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In this such a brief illustration regarding survival entrepreneurship as a launching pad for a more vibrant central appalachia.
Survival Entrepreneurship as a Launching Pad
For a More Vibrant Central Appalachia
Ronald J . Hustedde, Ph.D.
Department of Community & Leadership Development
University of Kentucky
500 Garrigus Building
Lexington, KY 40546-0215
E-mail: [email protected]
Phone: 859-257-3186
The purpose of this essay is to explore four major questions facing Central Appalachia:
1) What should be done to revitalize communities and small businesses in Central
Appalachia? 2) What should be done to foster entrepreneurship and new business
development? 3) What role do residents want to play in shaping their future, and what
should planning officials do to help increase civic engagement in the economic
transition? 4) Can collaboration between cities and rural communities create new
opportunities for income?
The New Economic Reality for Central Appalachia
Central Appalachia is experiencing a paradigm shift.
Central Appalachian communities have had some success in recruiting branch
manufacturing or distribution plants, especially in areas that are metropolitan and
adjacent to interstate highways. These venues have been especially attractive because of
relatively low wages and land costs. However, this strategy is limited in rural areas as
evidenced by vacant industrial parks and industries that left town as soon as the economic
incentives ran out. Agriculture, coal and timber industries, while economically
significant, have seen a steady decline in the number of jobs.
Appalachia’s natural beauty has been touted for its potential to expand more vigorously
into the burgeoning $3.6 trillion global tourism market, especially in ecotourism (Fritsch
and J ohannsen, 2004). Yet the region has not fully explored this potential. While
ecotourism can provide economic opportunities that respect local traditions and the
environment, it can also be marked by low wages unless businesses are locally owned. In
addition, Fritsch and J ohannsen maintain that it would be a mistake for the region to
depend exclusively on tourism because the industry can be fickle; it isn’t a panacea to
eradicate poverty.
There is growing attention towards entrepreneurship as an economic development
strategy because traditional approaches aren’t working. Entrepreneurship is the engine of
economic growth that is often overlooked by economic developers. It is estimated that
44%t of new jobs in the U.S. are created by start-up firms which grow into larger and
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more successful firms. While small businesses employ about 50% of the Central
Appalachia’s non-farm private workforce, it should be noted that not all small businesses
are entrepreneurial. Entrepreneurs are innovators who question the status quo. They
listen to their customers and transform ideas into something that people want, need or
value. It can be a product or service. It has been estimated that these entrepreneurial
firms create about 70% of new economic growth (U.S. Small Business Administration,
2004). They create about two-thirds of all new jobs. Dabson argues we can not predict
which entrepreneurs will grow rapidly. He suggests we must find a way to create a
critical mass of entrepreneurs to drive local economies. Typically, entrepreneurs are less
likely to leave because of tax incentives offered elsewhere. They tend to serve as local
leaders and are often involved in local philanthropy or other efforts to improve the local
quality of life. They make an emotional as well as an economic connection to the
community and region.
If current trends continue, it is estimated that 25% of the nation’s workforce will be self-
employed by 2015 (Goetz, 2008). Many could be categorized as necessity entrepreneurs
who turn to entrepreneurship as a form of self-survival. There are lifestyle entrepreneurs
who are drawn to a particular lifestyle or a community. Only a few of these become
opportunity entrepreneurs whose businesses grow at an annual rate of 15-20%. They
usually incorporate technology as part of their innovative services, products or marketing
approaches but they aren’t always high technology oriented. It is difficult to predict
which entrepreneurial ventures are more likely to be high growth. Hence, communities
must create a climate in which it is easier for a critical mass of entrepreneurs to emerge in
order to create more jobs and wealth in the region.
Central Appalachia has a rich history of survival entrepreneurs who find ways to subsist
through bartering or other non-conventional approaches. One can see them at flea
markets or in the cash economy as carpenters, day care providers or mechanics. The
individuals who turn to illegal activities associated with drugs or alcohol sales can be
viewed as entrepreneurs because they employ innovative approaches to produce, sell or
market goods or services. In essence, Central Appalachia has a rich history of survival
entrepreneurs who can make it through tough times employing a variety of innovative
approaches. I believe we need to capitalize on these assets.
The question: How can Appalachia build on its asset of survival entrepreneurship in ways
that can allow the region to prosper and to improve the quality of life? The bulk of this
paper is focused on what can be done.
Entrepreneurship must be operated as part of a system.
Entrepreneurship is often treated in isolation from the rest of the community as a project
or a program. It must be viewed as part of a system that is integrated with education,
citizenship, health and other aspects of the community. A human system is characterized
by three aspects: 1) the whole is greater than the sum of its parts; 2) all parts are
interdependent and affect each other; and 3) a living system perpetuates itself by adapting
to its context (Moffitt, 1999).
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One can ask what is the role of entrepreneurship in our educational system, our health
system, our civic and religious life, transportation, finance and other parts of the
community or region? How does it enhance our prosperity and quality of life? How is
part of our community vision and local values? Those who treat entrepreneurship in
isolation from the rest of community and civic life will not reap much success.
If entrepreneurship is about innovation and meeting new needs and wants, then a
community or region must view itself as an entrepreneurial venture. Central Appalachia
must foster a culture that welcomes and encourages creativity. Culture is a kind of
collective mind programming that influences what is acceptable and what is not. It
evolves. It is influenced by the closing of a manufacturing plant, government regulations
or the opening of a major discount retailer. Entrepreneurship can be fostered within the
Central Appalachian culture. It must involve civic engagement to be fruitful.
Step One: Build Entrepreneurship Literacy Among Elected and Community
Leaders and Create Advocates for Entrepreneurship
Many gifted local leaders invest the bulk of local economic development resources in
traditional industrial recruitment because they are often unaware of the magnitude and
promise of entrepreneurship for their community and region. Here is what can be done:
• Explore creative venues to convey information about entrepreneurship
from Ewing Marion Kauffman Foundation or the Center for Rural
Entrepreneurship.
• Follow-up with ways to honor innovators in the community or region with
visits from local leaders.
• Overcome the stereotypes that entrepreneurship is only about retail or that
it includes all small businesses.
• Create an “entrepreneurial hall of fame” that honors historic and current
figures in the region.
• Incorporate entrepreneurship advocacy and awareness into all leadership
programs at the community and regional level.
The Kentucky Entrepreneurial Coaches Institute is a grass-roots leadership program that
has led to transformational changes at the local level because of new entrepreneurial
advocates and leaders. Entrepreneurship literacy will increase the probability that
communities can move from an exclusive focus on industrial recruitment to a broader
economic development agenda.
Step Two: Discover how the educational system is an entrepreneurial venture and
develop an action plan to maximize its impact.
Educational institutions can rediscover their entrepreneurial natures. How are they
innovative? How do they encourage free thinking to meet needs and wants? How can
we expand on this creativity to build new ventures?
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Begin at the middle school. The Appalachian Regional Commission is currently funding
“E-Discovery Challenge” in Kentucky. It involves 55 middle school teachers in 19
distressed counties. They are using a field-tested curriculum that meets the state’s core
content requirements. The teachers will guide students to create teams to launch
entrepreneurial ventures in which they will sell products or services. Modest amounts of
seed money will be lent to the student teams with the understanding that it will be paid
back. It is anticipated that this new curriculum will inspire students to consider
entrepreneurship as a viable option and that it will encourage creativity and innovation.
Expand entrepreneurship at the high school level. Create entrepreneurship clubs and
contests for teens. There are state-wide and national contests that provide travel
opportunities and feedback from respected mentors and guides as well as startup funds
for various ventures. Plant the possibilities for students to view themselves as
entrepreneurs who can make a living and a difference in their communities.
Most of Central Appalachia’s population is within a 30 mile driving distance of a two
year or a four year educational institutions. These community colleges and universities
should be viewed as knowledge mines that can foster entrepreneurial ventures.
Incentives should be provided for these institutions to create classes for entrepreneurship,
especially, those involved with engineering, biological systems, health delivery and the
arts. Students should be encouraged to launch their own ventures and to take part in
entrepreneurial contests. Every institution must have an entrepreneurial club that is part
of a Central Appalachian student entrepreneurial network. Students must be given the
opportunity to develop an entrepreneurial identity and to be tied to others with similar
interests.
Adults can be inspired and learn from their children about entrepreneurship. They can
serve as mentors or be trained as entrepreneurial coaches. There are many success stories
about youth entrepreneurship. One comes from Big Stone Gap, Virginia in which an
entrepreneurship program has expanded into seven high schools with involvement from
24 teachers. Twenty-three social programs have contributed financially to the program.
Students have renovated an old corn mill for tours. They have produced Bluegrass music
on compact discs and have sold old tinplate photographs they found. The students have
also helped to control West Nile virus-carrying insects by building and selling bat houses
to area residents. A beauty parlor, a catering business and a plasma cutter for
manufacturing signs and other metal products have been part of this community-based
youth entrepreneurship endeavor (Schroeder, 2007, p. 155).
Step Three: Discover and act on the region’s entrepreneurial vision of itself?
Communities must view themselves as entrepreneurial ventures if they going to prosper.
That is, they must determine their strengths and assets and focus less on problems.
What are their most significant natural assets they want visitors to see? What are their
skills and passions? What is their competitive advantage in the nation or world? After
all, there is only one Central Appalachia in the world. There is only one Ivanhoe,
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Virginia or Whitesburg, Kentucky. Build on that. What is Central Appalachia’s brand or
brands? How does it want to be known to the world?
A community should set a goal of involving at least 15 to 20 % of its citizens in
developing a vision with clear goals and objectives for the next 10-20 years. One of the
best resources for such an endeavor is the county’s Cooperative Extension Service.
Extension agents are adult educators who have access to the educational resources to help
build a shared vision. They can link communities with those who have expertise about
new trends in the economy without dominating the discussion. They can create venues
for active group involvement. Critics argue that one can not expect citizens to show up at
a county courthouse for a meeting. Rather, one must go to the places where they
naturally meet: fire stations, churches, clubs and schools.
There are many examples of communities that have built a vision of themselves as an
entrepreneurial venture (Hustedde, 2007, pp. 52-53). For example, Owen County,
Kentucky has involved more than 25% of its adults and youth in creating a vision for the
year 2020. Western North Carolina discovered one of its hidden assets: the nearly
invisible craftsmen along back roads and highways of the Blue Ridge Mountains. A
cluster of communities emerged to create a Hand Made in America trail which generates
about $120 million annually towards the local economy.
Without a community-based vision, it is difficult to develop a plan for action. Some
leaders complain about apathy to carry out such a vision. But the literature suggests that
people aren’t apathetic. They don’t know how to engage in collective action. They see
meetings that are one-sided communication patterns or fighting matches. Leaders can
cooperate with Extension educators to learn facilitation skills to actively involve citizens
in a meaningful way. In any case, incentives are needed to encourage a community-
based entrepreneurial vision. Otherwise, it becomes “one more thing to do.”
The Georgia Department of Economic Development provides a community-based
program to towns and cities that incorporate entrepreneurship into overall goals and
strategies. When these communities meet these and other conditions, they are given the
status and privileges associated with being one of Georgia’s “entrepreneurial friendly
communities.” They become part of an entrepreneurial network with access to resources
that aren’t available to everyone. Central Appalachian communities could receive
similar incentives to become certified as “entrepreneurial-friendly.”
Step Four: Create New Opportunities to Finance Entrepreneurs and Build
Entrepreneurial Support Systems.
Most entrepreneurial startups begin with modest capital from personal savings, family,
friends and credit cards. According to a study of startup firms, only 7% receive funding
from banks (Bhide, 2000). Capital may be needed to build and test a new prototype such
as a trailer hitch device or to ask potential customers about a product or service. In many
cases, entrepreneurs need operating capital until income exceeds expenses.
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Entrepreneurs may have access to capital but be unaware about how to locate it. Some
regions such as Pike County, Kentucky along the Virginia border have created a network
of informal investors known as “angels” who listen to proposals from budding or current
entrepreneurs and create a venue for them to find capital. They also provide feedback to
launch businesses or to refine a business plan. Fairfield, Iowa has an Idea Bounce in
which entrepreneurs share their ideas with a small group of other business people for
feedback.
Significant amounts of locally-generated capital are leaving rural communities as part of
the intergenerational transfer of wealth over the next 20 years. As a consequence, rural
Nebraska communities are creating philanthropic foundations in which individuals are
asked to leave 5% of their estate to the local community. When pooled together, these
monies can reach significant sums that can be invested in local entrepreneurship or other
creative endeavors that can foster an entrepreneurial climate.
In other cases, some communities have concluded that their economic development
investments often lie idle in vacant industrial parks or buildings. Some have continued
part of their portfolio in industrial recruitment but have shifted more resources for
entrepreneurs by turning their vacant buildings downtown into business incubators with
low-cost rent. They diversify into entrepreneurship education, micro-loans or other
ventures.
Communities can foster partnerships to find capital for entrepreneurial endeavors. They
include Community Development Financial Institutions (CDFIs) with the two-pronged
purpose of serving communities and making a return on their investments The Kentucky
Highlands Investment Corporation in London, Kentucky is a CDFI with a rich history of
partnering with federal agencies and others to provide startup and expansion capital for
entrepreneurs. The Corporation also provides technical assistance through workshops or
one-on-one guidance.
Entrepreneurs find it difficult to sort through the complexities about finance and the
variety of technical assistance about market trends, competition mark research, financial
projections and management strengths and weaknesses. Through the Kentucky
Entrepreneurial Coaches Institute, five communities in South Central Kentucky have
created entrepreneurial resource centers in their public libraries or Extension offices.
These resource centers have desks, entrepreneurial self-help books and computers with a
program that provides a one-stop guide for entrepreneurs. In most cases, the librarian has
also received supplemental training from the University of Kentucky business librarian to
assist entrepreneurs with data sources.
Step Five: Create Links with Urban Areas
It is in the self-interest of rural communities to make strong entrepreneurial linkages and
partnerships with urban areas. These linkages involve four approaches: 1) matchmaking;
2) inviting former residents to return; 3) attracting entrepreneurs from elsewhere; and 4)
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making links with urban-based economic development organizations and professional or
interest-based groups.
Matchmaking
Central Appalachia has businesses and farms with aging owners who do not have a
successor or a clear exit strategy. Hardware stores, bakeries, plumbing firms and
automobile repair add to the local quality of life and prevent income leakages. But
without successors, they are often closed when the owners retire, get sick or die.
Communities can forge links with aspiring urban entrepreneurs who are interested in
rural lifestyles and owning their own businesses. One can view it as a form of match
making in which aging business owners find younger successors to learn about the
business and explore a gradual buy-out to carry on and embellish their enterprises with
new ideas and still service local needs. These successor entrepreneurs can bring new
leadership and ideas to the communities they serve.
Come back home
Several Nebraska communities keep in touch with high school alumni who live in urban
areas. They encourage those who have been successful to return to the community and
start new businesses. They provide low-cost rent, micro-funds and technical assistance.
They link these aspiring entrepreneurs with the know-how they need to prosper. One
community gives its high school graduates a mailbox and a letter inviting them back to
the community when they finish their studies or gain some experience. In other cases,
they create awards programs for former high school students to return. Such expressions
create a hospitable climate to “come back home.”
Attract new entrepreneurs
Rural communities have been creative in attracting physicians or other health care
providers when vacancies exist. They forgive student loans or provide expenses to start
up clinics. Paducah, Kentucky has launched an arts incubator program to attract artists
from around the country. These attempts to lure can be expanded upon. For example,
some communities can attract entrepreneurs where local entrepreneurial gaps exist in
eco-tourism or heritage tourism. They can find butchers, plumbers, or provide business
incubator space to start new enterprises. One small community attracted a grocer by
offering low-cost loans, an inexpensive building and even stocked the grocery shelves, a
major task, in order to launch this needed venture. A welcoming atmosphere along with
a clear vision and forms of emotional, financial or technical assistance can attract existing
or aspiring entrepreneurs to a region.
Form Direct Links with Urban Economic Development Organizations and Professional
and Interest-Based Groups and Organizations
In other cases, Central Appalachian communities can create direct links with economic
development organizations and professional and interest-based groups in urban areas to
promote their communities as venues for activities such as horseback riding competitions,
scout expeditions, wildlife appreciation, bird sanctuaries and retreat centers. They can
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capitalize on their quilts, scenery and the educational assets of their institutions which are
valued by urban residents.
Step Six: Integrate the Arts into Entrepreneurship and Other Aspects of Your
Community System
Entrepreneurs are attracted to places that value creativity (Florida, 2002). They want to
be in communities that nurture the arts, promote a healthy civic life, honor diversity and
celebrate their cultural uniqueness. The arts can open up minds and hearts to new ideas
and create a healthy civic life. Pike County, Kentucky has one of the nation’s first fine
arts Extension agents. Her role involves integrating the arts into all aspects of
community life. She used local resources to start a community theatre that attracts well-
known playwrights. She has started new arts programs that are woven into economic
development, health, education and other aspects of community life.
Art takes many forms including storytelling, poetry, music, dance, the visual arts and
other approaches. Some communities separate the arts from daily life. However, if art is
incorporated into the other five steps listed above, it becomes more vibrant and relevant.
Entrepreneurship is more than a cerebral activity; it involves the emotions integral to
human life. Emotions are value judgments that are part of human survival. The arts
provide emotional links between those whose stories have been hushed or not shared by
all citizens. They stimulate the imagination and can foster a sense of delight and
solidarity among citizens. Entrepreneurs are attracted to places in which a diversity of
arts is valued.
Take the case of Palestine, a small municipality in Southern Illinois. Palestine wants its
citizens to enjoy and experience the arts, which they see as part of their overall economic
development strategy. The Palestine Artist Relocation Program has attracted artists of all
genres and from various geographical locations with affordable housing, a cooperative
gallery, low-cost historic and commercial sites, minimal interest loans and other
resources. The community makes it clear that the arts complement its entrepreneurship
endeavors and other community-based visions and plans.
Step Seven: Create Regional Clusters
One of the myths of entrepreneurship is the lone entrepreneur who can succeed at
everything. However, the reality is that the best entrepreneurs belong to teams in which
individuals excel in one of three things: marketing or sales; the product or service; and
finance. There isn’t a single individual who is skilled in each of the three areas.
Conversely, rural communities can not be lone entrepreneurs; they must integrate into a
region in order to form entrepreneurial ventures. Entrepreneurs and their customers don’t
necessarily care about political boundaries.
In many cases, regional collaboration is essential. Elliott County, Kentucky and four
other rural counties discovered their natural, historic and cultural assets poised them to
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compete for the ecological and heritage tourism markets. They combined their resources
to form a five-county eco-tourism organization in order to develop an asset map and to
market their region to tourists. Their non-profit group has attracted significant funding
from federal and philanthropic foundations to develop their tourism potential even
further.
Central Appalachia may be too big and diverse a region to view itself as a cluster.
Smaller regional clusters make more sense if there is a shared communication link with
key television and radio stations and newspapers or if there are other systems of
communication in place. Some of the rural communities in South Central Kentucky
could not afford a full-time economic developer to foster entrepreneurship or other
economic development agendas. Hence, they combined their resources to hire a full-time
professional who can promote the region and still work with individual communities.
Some communities may have access to unique resources such as Athens, Ohio with its
regional kitchen incubator for gourmet food products, while other municipalities may
employ their entire downtowns as incubators for a variety of retail and service-related
businesses. In essence, regionalism makes more sense than a community working in
isolation from its neighbors.
Summary
This essay has explored four major questions facing Central Appalachia: 1) What should
be done to revitalize communities and small businesses in Central Appalachia? 2) What
should be done to foster entrepreneurship and new business development? 3) What role
do residents want to play in shaping their future and what should planning officials do to
help increase civic engagement in the economic transition? 4) Can collaboration between
cities and rural communities create new opportunities for income?
Central Appalachia has a rich history of survival entrepreneurs who can adapt quickly to
the ups and downs of changing markets. Survival entrepreneurship can be expanded into
something more potent. If the region wants to prosper and survive, it must view itself as
an entrepreneurial venture. It must assess its natural, physical, economic, human and
cultural assets and their role in meeting the new needs of consumers at the regional,
national and international levels. They are many resources to stimulate this kind of
creative thinking (Michalko, 2006).
There are seven steps that will address the four questions listed above.
Step One: Build economic literacy among elected and community leaders about
entrepreneurship and its promise and potential for the region. It doesn’t make sense to
exclusively invest limited resources and time in traditional industrial recruitment.
Communities in the region must have a more diversified economic development
portfolio.
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Step Two: Discover how local educational institutions are entrepreneurial ventures and
develop an action plan to maximize their impact. Entrepreneurship programs can be
integrated into the mission and goals of middle schools, high schools, community
colleges and regional universities in Central Appalachia, which can benefit education and
lead to greater prosperity.
Step Three: Discover how communities or the region itself is an entrepreneurial venture.
Build an innovative and provocative vision for the community that is realistic and builds
on core strengths. The community must behave as an entrepreneur and look for new
opportunities that others don’t see.
Step Four: Create new opportunities to finance entrepreneurs and build entrepreneurial
support systems. This essay has offered examples of how limited resources can be used
creatively to provide financing and to support entrepreneurs with technical assistance for
market research, competitive analysis, market trends and financial projections.
Step Five: Create direct links with urban areas. Strategies include matchmaking with
aging business owners; recruiting former high school graduates back home; attracting
new entrepreneurs and making direct links with urban-based economic development and
professional groups to address their needs.
Step Six: Integrate the arts into entrepreneurship and other aspects of community life.
Entrepreneurs want to be with other creative people, including artists. The arts opens up
minds and hearts and can provide a sense of solidarity among peoples.
Step Seven: Create regional clusters with shared communication links such as a common
newspaper, television or radio station. These clusters can combine resources to promote
ecological or heritage tourism, to provide unique spaces for regional business incubators
or to share the resources of a full-time economic and community developer. Small
municipalities can no longer afford to go it alone.
The bottom line: Central Appalachia must build more boldly on its survival
entrepreneurship strengths and view itself and behave as an entrepreneurial venture. It
must explore new possibilities to meet changing global, national, and regional needs. A
welcoming and nurturing entrepreneurial climate can be created for a critical mass of
entrepreneurs to emerge. Entrepreneurship can not be an isolated program or project; it
must be integrated into all aspects of community life and viewed as a system if the region
wants to thrive. Central Appalachia can become the entrepreneurial hub for rural
America.
References
Bhide, Amar V. (2000) The Origins and Evolution of New Businesses. New York: Oxford
University Press.
11
Dabson, Brian (2007) in Entrepreneurship and Local Economic Development ed.
Norman Walzer. Lanham, MD: Lexington Books. Pp. 21-37.
Florida, Richard (2002) The Rise of the Creative Class. New York: Basic Books.
Fritsch, Al and Kristin J ohannsen (2004) Ecotourism in Appalachia: Marketing the
Mountains, Lexington, KY: University of Kentucky Press
Goetz, Stephen (2008). Self-Employment in Rural America: The New Economic Reality,
Rural Realities, Vol. 2, Issue 3, Pp. 1-13. Website:
www.ruralsociology.org/pubs/ruralrealities
Hustedde, Ron (2007). “What’s Culture Got to Do with It?” in Entrepreneurship and
Local Economic Development ed. Norman Walzer. Lanham, MD: Lexington Books. Pp.
39-58.
Milchalko, Michael (2006, Second Edition) Thinkertoys: a handbook of business
creativity. Berkeley, CA: Ten Speed Press.
Moffitt, Leonard Caum (1999) “A complex system named community,” Journal of the
Community Development Society, 30 (2). Pp. 232-242.
Schroeder, Craig (2007). “The Difference Makers: Entrepreneurial Young People,” in
Entrepreneurship and Local Economic Development, ed. Norman Walzer. Lanham, MD:
Lexington Books. Pp. 145-163.
U.S. Small Business Administration Office of Advocacy (2004). Small Business Profile:
U.S. Washington, D.C.
doc_354573546.pdf
In this such a brief illustration regarding survival entrepreneurship as a launching pad for a more vibrant central appalachia.
Survival Entrepreneurship as a Launching Pad
For a More Vibrant Central Appalachia
Ronald J . Hustedde, Ph.D.
Department of Community & Leadership Development
University of Kentucky
500 Garrigus Building
Lexington, KY 40546-0215
E-mail: [email protected]
Phone: 859-257-3186
The purpose of this essay is to explore four major questions facing Central Appalachia:
1) What should be done to revitalize communities and small businesses in Central
Appalachia? 2) What should be done to foster entrepreneurship and new business
development? 3) What role do residents want to play in shaping their future, and what
should planning officials do to help increase civic engagement in the economic
transition? 4) Can collaboration between cities and rural communities create new
opportunities for income?
The New Economic Reality for Central Appalachia
Central Appalachia is experiencing a paradigm shift.
Central Appalachian communities have had some success in recruiting branch
manufacturing or distribution plants, especially in areas that are metropolitan and
adjacent to interstate highways. These venues have been especially attractive because of
relatively low wages and land costs. However, this strategy is limited in rural areas as
evidenced by vacant industrial parks and industries that left town as soon as the economic
incentives ran out. Agriculture, coal and timber industries, while economically
significant, have seen a steady decline in the number of jobs.
Appalachia’s natural beauty has been touted for its potential to expand more vigorously
into the burgeoning $3.6 trillion global tourism market, especially in ecotourism (Fritsch
and J ohannsen, 2004). Yet the region has not fully explored this potential. While
ecotourism can provide economic opportunities that respect local traditions and the
environment, it can also be marked by low wages unless businesses are locally owned. In
addition, Fritsch and J ohannsen maintain that it would be a mistake for the region to
depend exclusively on tourism because the industry can be fickle; it isn’t a panacea to
eradicate poverty.
There is growing attention towards entrepreneurship as an economic development
strategy because traditional approaches aren’t working. Entrepreneurship is the engine of
economic growth that is often overlooked by economic developers. It is estimated that
44%t of new jobs in the U.S. are created by start-up firms which grow into larger and
2
more successful firms. While small businesses employ about 50% of the Central
Appalachia’s non-farm private workforce, it should be noted that not all small businesses
are entrepreneurial. Entrepreneurs are innovators who question the status quo. They
listen to their customers and transform ideas into something that people want, need or
value. It can be a product or service. It has been estimated that these entrepreneurial
firms create about 70% of new economic growth (U.S. Small Business Administration,
2004). They create about two-thirds of all new jobs. Dabson argues we can not predict
which entrepreneurs will grow rapidly. He suggests we must find a way to create a
critical mass of entrepreneurs to drive local economies. Typically, entrepreneurs are less
likely to leave because of tax incentives offered elsewhere. They tend to serve as local
leaders and are often involved in local philanthropy or other efforts to improve the local
quality of life. They make an emotional as well as an economic connection to the
community and region.
If current trends continue, it is estimated that 25% of the nation’s workforce will be self-
employed by 2015 (Goetz, 2008). Many could be categorized as necessity entrepreneurs
who turn to entrepreneurship as a form of self-survival. There are lifestyle entrepreneurs
who are drawn to a particular lifestyle or a community. Only a few of these become
opportunity entrepreneurs whose businesses grow at an annual rate of 15-20%. They
usually incorporate technology as part of their innovative services, products or marketing
approaches but they aren’t always high technology oriented. It is difficult to predict
which entrepreneurial ventures are more likely to be high growth. Hence, communities
must create a climate in which it is easier for a critical mass of entrepreneurs to emerge in
order to create more jobs and wealth in the region.
Central Appalachia has a rich history of survival entrepreneurs who find ways to subsist
through bartering or other non-conventional approaches. One can see them at flea
markets or in the cash economy as carpenters, day care providers or mechanics. The
individuals who turn to illegal activities associated with drugs or alcohol sales can be
viewed as entrepreneurs because they employ innovative approaches to produce, sell or
market goods or services. In essence, Central Appalachia has a rich history of survival
entrepreneurs who can make it through tough times employing a variety of innovative
approaches. I believe we need to capitalize on these assets.
The question: How can Appalachia build on its asset of survival entrepreneurship in ways
that can allow the region to prosper and to improve the quality of life? The bulk of this
paper is focused on what can be done.
Entrepreneurship must be operated as part of a system.
Entrepreneurship is often treated in isolation from the rest of the community as a project
or a program. It must be viewed as part of a system that is integrated with education,
citizenship, health and other aspects of the community. A human system is characterized
by three aspects: 1) the whole is greater than the sum of its parts; 2) all parts are
interdependent and affect each other; and 3) a living system perpetuates itself by adapting
to its context (Moffitt, 1999).
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One can ask what is the role of entrepreneurship in our educational system, our health
system, our civic and religious life, transportation, finance and other parts of the
community or region? How does it enhance our prosperity and quality of life? How is
part of our community vision and local values? Those who treat entrepreneurship in
isolation from the rest of community and civic life will not reap much success.
If entrepreneurship is about innovation and meeting new needs and wants, then a
community or region must view itself as an entrepreneurial venture. Central Appalachia
must foster a culture that welcomes and encourages creativity. Culture is a kind of
collective mind programming that influences what is acceptable and what is not. It
evolves. It is influenced by the closing of a manufacturing plant, government regulations
or the opening of a major discount retailer. Entrepreneurship can be fostered within the
Central Appalachian culture. It must involve civic engagement to be fruitful.
Step One: Build Entrepreneurship Literacy Among Elected and Community
Leaders and Create Advocates for Entrepreneurship
Many gifted local leaders invest the bulk of local economic development resources in
traditional industrial recruitment because they are often unaware of the magnitude and
promise of entrepreneurship for their community and region. Here is what can be done:
• Explore creative venues to convey information about entrepreneurship
from Ewing Marion Kauffman Foundation or the Center for Rural
Entrepreneurship.
• Follow-up with ways to honor innovators in the community or region with
visits from local leaders.
• Overcome the stereotypes that entrepreneurship is only about retail or that
it includes all small businesses.
• Create an “entrepreneurial hall of fame” that honors historic and current
figures in the region.
• Incorporate entrepreneurship advocacy and awareness into all leadership
programs at the community and regional level.
The Kentucky Entrepreneurial Coaches Institute is a grass-roots leadership program that
has led to transformational changes at the local level because of new entrepreneurial
advocates and leaders. Entrepreneurship literacy will increase the probability that
communities can move from an exclusive focus on industrial recruitment to a broader
economic development agenda.
Step Two: Discover how the educational system is an entrepreneurial venture and
develop an action plan to maximize its impact.
Educational institutions can rediscover their entrepreneurial natures. How are they
innovative? How do they encourage free thinking to meet needs and wants? How can
we expand on this creativity to build new ventures?
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Begin at the middle school. The Appalachian Regional Commission is currently funding
“E-Discovery Challenge” in Kentucky. It involves 55 middle school teachers in 19
distressed counties. They are using a field-tested curriculum that meets the state’s core
content requirements. The teachers will guide students to create teams to launch
entrepreneurial ventures in which they will sell products or services. Modest amounts of
seed money will be lent to the student teams with the understanding that it will be paid
back. It is anticipated that this new curriculum will inspire students to consider
entrepreneurship as a viable option and that it will encourage creativity and innovation.
Expand entrepreneurship at the high school level. Create entrepreneurship clubs and
contests for teens. There are state-wide and national contests that provide travel
opportunities and feedback from respected mentors and guides as well as startup funds
for various ventures. Plant the possibilities for students to view themselves as
entrepreneurs who can make a living and a difference in their communities.
Most of Central Appalachia’s population is within a 30 mile driving distance of a two
year or a four year educational institutions. These community colleges and universities
should be viewed as knowledge mines that can foster entrepreneurial ventures.
Incentives should be provided for these institutions to create classes for entrepreneurship,
especially, those involved with engineering, biological systems, health delivery and the
arts. Students should be encouraged to launch their own ventures and to take part in
entrepreneurial contests. Every institution must have an entrepreneurial club that is part
of a Central Appalachian student entrepreneurial network. Students must be given the
opportunity to develop an entrepreneurial identity and to be tied to others with similar
interests.
Adults can be inspired and learn from their children about entrepreneurship. They can
serve as mentors or be trained as entrepreneurial coaches. There are many success stories
about youth entrepreneurship. One comes from Big Stone Gap, Virginia in which an
entrepreneurship program has expanded into seven high schools with involvement from
24 teachers. Twenty-three social programs have contributed financially to the program.
Students have renovated an old corn mill for tours. They have produced Bluegrass music
on compact discs and have sold old tinplate photographs they found. The students have
also helped to control West Nile virus-carrying insects by building and selling bat houses
to area residents. A beauty parlor, a catering business and a plasma cutter for
manufacturing signs and other metal products have been part of this community-based
youth entrepreneurship endeavor (Schroeder, 2007, p. 155).
Step Three: Discover and act on the region’s entrepreneurial vision of itself?
Communities must view themselves as entrepreneurial ventures if they going to prosper.
That is, they must determine their strengths and assets and focus less on problems.
What are their most significant natural assets they want visitors to see? What are their
skills and passions? What is their competitive advantage in the nation or world? After
all, there is only one Central Appalachia in the world. There is only one Ivanhoe,
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Virginia or Whitesburg, Kentucky. Build on that. What is Central Appalachia’s brand or
brands? How does it want to be known to the world?
A community should set a goal of involving at least 15 to 20 % of its citizens in
developing a vision with clear goals and objectives for the next 10-20 years. One of the
best resources for such an endeavor is the county’s Cooperative Extension Service.
Extension agents are adult educators who have access to the educational resources to help
build a shared vision. They can link communities with those who have expertise about
new trends in the economy without dominating the discussion. They can create venues
for active group involvement. Critics argue that one can not expect citizens to show up at
a county courthouse for a meeting. Rather, one must go to the places where they
naturally meet: fire stations, churches, clubs and schools.
There are many examples of communities that have built a vision of themselves as an
entrepreneurial venture (Hustedde, 2007, pp. 52-53). For example, Owen County,
Kentucky has involved more than 25% of its adults and youth in creating a vision for the
year 2020. Western North Carolina discovered one of its hidden assets: the nearly
invisible craftsmen along back roads and highways of the Blue Ridge Mountains. A
cluster of communities emerged to create a Hand Made in America trail which generates
about $120 million annually towards the local economy.
Without a community-based vision, it is difficult to develop a plan for action. Some
leaders complain about apathy to carry out such a vision. But the literature suggests that
people aren’t apathetic. They don’t know how to engage in collective action. They see
meetings that are one-sided communication patterns or fighting matches. Leaders can
cooperate with Extension educators to learn facilitation skills to actively involve citizens
in a meaningful way. In any case, incentives are needed to encourage a community-
based entrepreneurial vision. Otherwise, it becomes “one more thing to do.”
The Georgia Department of Economic Development provides a community-based
program to towns and cities that incorporate entrepreneurship into overall goals and
strategies. When these communities meet these and other conditions, they are given the
status and privileges associated with being one of Georgia’s “entrepreneurial friendly
communities.” They become part of an entrepreneurial network with access to resources
that aren’t available to everyone. Central Appalachian communities could receive
similar incentives to become certified as “entrepreneurial-friendly.”
Step Four: Create New Opportunities to Finance Entrepreneurs and Build
Entrepreneurial Support Systems.
Most entrepreneurial startups begin with modest capital from personal savings, family,
friends and credit cards. According to a study of startup firms, only 7% receive funding
from banks (Bhide, 2000). Capital may be needed to build and test a new prototype such
as a trailer hitch device or to ask potential customers about a product or service. In many
cases, entrepreneurs need operating capital until income exceeds expenses.
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Entrepreneurs may have access to capital but be unaware about how to locate it. Some
regions such as Pike County, Kentucky along the Virginia border have created a network
of informal investors known as “angels” who listen to proposals from budding or current
entrepreneurs and create a venue for them to find capital. They also provide feedback to
launch businesses or to refine a business plan. Fairfield, Iowa has an Idea Bounce in
which entrepreneurs share their ideas with a small group of other business people for
feedback.
Significant amounts of locally-generated capital are leaving rural communities as part of
the intergenerational transfer of wealth over the next 20 years. As a consequence, rural
Nebraska communities are creating philanthropic foundations in which individuals are
asked to leave 5% of their estate to the local community. When pooled together, these
monies can reach significant sums that can be invested in local entrepreneurship or other
creative endeavors that can foster an entrepreneurial climate.
In other cases, some communities have concluded that their economic development
investments often lie idle in vacant industrial parks or buildings. Some have continued
part of their portfolio in industrial recruitment but have shifted more resources for
entrepreneurs by turning their vacant buildings downtown into business incubators with
low-cost rent. They diversify into entrepreneurship education, micro-loans or other
ventures.
Communities can foster partnerships to find capital for entrepreneurial endeavors. They
include Community Development Financial Institutions (CDFIs) with the two-pronged
purpose of serving communities and making a return on their investments The Kentucky
Highlands Investment Corporation in London, Kentucky is a CDFI with a rich history of
partnering with federal agencies and others to provide startup and expansion capital for
entrepreneurs. The Corporation also provides technical assistance through workshops or
one-on-one guidance.
Entrepreneurs find it difficult to sort through the complexities about finance and the
variety of technical assistance about market trends, competition mark research, financial
projections and management strengths and weaknesses. Through the Kentucky
Entrepreneurial Coaches Institute, five communities in South Central Kentucky have
created entrepreneurial resource centers in their public libraries or Extension offices.
These resource centers have desks, entrepreneurial self-help books and computers with a
program that provides a one-stop guide for entrepreneurs. In most cases, the librarian has
also received supplemental training from the University of Kentucky business librarian to
assist entrepreneurs with data sources.
Step Five: Create Links with Urban Areas
It is in the self-interest of rural communities to make strong entrepreneurial linkages and
partnerships with urban areas. These linkages involve four approaches: 1) matchmaking;
2) inviting former residents to return; 3) attracting entrepreneurs from elsewhere; and 4)
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making links with urban-based economic development organizations and professional or
interest-based groups.
Matchmaking
Central Appalachia has businesses and farms with aging owners who do not have a
successor or a clear exit strategy. Hardware stores, bakeries, plumbing firms and
automobile repair add to the local quality of life and prevent income leakages. But
without successors, they are often closed when the owners retire, get sick or die.
Communities can forge links with aspiring urban entrepreneurs who are interested in
rural lifestyles and owning their own businesses. One can view it as a form of match
making in which aging business owners find younger successors to learn about the
business and explore a gradual buy-out to carry on and embellish their enterprises with
new ideas and still service local needs. These successor entrepreneurs can bring new
leadership and ideas to the communities they serve.
Come back home
Several Nebraska communities keep in touch with high school alumni who live in urban
areas. They encourage those who have been successful to return to the community and
start new businesses. They provide low-cost rent, micro-funds and technical assistance.
They link these aspiring entrepreneurs with the know-how they need to prosper. One
community gives its high school graduates a mailbox and a letter inviting them back to
the community when they finish their studies or gain some experience. In other cases,
they create awards programs for former high school students to return. Such expressions
create a hospitable climate to “come back home.”
Attract new entrepreneurs
Rural communities have been creative in attracting physicians or other health care
providers when vacancies exist. They forgive student loans or provide expenses to start
up clinics. Paducah, Kentucky has launched an arts incubator program to attract artists
from around the country. These attempts to lure can be expanded upon. For example,
some communities can attract entrepreneurs where local entrepreneurial gaps exist in
eco-tourism or heritage tourism. They can find butchers, plumbers, or provide business
incubator space to start new enterprises. One small community attracted a grocer by
offering low-cost loans, an inexpensive building and even stocked the grocery shelves, a
major task, in order to launch this needed venture. A welcoming atmosphere along with
a clear vision and forms of emotional, financial or technical assistance can attract existing
or aspiring entrepreneurs to a region.
Form Direct Links with Urban Economic Development Organizations and Professional
and Interest-Based Groups and Organizations
In other cases, Central Appalachian communities can create direct links with economic
development organizations and professional and interest-based groups in urban areas to
promote their communities as venues for activities such as horseback riding competitions,
scout expeditions, wildlife appreciation, bird sanctuaries and retreat centers. They can
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capitalize on their quilts, scenery and the educational assets of their institutions which are
valued by urban residents.
Step Six: Integrate the Arts into Entrepreneurship and Other Aspects of Your
Community System
Entrepreneurs are attracted to places that value creativity (Florida, 2002). They want to
be in communities that nurture the arts, promote a healthy civic life, honor diversity and
celebrate their cultural uniqueness. The arts can open up minds and hearts to new ideas
and create a healthy civic life. Pike County, Kentucky has one of the nation’s first fine
arts Extension agents. Her role involves integrating the arts into all aspects of
community life. She used local resources to start a community theatre that attracts well-
known playwrights. She has started new arts programs that are woven into economic
development, health, education and other aspects of community life.
Art takes many forms including storytelling, poetry, music, dance, the visual arts and
other approaches. Some communities separate the arts from daily life. However, if art is
incorporated into the other five steps listed above, it becomes more vibrant and relevant.
Entrepreneurship is more than a cerebral activity; it involves the emotions integral to
human life. Emotions are value judgments that are part of human survival. The arts
provide emotional links between those whose stories have been hushed or not shared by
all citizens. They stimulate the imagination and can foster a sense of delight and
solidarity among citizens. Entrepreneurs are attracted to places in which a diversity of
arts is valued.
Take the case of Palestine, a small municipality in Southern Illinois. Palestine wants its
citizens to enjoy and experience the arts, which they see as part of their overall economic
development strategy. The Palestine Artist Relocation Program has attracted artists of all
genres and from various geographical locations with affordable housing, a cooperative
gallery, low-cost historic and commercial sites, minimal interest loans and other
resources. The community makes it clear that the arts complement its entrepreneurship
endeavors and other community-based visions and plans.
Step Seven: Create Regional Clusters
One of the myths of entrepreneurship is the lone entrepreneur who can succeed at
everything. However, the reality is that the best entrepreneurs belong to teams in which
individuals excel in one of three things: marketing or sales; the product or service; and
finance. There isn’t a single individual who is skilled in each of the three areas.
Conversely, rural communities can not be lone entrepreneurs; they must integrate into a
region in order to form entrepreneurial ventures. Entrepreneurs and their customers don’t
necessarily care about political boundaries.
In many cases, regional collaboration is essential. Elliott County, Kentucky and four
other rural counties discovered their natural, historic and cultural assets poised them to
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compete for the ecological and heritage tourism markets. They combined their resources
to form a five-county eco-tourism organization in order to develop an asset map and to
market their region to tourists. Their non-profit group has attracted significant funding
from federal and philanthropic foundations to develop their tourism potential even
further.
Central Appalachia may be too big and diverse a region to view itself as a cluster.
Smaller regional clusters make more sense if there is a shared communication link with
key television and radio stations and newspapers or if there are other systems of
communication in place. Some of the rural communities in South Central Kentucky
could not afford a full-time economic developer to foster entrepreneurship or other
economic development agendas. Hence, they combined their resources to hire a full-time
professional who can promote the region and still work with individual communities.
Some communities may have access to unique resources such as Athens, Ohio with its
regional kitchen incubator for gourmet food products, while other municipalities may
employ their entire downtowns as incubators for a variety of retail and service-related
businesses. In essence, regionalism makes more sense than a community working in
isolation from its neighbors.
Summary
This essay has explored four major questions facing Central Appalachia: 1) What should
be done to revitalize communities and small businesses in Central Appalachia? 2) What
should be done to foster entrepreneurship and new business development? 3) What role
do residents want to play in shaping their future and what should planning officials do to
help increase civic engagement in the economic transition? 4) Can collaboration between
cities and rural communities create new opportunities for income?
Central Appalachia has a rich history of survival entrepreneurs who can adapt quickly to
the ups and downs of changing markets. Survival entrepreneurship can be expanded into
something more potent. If the region wants to prosper and survive, it must view itself as
an entrepreneurial venture. It must assess its natural, physical, economic, human and
cultural assets and their role in meeting the new needs of consumers at the regional,
national and international levels. They are many resources to stimulate this kind of
creative thinking (Michalko, 2006).
There are seven steps that will address the four questions listed above.
Step One: Build economic literacy among elected and community leaders about
entrepreneurship and its promise and potential for the region. It doesn’t make sense to
exclusively invest limited resources and time in traditional industrial recruitment.
Communities in the region must have a more diversified economic development
portfolio.
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Step Two: Discover how local educational institutions are entrepreneurial ventures and
develop an action plan to maximize their impact. Entrepreneurship programs can be
integrated into the mission and goals of middle schools, high schools, community
colleges and regional universities in Central Appalachia, which can benefit education and
lead to greater prosperity.
Step Three: Discover how communities or the region itself is an entrepreneurial venture.
Build an innovative and provocative vision for the community that is realistic and builds
on core strengths. The community must behave as an entrepreneur and look for new
opportunities that others don’t see.
Step Four: Create new opportunities to finance entrepreneurs and build entrepreneurial
support systems. This essay has offered examples of how limited resources can be used
creatively to provide financing and to support entrepreneurs with technical assistance for
market research, competitive analysis, market trends and financial projections.
Step Five: Create direct links with urban areas. Strategies include matchmaking with
aging business owners; recruiting former high school graduates back home; attracting
new entrepreneurs and making direct links with urban-based economic development and
professional groups to address their needs.
Step Six: Integrate the arts into entrepreneurship and other aspects of community life.
Entrepreneurs want to be with other creative people, including artists. The arts opens up
minds and hearts and can provide a sense of solidarity among peoples.
Step Seven: Create regional clusters with shared communication links such as a common
newspaper, television or radio station. These clusters can combine resources to promote
ecological or heritage tourism, to provide unique spaces for regional business incubators
or to share the resources of a full-time economic and community developer. Small
municipalities can no longer afford to go it alone.
The bottom line: Central Appalachia must build more boldly on its survival
entrepreneurship strengths and view itself and behave as an entrepreneurial venture. It
must explore new possibilities to meet changing global, national, and regional needs. A
welcoming and nurturing entrepreneurial climate can be created for a critical mass of
entrepreneurs to emerge. Entrepreneurship can not be an isolated program or project; it
must be integrated into all aspects of community life and viewed as a system if the region
wants to thrive. Central Appalachia can become the entrepreneurial hub for rural
America.
References
Bhide, Amar V. (2000) The Origins and Evolution of New Businesses. New York: Oxford
University Press.
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Dabson, Brian (2007) in Entrepreneurship and Local Economic Development ed.
Norman Walzer. Lanham, MD: Lexington Books. Pp. 21-37.
Florida, Richard (2002) The Rise of the Creative Class. New York: Basic Books.
Fritsch, Al and Kristin J ohannsen (2004) Ecotourism in Appalachia: Marketing the
Mountains, Lexington, KY: University of Kentucky Press
Goetz, Stephen (2008). Self-Employment in Rural America: The New Economic Reality,
Rural Realities, Vol. 2, Issue 3, Pp. 1-13. Website:
www.ruralsociology.org/pubs/ruralrealities
Hustedde, Ron (2007). “What’s Culture Got to Do with It?” in Entrepreneurship and
Local Economic Development ed. Norman Walzer. Lanham, MD: Lexington Books. Pp.
39-58.
Milchalko, Michael (2006, Second Edition) Thinkertoys: a handbook of business
creativity. Berkeley, CA: Ten Speed Press.
Moffitt, Leonard Caum (1999) “A complex system named community,” Journal of the
Community Development Society, 30 (2). Pp. 232-242.
Schroeder, Craig (2007). “The Difference Makers: Entrepreneurial Young People,” in
Entrepreneurship and Local Economic Development, ed. Norman Walzer. Lanham, MD:
Lexington Books. Pp. 145-163.
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