Job Creation and Entrepreneurial Development

On Friday we asked some questions about what type of entrepreneurs and companies would be targeted by a Lehigh Valley entrepreneurial development initiative. This stemmed from a group discussion hosted by Lehigh Valley Economic Development Corporation that covered a wide range of topics related to stimulating entrepreneurial activity and startups in our region. 


The group also asked itself about the relative merits of helping companies that create a lot of jobs locally versus companies that stay small and outsource the bulk of its activities. Many economic development organizations measure their success on job creation and are evaluated by the communities that they serve by the same metric. All economic developers understand that government/economic developers do not directly create jobs, but our efforts can facilitate the creation of jobs by private industry. The most visible way to do that is to recruit existing firms to the region, such as when Olympus America moved its North American headquarters to the Lehigh Valley. Another way is to assist existing firms with growth that requires them to bring in new employees. Growing companies like Eastern Surfaces in Allentown, benefit from low-interest loans to fund growth.


Another significant way to facilitate job creation is by helping early-stage entrepreneurs and startups get off the ground.
Our group wondered if we would derive some benefit from focusing on entrepreneurial companies that promised significant job creation versus smaller companies that may not create a lot of jobs. The arguments for job creators are obvious: we are still recovering from the Great Recession and have 8.7% unemployment. When we help a new company startup and they employ 100 people at the end of 3 years, everyone in the community looks at the results as a win, independent of other conditions. There is a much larger discussion looming behind this, but not all jobs are the same. Would you rather have your regional economic development practitioners concentrate on helping a startup that will employ 50 call center jobs or a small business that will create 5 jobs for chemical engineers and inventors? Not an easy question to answer.


The other apparent option for startup assistance is to focus on the company independent of what they say they will do for job numbers. With companies like those in the Bridgeworks Enterprise Center and the Southside Bethlehem Keystone Innovation Zone, the job creation happens outside of the organization. They tend to operate small and lean, outsourcing most of what they do and integrating those activities into the company when it makes strategic sense. But those small companies do a lot for job creation. They create a network of companies, many local, that need people to satisfy the demands of the initial entrepreneur. Most importantly, perhaps, it is this diverse network of startups and entrepreneurs that will deliver the innovation that we need to be successful as a region. Millions of years of random mutation got us to today. The more chances that we take on individuals, the more likely it is that we will see the next great American company come out of the Lehigh Valley.


In the end, the one thing that we know for certain is that startups as a group have driven job growth in this country for the past 30 years (read the Kauffman Foundation report) and we are counting on them to continue to create jobs and drive innovation in the future.