Building a Culture of Entrepreneurship in Formerly Industrial Regions

This blog is part of an ongoing series of contributions from participants in The German Marshall Fund’s flagship leadership development program, The Marshall Memorial Fellowship (MMF).

There is frequent discussion in the United States around the political differences that geographically divide the nation. However, another significant cultural difference has emerged: divergent attitudes toward risk and innovation. 

Growing up in the rural Midwestern United States, I was mainly exposed to highly conservative and traditional industries, namely manufacturing and agriculture. As these industries began to face growing pressure from foreign competition in an increasingly integrated global marketplace, the need arose for individuals and entities to innovate and to introduce new economic opportunities. The struggle to meet this challenge suggests that a cultural change was needed. 

The conservative norms of historically industrial economies have often included a reflexive aversion to risk and a stigmatization of failure, neither of which has helped to create an entrepreneur-friendly culture. In contrast, innovation hubs like Silicon Valley have long operated on cultural norms that venerate, support, and reward risk-taking. In these places, the failure of a new venture is viewed as a wisdom-gaining experience, but in more conservative regions, the opposite is often true.

So how are such regions able to foster a culture that encourages the pursuit of entrepreneurial endeavors? Following weeks of travel as a Marshall Memorial Fellow (MMF), I observed a variety of European cities, which were at various stages of building their entrepreneur-friendly cultures — some were quite advanced in the process; others, at much earlier stages. The differences in approach between these two groups are multifold and can be used to craft a roadmap for regions looking to improve their entrepreneurial landscape.

Community leaders must recognize the importance of SMEs within their regional economies, providing them with necessary resources. 

Historically, manufacturing-dependent cities have grown culturally accustomed to a handful of large employers dominating the local job market, and have traditionally allocated resources — financial, civic/governmental, and human capital — accordingly. In moving to an entrepreneur-friendly economy, key players within the region should take action to show their SME communities that they are a valuable part of the ecosystem. This could include growth and location-oriented grants or considerations (such as those typically received by large multinationals), subsidized access to key professional services that are often a cost burden for smaller entities (compliance, legal, accounting, and the like), and access to talent pipelines via connections at local schools, universities, and industry associations. In Berlin, a city that has been working to cultivate a diverse economy, we learned about educational policies that allow vocational students to have on-the-job training for highly technical positions; creating a pipeline of talent for the SMEs in the program.

Successful communities are striving for balance in access to capital. 

In less entrepreneurial communities, there is a tendency to rely solely on scarce grants, friends and family, or regional investors or lenders for support, often on onerous terms. While this model is often sufficient to source initial seed funding, SMEs risk funding gaps at key stages of growth and in succession planning, which is an issue in both the United States and Europe. A more intentional approach to diversifying available capital resources would support broader access to investment on more favorable terms. Communities seeking to encourage entrepreneurship should seek to cultivate relationships with funding sources outside of their immediate regions, as well as work with regional players to encourage expanding funding options to fill common gaps in the growth and planning processes. During my individual appointments in Warsaw, a city that has experienced a decades-long economic boom, I learned of efforts within its financial community to attract foreign capital to the region, as well as specific initiatives that allow SMEs to participate in capital raising platforms typically reserved for large companies.

Communities should begin educating people at various career stages about entrepreneurialism and calculated risk-taking.

This could include having classes available that detail the practical aspects of entrepreneurialism, including finance (both company budgeting and personal impact), branding, and business development, as well as access to entrepreneur mentors and advisors to serve as guides and sounding boards throughout the process. While visiting Turin, a city with manufacturing-centric roots that has more recently begun to cultivate its entrepreneurial ecosystem, I learned about the efforts of tech accelerators to help new entrepreneurs navigate their businesses’ startup stages and prepare for growth. 

Kristen Laughlin, president and chief executive officer at Avion Consulting Group in Cleveland, Ohio, is a Spring 2018 American Marshall Memorial Fellow.