Networking is key to thriving economies
What makes some regional economies grow faster than others? Recent work by the National Commission on Entrepreneurship reports that 5 to 10 percent of U.S. firms can be called entrepreneurial growth companies. Those companies are responsible for two-thirds of the 240,000 new jobs created each month.
Why do some regions nurture these growth companies better than others?
In comparing the growth of Silicon Valley vs. slower growing Boston in the last 30 years, and seeing how some regions like Austin apparently came out of nowhere, the commission found that the performance of different regions could not be explained just by looking at such factors as costs and skills of workers, taxes, land and the other inputs.
The commission suggested what better explained success was the creation of a regional culture that had a vision of itself, key leaders who shared and communicated that vision, ancestor companies, heroes that promoted success, and most of all vibrant networks that honored and rewarded values like risk taking, openness, and change.
Regional economies grew faster when they emphasized both cooperation and competition and not just company competition, start-ups rather than climbing the corporate ladder, building companies and not just making money, and loyalty to an overall network.
Corporate and regional cultures influenced each other so the kind of influence a Hewlett Packard had in Silicon Valley, or Dell and others had in Austin helped create a different regional culture than the impact of DEC or Data General had on Boston or the Big 3 automakers had on Detroit.
Regions grew faster that valued risk taking, and honoring and learning from failure, rather than risk-avoidance and stigma for failure. In short, networks trumped hierarchies.
All regions have their techies, business managers, investor, and community leaders, but regions grew faster which could communicate to themselves a vision of itself that could transcend inevitable changes in technology, markets, elections and even the fate of leading companies.
What do these findings have to do with Alaska?
A recent survey of 480 members of state business and civic organizations provide some clues. The full results and your chance to take the survey are available at (www.ahtbc.org).
The most important success factor was an economy that could produce good jobs to hold young people in the state -- and nearly half, or 49 percent, rated Alaska’s ability to produce these jobs as poor. The next most important success factor was, unsurprisingly, an adequate supply of skilled workers; 36 percent rated the state’s performance as poor in this area and 47 percent as average.
The quality of the state’s kindergarten to 12, post-secondary and higher education system was rated the fourth most important success factor. Approximately 7 of 10 Alaskans rated the state’s education system as average or poor.
The state was rated lowest on four important factors that 8 of 10 participants rated as important or very important: its dependence on oil and gas revenues to fund public services; its lack of a state fiscal plan; the absence of local economic development strategies; and the absence of a state economic development strategy.
The most positive news from the survey is that quality of life was rated as the third most important factor for the state’s economy and 61 percent of respondents rated the state as good or excellent in this area.
The encouraging news is that the business community and the state may be poised to start an honest process of benchmarking our common definition of success and measuring our progress.
Stronger private-public partnerships will be necessary to improve key parts of our economic infrastructure, such as improving education, creating more risk capital, and having the public and private sectors focus on what must be done to build a larger, more diversified economic base.
Perhaps even more importantly, it may be time to create stronger linkages in the economy between educators and employers, industry suppliers and customers, investors and entrepreneurs, and the regulators and the regulated.
A number of key organizations have been established or expanded in the last few years, such as the Oil Industry Support Alliance, the Information Technology Career Consortium, InvestNet, the Processor Industry Consortium, and industry advisory groups for different university units. They all seek to address our common need to have a better networked state.
What apparently may be lacking may be more fundamental than either a state economic strategy or fiscal plan. It may be our collective sense of Alaska having a sustainable economic future. As important as it is to build enterprises that can compete globally, we may also need to have the confidence and will to construct a common vision that Alaska can grow those enterprises.
My hunch is that a common vision of our future will need to combine some existing competitive advantages in terms of our resources and location with the technology and intellectual capital to produce more physical and knowledge products for the world. It will involve an Old Economy most Alaskans will recognize with a New Economy that will look different from what has happened in Austin or California.
Almost every respondent, 97 percent, of the statewide survey agreed or strongly agreed that the private sector business and public policy organizations should work with state and local government to improve the state’s economic performance. In a mixed economy in a state of now only average per capita income, the will and need to construct that road map is both appropriate and timely.
Jamie Kenworthy is executive director of the Alaska Science and Technology Foundation.