Entrepreneurs, not big business, drive development, prosperity

BYLINE: Joel Stashenko and Richard A. D'Errico

The Capital Region is a model of the way communities should transition to the new entrepreneurial economy of knowledge, information and globalization.

Upstate New York in general is cited as as example of how not to go.

That is the message of a report that advises what states should and should not do to compete successfully in a global economy.

Targeted state investments in semiconductor developer Advanced Micro Devices Inc. and other high-technology companies is one way to spur the entrepreneurial attitude that states and regions will need to compete on a global stage, a Kansas City entrepreneurship foundation said in a new study.

The current shift to a knowledge-based economy is as dramatic as the loss of manufacturing jobs a generation ago, the study said. While Boston and places like it survived by developing electronics, defense and other high-tech industries, much of upstate New York has yet to find alternatives to manufacturing.

"The key question is which path the United States will follow: Boston's or upstate New York's?" the study asked. "The former implies moving aggressively into next-generation industries, including advanced IT, robotics, nanotechnology, biotechnology and high-level business services, while at the same time maintaining a smaller share of highly efficient and competitive traditional industries. The latter implies sticking with our existing economic base at the risk of slow overall growth and even slower income growth."

The Ewing Marion Kauffman Foundation votes for the "new economy" and in its 2007 State New Economy Index gives New York a No. 10 ranking among the states for best economic climate in the country for entrepreneurs.

States no longer have the luxury of what Kauffman researcher Robert Atkinson called the strategy of "smokestack chasing"--enticing old-style manufacturers with lower costs and incentives. Those companies are now more likely to set up operations in Southeast Asia than they are to the southeastern United States, according to Atkinson.

The better strategy for states is to foster entrepreneurial activities and to help existing companies innovate to better compete globally.

"In short, regions need to be places where existing firms can become more productive and innovative and new firms can emerge and thrive," the report said.


'Gazelle' jobs

The rankings were based on 26 elements of a state's economy, from the availability of venture capital to numbers of patents granted. New York ranked in the top five nationally in its numbers of professional and technical job holders, high-wage jobs and "gazelle" jobs. Those are jobs in companies where sales revenues have grown 20 percent or more for four straight years.

Atkinson, who wrote the study with Daniel Correa, said the "gazelle" jobs category was especially important as a sign of a state's economic vitality. Twelve percent of New York's jobs were in such fast-growing companies, according to National Policy Research Council data.

The "gazelle" jobs is "a very telling indicator of what is happening now rather than what has been happening historically," said Michael Tentnowski, director of incubator programs for Rensselaer Polytechnic Institute.

He noted that New York also scored well in measures of global economic activities like package exports (seventh nationally).

"I am, of course, very interested in the globalization of our incubator, and find this statistic very favorable," Tentnowski said.

Many states have traditionally not seen the value in entrepreneurship promotion, because the returns tend to be so much more dramatic when they land auto plants, the Kauffman researchers said.

"There is no ribbon to cut and no press release to issue when an entrepreneur gets a capital infusion and hires 10 new employees," the Kauffman report said.

Daniel Gundersen, upstate New York chairman for Empire State Development Corp., said the agency under new Gov. Eliot Spitzer is following an economic development blueprint like the one the Kauffman Foundation outlined.

"We need to change the mind-set of economic development ... merely as doling out large bags of cash," Gundersen said. "We need to change our mind-set away from the belief that it's all about making deals."

Gundersen's counterpart for downstate development at ESD, Patrick Foye, said the new administration's attitude will be reflected in how it dispenses a proposed $300 million in economic promotion funds. The money will be applied to where it will produce the "highest financial and social returns," Foye said.

"The answer is not to throw money around indiscriminately," Foye said.


Upstate migration

A long-time leader of the Capital Region's business community, MapInfo Corp. founder and former CEO Mike Marvin, said New York's tax policies continue to make it a hard sell to companies that are looking to establish headquarters here. Marvin said it is important to have the headquarters of companies locally because that is where the decision-makers work.

Marvin spends part of his time at a home in the Charlotte, N.C., area. He cited a recent report that one quarter of Charlotte's new residents are coming from upstate cities like Rochester and Buffalo.

"Down here there's a very healthy economy," he said. "It's a healthy economy, something I'm not used to being around."

Marvin said the Capital Region should focus on growing companies that are already based here, like North Greenbush's MapInfo.

The area is more entrepreneurial than it was when he arrived in 1976 from Philadelphia. He credited former Rensselaer President George Low with fostering the entrepreneurial spirit at the college and its Rensselaer Technology Park, which is where MapInfo is headquartered.

"That's why Albany today is, on average, better than the rest of the other upstate areas," Marvin said.

Other targeted state investments in the Capital Region are its pledge of $1.2 billion for an AMD computer-chip plant in Malta, Saratoga County, and $30 million to lure Vistec Lithrography to move its headquarters and research and development operation here.

The region has been conducive enough to grow businesses such as Intermagnetics General Corp., Rupprecht & Patashnick Co. and Amici, which were bought by giants Royal Philips Electronics, Thermo Fisher Scientific Inc. and Xerox, respectively.

The Kauffman Foundation timed the release of its annual report to EntrepreneurshipWeek USA. Kauffman and 1,000 other organizations and universities held events around the nation Feb. 24-March 3 to start their own business or innovating inside existing companies or organizations.