Recent Research: Broadband Availability and Rural Entrepreneurship

September 29, 2016

Because existing evidence points to the presence of broadband as having a positive connection to the economic health in rural areas, numerous states and the federal government have made increasing broadband in these places a top priority.  In particular, many rural areas view broadband as an important tool in attracting entrepreneurs and other creative-class employees. Although this tactic is well intentioned, new research suggests that the association between expanded rural broadband availability and the proliferation of entrepreneurship and creative-class employees may not be as strong as one might think, and that the relationship may actually be negative.

In a recently released peer-reviewed article appearing in The Review of Regional Studies, authors Kelsey Conley and Brian Whitacre of Oklahoma State University ask, Does Broadband Matter for Rural Entrepreneurs and Creative Class Employees? Using broadband data from the Federal Communications Commission and the National Broadband Map, and creative class and entrepreneurship data from the USDA and the Bureau of Economic Analysis, the authors analyze the relationship between broadband adoption/availability and creative class and entrepreneurs, both over a period of time (2000 through 2011-2012) and during a specific period of time (2011-2012). Other variables considered by the authors include age, race, education levels, unemployment rates, the existence of natural amenities that can affect development patterns, and the percentage of workers who were engaged in agriculture or manufacturing.

Running counter to conventional wisdom, Conley and Whitacre find that broadband adoption showed a negative relationship with creative-class employees and entrepreneurs at both a specific point in time (2011) and during the period from 2000-2011. The authors also find there was a negative relationship between broadband availability and creative-class employees during the same time periods. The one positive relationship identified by the authors was for broadband availability and entrepreneurship during 2012.

Writing for the Daily Yonder, Conley and Whitacre suggest one potential explanation for their findings. The authors explain that the negative correlation between broadband and creative-class or entrepreneurial employment could be spurred by potential candidates discovering job opportunities in non-entrepreneurial sectors as a result of the proliferation of broadband. As broadband availability improved over time, the rates of “necessity entrepreneurs,” (i.e., those individuals who found their companies out of necessity), began to decline.

Several other factors could potentially explain the authors’ findings. As noted in their paper, Conley and Whitacre do not consider different types of entrepreneurship. Refining their analysis to include innovative entrepreneurs, they note, could be useful for future research and may lead to potentially different conclusions. A recent article in the Harvard Business Review highlights some of the challenges in defining entrepreneurship. Conley and Whitacre also note that there may be reliability issues with the broadband availability data they use to describe rural areas.

Furthermore, entrepreneurship declined in many places throughout the United States during the periods analyzed by Conley and Whitacre, regardless of broadband availability. In a 2016 study by Ryan Decker of the Federal Reserve and three other economists, the authors find evidence that the post-2000 period shows a decline in transformational entrepreneurship, at least as measured by employment growth, and that this trend has been seen across all sectors of the economy. It is possible that the negative relationship between rural broadband and entrepreneurship witnessed by Conley and Whitacre is a part of the broader trend of declining entrepreneurship during this time period in the United States as a whole.

The authors conclude by noting that their research should not imply that improving broadband adoption and availability is something that rural areas should avoid, and are quick to recognize that their results do not imply causality. Indeed, the authors’ previous research shows improving broadband adoption rates can lead to improved economic outcomes. Rather, Conley and Whitacre suggest that not all implications of this type of policy are positive – and that in some instances, consequences may be considered negative.

All in all, rural broadband should be considered as part of the economic development toolkit, but by no means a policy panacea. The development of entrepreneurial capabilities requires more than just physical connectivity; it also requires access to capital, development support, and an environment conducive to doing business. As noted in an August 2016 TechCrunch article, “Although challenges still exist for rural startups, the assumption that rural areas cannot support tech startups is coming under fire.” Entrepreneurial growth can exist in rural communities, though it requires more than just broadband. 

rural, entrepreneurship, broadband