The Power of Entrepreneurship in Economic Development

Entrepreneurship has emerged as a cornerstone of economic stability, playing a pivotal role in job creation, innovation, and community building. Small businesses, often referred to as the backbone of vibrant economies, are increasingly recognized by municipalities as vital players in local economic strategies. By spotlighting small enterprises and revitalizing downtown districts, cities are investing in their entrepreneurial ecosystems, breathing new life into local economies.

What is Entrepreneur-Led Economic Development?

Entrepreneur-led economic development is a proactive approach where regions intentionally support the creation and expansion of businesses driven by entrepreneurs. This strategy shifts the focus from traditional industries and large corporations to fostering an ecosystem at the grassroots level. By providing essential resources—such as access to capital, business training, and valuable market connections—this model cultivates an environment that encourages economic resilience.

In this context, entrepreneurs are seen as catalysts for change, driving not only economic growth but also transformation within the local economy. Their businesses often introduce innovative products and services that challenge the status quo and meet evolving community needs. This fosters a more diverse and adaptable economy, reducing reliance on a single industry or external factors.

Benefits of Entrepreneur-Led Economic Development

Job Creation

Entrepreneurial ventures play a significant role in creating employment opportunities across various industries. From support staff to marketing professionals, these businesses often require a diverse workforce as they grow. According to the U.S. Bureau of Labor Statistics, small businesses (those with 249 or fewer employees) accounted for 99 percent of the 5.6 million firms covered under Unemployment Insurance in the first quarter of 2023. Over the past decade, small businesses have employed an average of 46% of the workforce while contributing 55% of new jobs created.

Economic Diversification & Innovation

Economic diversification and innovation are key benefits of entrepreneur-led economic development. By introducing new products, services, and business models, entrepreneurs invigorate local economies and attract new business, fostering a competitive marketplace. As they launch new ventures, they create fresh markets and drive increased economic activity, contributing not only through their business offerings but also by paying taxes that support the local economy.

Revitalization

Small businesses contribute to building strong, vibrant local economies by catering to community needs and supporting local initiatives. They foster a sense of identity within the community, and the taxes they pay are often reinvested back into local infrastructure and development projects. Entrepreneurs also play a unique role in revitalizing neglected areas by repurposing abandoned buildings into thriving businesses, breathing new life into forgotten spaces and enhancing the overall appeal of the community.

Municipal Example: The Shops at Sharp End

In Columbia, Missouri, the Missouri Women’s Business Center (MOWBC) partnered with the City’s Regional Economic Development Inc. (REDI) and the Downtown Community Improvement District to create The Shops at Sharp End. This initiative aimed to revitalize the historic African American business district while honoring the diversity of local entrepreneurs and promoting economic growth. The Shops serve as an incubator, providing entrepreneurs with resources such as workshops, coaching, and affordable retail space at just $50 per month, addressing high rental costs in downtown areas. The program also offers entrepreneurship support and scholarships to ensure accessibility, helping build a diverse and thriving entrepreneurial community.

How Municipal Leaders Can Support Entrepreneur-Led Economic Development

Municipal leaders play a critical role in supporting small businesses as a means of revitalizing their local economies. By creating opportunities for small businesses to thrive, leaders take a transformative approach to economic development, shifting the focus from big-box retailers and large corporations to small businesses that reflect community needs. These businesses not only stimulate local economies but also reinvest in their communities, creating a positive cycle of growth. Here are some ways municipal leaders can support entrepreneurs:

Financial Support & Regulations

Grants and Microloans: Offer direct financial assistance to small businesses to help cover operational costs, expansion projects, or equipment upgrades. Microloans can be tailored to the specific needs of micro-enterprises.

Tax Incentives: Introduce tax breaks for small businesses, such as property tax reductions or sales tax rebates, to ease financial burdens.

Simplified Permitting: Streamline the permitting process for new businesses to minimize administrative barriers.

Business Development & Engagement

Business Incubators: Create shared spaces with facilities and services to help new businesses grow during their early stages.

Education: Provide training on essential topics such as business management, marketing, financial planning, and regulatory compliance.

Local Business Directories: Develop both online and printed directories to showcase and promote local businesses.

Programs like the NLC’s City Inclusive Entrepreneurship Program play a crucial role in fostering city leadership’s support for local entrepreneurs. By providing tailored strategies and resources, these initiatives empower communities to thrive economically, ensuring long-term growth. Through such partnerships, cities can create environments where innovation and entrepreneurship are supported, paving the way for thriving economies.

Cities Inclusive Entrepreneurship (CIE) Program Summary

Since its inception in 2019, the NLC’s CIE program has been championing small business and entrepreneurial support. The program has made significant impacts, fostering a culture of entrepreneurship that not only supports local economies but also enhances community resilience.

About the Author

Tomeka Lee is a Program Manager for Economic Development and Entrepreneurship at the National League of Cities. Her work focuses on empowering local leaders to create environments conducive to entrepreneurship and economic growth.

In conclusion, entrepreneurship is not just a means of economic growth; it is a transformative force that shapes communities and fosters resilience. By investing in entrepreneurial ecosystems, municipalities can create vibrant local economies that benefit everyone.