Endeavor Insight in New York has released a report on southeast Michigan’s fastest growing companies and what those companies suggest about the region’s competitive advantages. The research found that a significant portion of the region’s economy lies in industries that have low or negative projected growth over the next several years.
Because of this, the study calls upon regional leaders to direct more attention and resources to growing large, high-value entrepreneurial companies. In comparison, U.S. metropolitan areas with the greatest income and productivity generate local, entrepreneurial companies with 50 or more employees in high-value industries.
“During the last 15 years, southeast Michigan has generated fewer of these high-growth businesses than the most productive metropolitan areas in the U.S.,” says Antonio Luck, managing director of Endeavor’s Detroit office. “Startups and business attraction strategies play important roles in local economic development. This research points to a third pillar to pursue: helping to grow local, entrepreneurial companies in high-value industries. We know about 10 percent of the enterprises operating in southeast Michigan have 50 or more employees, but they have created more than 74 percent of the jobs in the community. We need more of these high-growth companies for southeast Michigan to thrive.”
The report calls for leaders in the region to focus on programs that support companies that hold the most promise for second-stage growth, or that beyond the startup phase.
Endeavor recommends business and community leaders support the growth of such companies by avoiding being overly focused on increasing the quantity of relocation incentives, or new and small businesses; dedicating more resources to support the founders of growing and scaling companies; working to better understand the needs of experienced entrepreneurs who are leading larger, high-value companies; and building stronger networks through which experienced founders are encouraged to share knowledge, social connections, and financial capital with up-and-coming entrepreneurs in the region. Endeavor calls this approach the entrepreneur-led economic development method.
“Our experience and research has shown that entrepreneurs who have built companies that have reached scale are among the most valuable economic development assets in any community. Southeast Michigan would be well-served to deploy their expertise to help growing and new companies reach their full potential,” says Luck.
The report recommends targeting six types of firms that represent the region’s competitive advantages: consulting, software, lending-based business and financial service, logistics and transportation, marketing and branding, and specialty food and beverage. Endeavor has found these industries offer, on average, wages in excess of $76,500, which is much greater than the typical personal income of southeast Michigan residents.
Additionally, the study points out that high-growth entrepreneurial businesses, especially those that are younger, are more likely to hire underrepresented workers such as those without a college degree or formerly unemployed individuals.
The report is titled “Southeast Michigan’s Competitive Advantages in Entrepreneurship,” is available here, and was supported by the William Davidson Foundation in Birmingham. It included an analysis of more than 10,000 companies across seven counties including and surrounding Detroit and Ann Arbor.
“The William Davidson Foundation funded this research to gain further insight into how we and others might support entrepreneurs, scale businesses, and strengthen our region’s economy,” says Darin McKeever, president and CEO of the William Davidson Foundation. “Endeavor’s findings point to another important way for how southeast Michigan can strategically grow its economy. We look forward to seeing how the research influences the regional dialogue.”
Luck and McKeever will present this research on Thursday, May 30 at the Detroit Chamber of Commerce’s annual Mackinac Policy Conference, which is taking place Tuesday-Friday.