Supporting Rural Entrepreneurship: What Can States Do? What Should They Do? (cont.)

What should states do?

As in urban areas, rural entrepreneurship is a local or regional affair.Most activity and most new program ideas will be generated at the local level. This issue of Economic Development America highlights numerous examples of such grassroots innovation – but they can’t do it alone. Many rural communities lack the size and resources to develop scalable programs. State governments and agencies should consider stepping in to assist when necessary. While the state’s basic role – the enabler and supporter of locally-led innovation – is clear, things cloud up when we dig into the details. Here are some other guidelines for what states can and should be doing:

• Get Out of the Way: Eliminate red tape and bureaucracy
• Show Them the Money: Invest in rural enterprise
• Be Entrepreneurial: Test new ideas
• Start at Beginning: Embrace youth entrepreneurship

Let’s look at each of these categories in turn.

Get Out of the Way.

Job number one for state government is to avoid screwing things up. It’s hard to be successful as an entrepreneur. It’s even harder in a rural community where one is far from potential markets, and support resources may be far away as well. In these instances, every little bit matters. If local or state regulations create serious burdens for local business owners, their potential success will be jeopardized. For example, some communities use zoning laws to prevent the establishment of “incidental businesses” on farmland. This wellintentioned farmland preservation strategy has the effect of blocking farmers from creating new businesses on their own farms

Thus, a critical role for state governments involves a detailed review of existing rules and regulations to ensure that they are “entrepreneur-friendly.” Fortunately, many governors have heard this message. Dozens of states have completed or are presently engaged in major regulatory streamlining initiatives. Typical initiatives include the following:

• Appointment of a Small Business Ombudsman or Advocate (Georgia, California, Louisiana)
• Requiring a “Small Business Impact Statement” prior to the adoption of new rules and regulations (Michigan, New Jersey, North Dakota,Washington)
• Creation of “one-stop centers” for business licensing and registration (Michigan,Wisconsin, Rhode Island)

Regulatory reform has been quite popular, and it is likely to remain so. Many governors are now adopting a version of model regulatory reform legislation developed by the Small Business Administration’s Office of Advocacy in 2002. Fourteen states and one territory have adopted some version of the model rules, and others are in the process of doing so.

Show Them the Money.

If state governments want to nurture rural entrepreneurship, they need to invest in the process. It’s not enough to use the bully pulpit and proclaim support for rural entrepreneurs; governors need to put real resources on the table. The great interest generated by regulatory reform is partially attributable to the fact that such activities are relatively low-cost. Meanwhile, few governors or state governments have gone ahead and made major investments to support rural entrepreneurship.

Two exceptions can be found in Kansas and Wisconsin. In Kansas, the Legislature enacted the Kansas Economic Growth Act of 2004. This bill created the Kansas Center for Entrepreneurship, a statewide coordinating body for entrepreneurship support providers, and calls for more than $500 million in new investments to support entrepreneurship (both urban and rural) across the state. More recently, the state has created a new venture capital fund (focused on biotech) and has revised its angel investor tax credits to expand their use and availability.

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