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Big Ideas for Small Business: A Regional Jobs Accelerator

Small Businesses Thrive and Create Jobs When the Regions They Operate in Also Thrive

SOURCE: AP/ Carlos Osorio

One of the Jobs and Innovation Accelerator program's first-round winners was the Southeast Michigan Advanced Energy Storage System, whose grant included $1 million from the Employment and Training Administration to make sure local green-tech training is meeting industry needs.

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This is the latest installment of a new CAP series called “Big Ideas for Small Business.” The weekly series aims to offer a collection of bold proposals that taken together will form a progressive pro-business agenda for the small- and medium-sized companies—and future big companies—our economic competitiveness depends on.

In this space CAP’s economic policy team will offer a weekly pro-growth alternative to the simplistic conservative advocacy for irresponsible tax policy and unaccountable government that are hardly the real priorities of small businesses—and that will do nothing to boost economic growth and ensure widely shared prosperity.

The problem

A jobless recovery continues to be one of the most worrying legacies of the Great Recession. We know that new companies are a critical part of new job creation but entrepreneurs hoping to start small businesses in communities across America face myriad challenges—from an inability to access capital, to a dearth of skilled workers in their region, to a lack of confidence in the long-term economic health of the communities and industries in which they operate.

There are many government agencies at the local, state, and federal level to support new businesses in facing these challenges. As my colleague Sean Pool identified in the first installment of our series on small business and job creation, a common federal application for businesses would help new and existing companies and entrepreneurs navigate the support open to them. Here, though, we look at another way government can make its resources go further in supporting job creation—by investing in regional economies via a Jobs Accelerator.

The ability of small businesses to succeed and create jobs is affected by the overall vibrancy of the communities that surround them. From the potential to capitalize on “knowledge spillovers” from nearby universities, to the availability of physical and institutional infrastructure for business creation, to access to high-quality human and financial capital, to the presence of other small companies with which they do business, entrepreneurs depend on their communities to create successful companies and create jobs.

Intuitively, we understand the value of such clusters of entrepreneurial activity. Think Silicon Valley or North Carolina’s Research Triangle. But how can we help regions across the nation develop the same degree of success?

The solution

Here’s a solution: Support economically distressed areas with programs that identify and cultivate successful regional economies in areas of the country with the most need. The Jobs and Innovation Accelerator announced earlier this year by the Obama administration does just that—and should be expanded.

The Economic Development Administration, the Department of Labor’s Employment and Training Administration, and the Small Business Administration worked together to provide small grants through a highly competitive process to 20 teams collaborating to bring jobs and new businesses to their regions. It was a good example of government working effectively and in concert, with three agencies kicking in funding and 13 other agencies offering technical support.

With only 45 days to submit applications, 121 regional teams from around the country applied—demonstrating a strong appetite for local-development agencies, universities, existing businesses, and entrepreneurs to work together. The $37 million in funding is expected to launch 339 new businesses—a phenomenal anticipated return on investment made possible in part because it is expected to generate almost twice as much investment from the private sector as the government put in.

One of the winning grantees is the Southeast Michigan Advanced Energy Storage System Initiative. Twelve partners joined together to win $976,000 from the Economic Development Administration to increase the capacity to analyze and advance the region’s economic development, another $1 million from the Employment and Training Administration to make sure local green-tech training is meeting industry needs, and $150,000 from the Small Business Administration to support existing efforts to build opportunities for minority suppliers. The Michigan Economic Development Corp. also saw promise in the plan and pledged to match up to $500,000 to the initiative.

With one of the highest unemployment rates in America, currently above 11 percent, Detroit fits the bill as an “economically distressed” region that has long been eligible for federal assistance. By focusing that support not just on individual small businesses but also on the broader regional economy that supports them, the Accelerator is laying the foundation for sustainable job creation.

Next steps

The Jobs Accelerator launched as another step in cross-agency efforts to promote targeted regional economic development, building off other successful programs such as the Energy Regional Innovation Cluster. We recommend that the Jobs Accelerator expands into a second round. Since $37 million of pooled federal funds is projected to launch 339 businesses, consider that $200 million (enough for two winning regions per state) could result in 1,800 new businesses employing thousands of workers. What’s even more compelling is that by being embedded within these regional economies, these new businesses boast a better chance of long-term success.

We know that new company creation is a critical piece of the jobs puzzle. We also know that three inventive agencies pooling funding through the Jobs and Innovation Accelerator (the Economic Development Administration, the Department of Labor, and the Small Business Administration) have come up with a way to spur new firms that works. Ensuring that an expanded second Accelerator round goes ahead in 2012 is a good next step.

Jennifer Erickson is Director of Competitiveness and Growth at the Center for American Progress.

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