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Fast-growing firms not limited to geographic "hot spots" or high-tech sector

by Laura Tomaka ~ February 2013 ~ Stateline Midwest »
A report by the Kauffman Foundation reveals some surprising results with regard to the “geography of entrepreneurship,” both in terms of where high-growth companies and innovations tend to be located and the factors that drive concentration patterns.
A part of Kauffman’s “The Ascent of America’s High-Growth Companes" series, the report analyzes state and metropolitan geographic trends of high-growth companies and innovations over the past 30 years. The companies studied are those that appear on Inc. magazine’s annual list of the 500 fastest-growing firms in the United States.
In terms of the total number of high-growth firms, Illinois (eighth), Ohio (12th), Michigan (16th) and Indiana (20th) rank among the top 20 U.S. states. But when the size of a state’s population is accounted for, Ohio, Michigan and Indiana fall out of the top 20, while Minnesota ranks 13th and Illinois drops to 16th.
In the Midwest, the Indianapolis and Minneapolis areas rank sixth and 17th, respectively, among the top 20 large metropolitan areas. Five other regions in the Midwest rank in the top 20 mid-size metro areas: Ann Arbor, Mich. (ninth), Madison, Wis. (11th), Des Moines, Iowa (16th), Omaha, Neb. (18th), and Akron, Ohio (20th).
The Kauffman study also shows that there is a large presence of innovative, high-growth companies outside the traditional technology “hot spots” of Boston and California’s Silicon Valley. And in general, “high tech” does not necessarily mean high growth: Between 2005 and 2010, the high-tech sectors accounted for only about one-quarter of the fastest-growing firms.
Of the various high-tech sectors, only information technology and the health and drug sectors were among the 10 fastest-growing industries.
Innovation and growth come from a wider range of industries than has been conventionally thought, the authors of the Kauffman study conclude.
They also found no correlation between the geographic concentration of fast-growing industries and several oft-cited growth factors: venture capital investment, high-quality research universities, federal research and development money, and patents.
Instead, the researchers found that the presence of a highly skilled labor force is the most important factor related to the geographic concentration of high-growth companies and innovations.

 

Article written by Laura Tomaka, who provides staffing services to the Midwestern Legislative Conference Economic Development Committee.