Is my city an incubator?

by francine Hardaway on May 16, 2005

Is my city an incubator? Thank God it is. We in Phoenix can bitch, but we shouldn�t. I�m sitting in a panel discussion at the National Business Incubator Association in which a speaker is comparing Phoenix to Philadelphia. His perception (he�s from Philly) is that in Phoenix, there�s a belief that the pie is growing, and that thus there�s a willingness to collaborate. He spoke sadly of the fiefdoms in Philly, and about the reverse pyramid model of government in Phoenix with the customer at the top. In Philly the residents are not seen as customers of the government, and it�s a zero sum game, in which if the suburbs grow, the city loses.

But a recent National League of Cities survey says that most municipalities will be less able to meet their financial obligations in 2005 than in 2004, and many of them are thinking of budget cuts and increased taxes. Even Phoenix. (Some communities in the west and Midwest are even worse off than the northeast, despite continued growth.) 75% of CFOS in western cities reported deteriorating conditions, declining fiscal fortunes. If it were not for the housing market, they�d be in even worse shape. They all seem to expect a pretty hard landing.

The fiscal problems of cities come from a convergence of factors. Some are internal, such as flawed financial planning and overgenerous pensions. But many are external: post 911 security issues, unfunded federal mandates, job losses, online sales that decrease city sales revenues, and the flight of people who work in the city to suburbs.

So the National League of Cities has said that cities must strengthen and promote themselves as centers of opportunity. Actually, that how they started; in the Middle Ages and again in the Industrial Revolution, cities were the places with the jobs, the places with the educational institutions, the places with the services. Now what can they be?

Cities must develop additional sources of revenue. Which means they must be redesigned to be effected incubators of new businesses, products, and services. More new businesses can generate more sales, payroll and property revenues to replace the declining influence of old line corporate headquarters.

So from that vantage point, what makes a city an incubator? �an environment designed to stimulate the birth, growth and development of new enterprises by improving their opportunities for the acquisition and exploitation of resources with the objective of facilitating and accelerating the development and commercialization of products and services.�

The prerequisites of business incubation are physical, human, social, organizational, and economic. The physical factors include real estate, facilities and equipment. Human capital is obvious � it�s engineers and scientists, but also managers, lawyers, and accountants. We could go on, but the important point is that the resources entrepreneurs need are embedded in diverse and multiple institutions: governments, academic and research institutions, professional and industry associations, financial institutions, foundations and philanthropists, and even religious institutions and ethnic collectives.

A good incubator manager brokers all these resources. So does a city.

If your city is to be a good business incubator, it must incorporate a business incubation policy and agenda in its economic development plan that is articulated to all citizens in the city. All the institutions in the city must communicate, cooperate, collaborate, capitalize and coordinate the incubation of new businesses.

The existence of an incubator in a community tells the world that entrepreneurship exists in the community and is valued. Interaction facilitates activity, but it is the critical exchanges and transactions among institutional stakeholders and entrepreneurs that build the market. Entrepreneurs don�t come to communities that don�t seem to want them.

But the next generations of entrepreneurs will come from different venues and institutions than the last. They may not even come from the United States. In many older cities, entrepreneurs have to be encouraged. Having worked for large corporations, they�re not willing to take the leap to self-employment. Phoenix is fortunate; we never have had a culture of economic dependence, and we will not require the huge culture shift that many cities who used to have corporate headquarters have developed.

This perspective is MORE than just making lemons out of the local lemonade; it is understanding the uniqueness of Phoenix to be a leadership city in the next century. There�s an index here at this conference called Business Incubation Competency. It�s indicative of the degree or extent to which multiple and diverse institutions work together to cooperate and catalyze new companies.

According to these measures, Phoenix is a city with a high Business Incubation Competency. Although our entrepreneurs complain, perhaps they should not. They come from a culture of entrepreneurship in a city of entrepreneurship, and one that is not suffering quite the diminution of resources characteristic of other cities.

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