The Role of Small and Large Business in Economic Development. Home Grown is Best

A growing number of economic development professionals have stopped chasing big businesses and started chasing the entrepreneurs who create them.

A recent study by the Federal Reserve Bank of Kansas City shows that traditional top-down approaches to economic development that relied on luring big firms with tax breaks and other financial incentives are being replaced by bottom-up efforts to foster an entrepreneurial culture where startups can flourish. This approach relies on developing and supporting entrepreneurs and small businesses while improving infrastructure and developing a highly skilled and educated workforce.

These efforts depend in large part on improving the quality of life in the community and creating an attractive business climate. While acknowledging that big firms contribute significantly to job creation and innovation, the author contends that concentrating on organic growth is likely to be a much more successful strategy than the recruitment of new firms. The hope is then that some of these home-grown businesses grow to become the big firms that offer better jobs and benefits to area residents.

By Kelly Edmiston

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