity, we should not be surprised.
For example, a recent Western Michigan University study found that entrepreneurs are having difficulty obtaining funding for research and development. This report takes on added meaning when we recognize that Michigan has dropped to a rank of 18th in the nation for federal Small Business Innovation Research (SBIR) R&D grants to our cutting-edge small businesses for breakthrough product development.
Our vaunted university system is another example that doing things is not the same as doing the right things well. The annual federal R&D budget exceeds $100 billion dollars. This funding goes, in large part, to universities and colleges to pay for the research and development of breakthrough scientific and technological innovations. Michigan universities secure hundreds of millions of dollars in state and federal R&D grants each year. If these same universities simply sold these scientific breakthroughs to entrepreneurs where they could be converted into breakthrough made-in-Michigan technology innovations, products and processes, it would not only jump-start entrepreneurial dynamism in the state but also generate substantial revenue each year for Michigan universities and colleges.
Michigan universities and colleges, however, have a dismal track record in selling the results of their world-class research to industry. Their lack of interest in commercialization is no surprise given their meager expenditures in technology transfer and apparent disdain for entrepreneurialism (borne out by the disturbing fact that degree-granting entrepreneur programs continue to be the exception, rather than the rule, in our taxpayer-funded university system).
Lastly, Michigan?s tax system is the drag on entrepreneurial dynamism and needs a serious overhaul if we are to become an entrepreneurial economy. We need a tax system that encourages, fosters, nurtures and nourishes entrepreneurial business creation, retention, expansion and attraction.
Running the race is not the same as winning the race. As a state we simply can?t afford to be behind the pack in global competitiveness. Twelve months from now our foundation will publish the next Michigan Entrepreneurship Score Card. Michigan?s business entrepreneurs, their champions and stakeholders will work hard over the next year to overcome public policy barriers and to foster robust entrepreneurialism dynamism in the state. We?ll continue to let you know how they are doing.
Mark H. Clevey is vice president of the Small Business Foundation of Michigan. He can be contacted at (517) 482-8788 or [email protected].
