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www.kauffman.org © 2013 Ewing Marion Kauffman Foundation Measuring Entrepreneurial Ecosystems March 16, 2015 Jordan Bell-Masterson Colin Tomkins-Bergh

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© 2013 Ewing Marion Kauffman Foundation

www.kauffman.org© 2013 Ewing Marion Kauffman Foundation

Measuring Entrepreneurial Ecosystems

March 16, 2015Jordan Bell-Masterson

Colin Tomkins-Bergh

© 2013 Ewing Marion Kauffman Foundation

Indicators of Entrepreneurial Ecosystem Vibrancy

Kauffman synthesis of leading research to answer the question:

What do we measure and how do we measure it?

Why? To gauge progress, inform program design, and to guide resource and funding decisions

© 2013 Ewing Marion Kauffman Foundation

Four Categories; Twelve Indicators

• Connectivityo Program connectivityo Spinoff rateo Dealmaker network

• Diversityo Diversity of economic

specializationso Economic mobilityo Immigrant share

• Densityo Entrepreneurial Densityo Young firm employment shareo High-tech firm density

• Fluidityo Population fluxo Labor market reallocationo High-growth firms

Stangler and Bell-Masterson: Measuring an Entrepreneurial Ecosystem

© 2013 Ewing Marion Kauffman Foundation

Density

• We want to measure density, not volumeo By e.g., population, geography

• For example, Boulder is small, but clearly punching above its weight

© 2013 Ewing Marion Kauffman Foundation

Density: New and young firms

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

0

50

100

150

200

250

300

Firms Age 0 per 100,000 people

United States Kansas City Metro Area

Source: BDS for Firm Data, and BEA for Population Datahttp://www.census.gov/ces/dataproducts/bds/data_firm.html and http://www.bea.gov/regional/downloadzip.cfm

© 2013 Ewing Marion Kauffman Foundation

Density: Employment Share of Young Firms

Source: U.S. Census Business Dynamics Statistics

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120.00%

5.00%

10.00%

15.00%

20.00%

25.00%

United States Austin Metro Area Denver Metro Area San Francisco Metro Area

St. Louis Metro Area Boston Metro Area Kansas City Metro Area

© 2013 Ewing Marion Kauffman Foundation

Density: High-Tech

Kansas City has a high-tech firm creation rate of 11.188, which ranks 36 out of 365 metros.1

o High-tech = IT, biotech, and advanced manufacturing (per Hecker (2005), Bureau of Labor Statistics)

Source: Kauffman Foundationhttp://www.kauffman.org/~/media/kauffman_org/research%20reports%20and%20covers/2014/01/beyond_metropolitan_startup_rates.pdf

1 Using NETS high-tech over 2009-2010;Averaged over 2 years, then per 100,000 population

© 2013 Ewing Marion Kauffman Foundation

Density: High-Tech

© 2013 Ewing Marion Kauffman Foundation

Fluidity

• Reallocation – the process by which a resource becomes more and more efficiently deployedo E.g. Economic reallocation, demographic reallocation

• Perfect information only found in theory, so churn typically represents improvemento See Haltiwanger et al. (2012) for importance of labor market reallocation

© 2013 Ewing Marion Kauffman Foundation

Fluidity: Population Flux

Source: IRS, SOI Tax Stats - Migration Data Downloads - County to County Migration Data

inflow outflow net

(10,000)

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

35,721 36,793

(1,072)

69,374 71,533

(2,159)# of Households # of People

© 2013 Ewing Marion Kauffman Foundation

Fluidity: Labor Market Reallocation

Labor Market Reallocation = Separations minus Job Destruction as a share of EmploymentSource: QWIhttp://qwiexplorer.ces.census.gov/

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

KC

Omaha

Denver

© 2013 Ewing Marion Kauffman Foundation

Fluidity: High-Growth Firms

Kansas City has a high-growth firm creation rate of 24.846, which ranks 92nd out of 365 metros.1

1 Using Inc. high-growth companies over 2010-2012;Summed and divided by population in millions.

Source: Kauffman Foundationhttp://www.kauffman.org/~/media/kauffman_org/research%20reports%20and%20covers/2014/01/beyond_metropolitan_startup_rates.pdf

© 2013 Ewing Marion Kauffman Foundation

Connectivity

• Recipe, not just ingredientso How do entrepreneurs, investors, programs etc. get mixed?

• St. Louis example

© 2013 Ewing Marion Kauffman Foundation

Connectivity:Dealmaker Networks

BostonSiliconValley

Minneapolis Denver RTP Austin Chicago Phoenix

Kansas City Omaha

Investors 6017 8543 2088 3092 1294 1473 3916 1562 394 371

Operators/ Entrepreneurs 31292 54154 11877 15003 6114 6714 23003 8593 1976 2134

Dealmakers 1703 4439 378 478 136 202 562 190 43 30

Total Dealmakers / Total Actors 4.56% 7.08% 2.71% 2.64% 1.84% 2.47% 2.09% 1.87% 1.81% 1.20%

Total Dealmakers /Total Companies 000s 136.9 226.3 56.6 68.4 50.3 68.6 39.9 33.1 25.1 21.8

Dealmaker = Actor with 3 or more equity positions in private companies

Source: Ted Zoller, UNC

© 2013 Ewing Marion Kauffman Foundation

Connectivity: Dealmaker Networks

Healthcare (59)

Information Tech (44)Telecom (6)

Source: Ted Zoller, UNC

© 2013 Ewing Marion Kauffman Foundation

Connectivity:Dealmaker Networks

Central Connected Network

Standalone Syndicates

Inter-firm Syndicates

Disassociated Firms

Source: Ted Zoller, UNC

© 2013 Ewing Marion Kauffman Foundation

Diversity

• Avoid becoming a monocultureo E.g. Detroit vs. Seattle

• Both in terms of firm sectors, and types of people founding the firms

© 2013 Ewing Marion Kauffman Foundation

Diversity: Multiple Economic Specializations

Sector KC Boulder Boston

NAICS 517 Telecommunications

2.36 0.98 0.87

NAICS 518 Data processing, hosting and related services

2.15 2.76 ND

NAICS 323 Printing and related support activities

1.77 1.08 0.97

NAICS 524 Insurance carriers and related activities

1.68 ND 1.26

NAICS 492 Couriers and messengers

1.58 0.52 ND

Sector KCBoulde

rBoston

NAICS 511 Publishing industries, except Internet

0.9 6.38 2.6

NAICS 334 Computer and electronic product manufacturing

0.69 6.24 2.5

NAICS 518 Data processing, hosting and related services

2.15 2.76 ND

NAICS 541 Professional and technical services

ND 2.43 1.53

NAICS 312 Beverage and tobacco product manufacturing

0.62 2.01 0.52

NAICS 451 Sports, hobby, music instrument, book stores

1.1 1.91 0.94

Sector KCBoulde

rBoston

NAICS 511 Publishing industries, except Internet

0.9 6.38 2.6

NAICS 523 Securities, commodity contracts, investments

1.41 1.39 2.53

NAICS 334 Computer and electronic product manufacturing

0.69 6.24 2.5

NAICS 519 Other information services

ND 1.5 2.23

NAICS 316 Leather and allied product manufacturing

ND 0.42 2.16

KC Top 5 Sectors

Boulder Top 5 Sectors

Boston Top 5 Sectors

Source: QCEW, http://data.bls.gov/location_quotient/ControllerServlet

© 2013 Ewing Marion Kauffman Foundation

Diversity: Economic SpecializationOmaha

Location Quotient

NAICS 1

15 A

gricu

lture

and

fore

stry s

uppo

rt ac

tivitie

s

NAICS 4

81 A

ir tra

nspo

rtatio

n

NAICS 1

12 A

nim

al p

rodu

ction

and

aqu

acul

ture

NAICS 1

11 C

rop

prod

uctio

n

NAICS 3

12 B

ever

age

and

toba

cco

prod

uct m

anuf

actu

ring

NAICS 2

12 M

inin

g, e

xcep

t oil a

nd g

as

NAICS 3

14 T

extile

pro

duct

mills

NAICS 3

39 M

iscel

lane

ous m

anuf

actu

ring

NAICS 2

37 H

eavy

and

civil

eng

inee

ring

cons

tructi

on

NAICS 4

86 P

ipel

ine

trans

porta

tion

NAICS 4

48 C

loth

ing

and

cloth

ing

acce

ssor

ies s

tore

s

NAICS 4

52 G

ener

al m

erch

andi

se st

ores

NAICS 3

33 M

achi

nery

man

ufac

turin

g

NAICS 2

36 C

onstr

uctio

n of

bui

ldin

gs

NAICS 3

37 F

urni

ture

and

rela

ted

prod

uct m

anuf

actu

ring

NAICS 4

45 F

ood

and

beve

rage

stor

es

NAICS 3

26 P

lasti

cs a

nd ru

bber

pro

ducts

man

ufac

turin

g

NAICS 5

11 P

ublis

hing

indu

strie

s, ex

cept

Inte

rnet

NAICS 4

92 C

ourie

rs a

nd m

esse

nger

s

NAICS 4

93 W

areh

ousin

g an

d sto

rage

NAICS 6

23 N

ursin

g an

d re

siden

tial c

are

facil

ities

NAICS 2

38 S

pecia

lty tr

ade

cont

racto

rs

NAICS 3

23 P

rintin

g an

d re

late

d su

ppor

t acti

vitie

s

NAICS 5

15 B

road

casti

ng, e

xcep

t Inte

rnet

NAICS 7

12 M

useu

ms,

histo

rical

site

s, zo

os, a

nd p

arks

NAICS 3

11 F

ood

man

ufac

turin

g

NAICS 5

18 D

ata

proc

essin

g, h

ostin

g an

d re

late

d se

rvice

s

0

1

2

3

4

5

6

© 2013 Ewing Marion Kauffman Foundation

Location Quotient

NAICS 2

13 S

uppo

rt ac

tivitie

s fo

r mini

ng

NAICS 3

36 T

rans

porta

tion

equip

men

t man

ufac

turin

g

NAICS 2

37 H

eavy

and

civi

l eng

ineer

ing c

onst

ruct

ion

NAICS 7

12 M

useu

ms,

hist

orica

l site

s, z

oos,

and

par

ks

NAICS 1

11 C

rop

prod

uctio

n

NAICS 4

47 G

asoli

ne s

tatio

ns

NAICS 5

15 B

road

cast

ing, e

xcep

t Int

erne

t

NAICS 4

48 C

lothin

g an

d clo

thing

acc

esso

ries

stor

es

NAICS 5

32 R

enta

l and

leas

ing s

ervic

es

NAICS 3

27 N

onm

etall

ic m

inera

l pro

duct

man

ufac

turin

g

NAICS 2

12 M

ining

, exc

ept o

il and

gas

NAICS 4

46 H

ealth

and

per

sona

l car

e st

ores

NAICS 7

21 A

ccom

mod

ation

NAICS 5

61 A

dmini

stra

tive

and

supp

ort s

ervic

es

NAICS 5

22 C

redit

inte

rmed

iation

and

relat

ed a

ctivi

ties

NAICS 4

24 M

erch

ant w

holes

alers

, non

dura

ble g

oods

NAICS 4

44 B

uildin

g m

ater

ial a

nd g

arde

n su

pply

stor

es

NAICS 8

13 M

embe

rship

ass

ociat

ions

and

orga

nizat

ions

Base

Indu

stry

: Tot

al, a

ll ind

ustri

es

NAICS 5

31 R

eal e

stat

e

NAICS 7

22 F

ood

serv

ices

and

drink

ing p

laces

NAICS 4

53 M

iscell

aneo

us s

tore

reta

ilers

NAICS 3

15 A

ppar

el m

anuf

actu

ring

NAICS 5

19 O

ther

info

rmat

ion s

ervic

es

NAICS 4

51 S

ports

, hob

by, m

usic

instru

men

t, bo

ok s

tore

s

NAICS 5

18 D

ata

proc

essin

g, h

ostin

g an

d re

lated

ser

vices

0

1

2

3

4

5

6

7

Diversity: Economic SpecializationBoulder

© 2013 Ewing Marion Kauffman Foundation

NAICS 2

13 S

uppo

rt ac

tivitie

s for

min

ing

NAICS 1

15 A

gricu

lture

and

fore

stry s

uppo

rt ac

tivitie

s

NAICS 2

11 O

il and

gas

extr

actio

n

NAICS 2

12 M

inin

g, e

xcep

t oil a

nd g

as

NAICS 4

81 A

ir tra

nspo

rtatio

n

NAICS 3

35 E

lectr

ical e

quip

men

t and

app

lianc

e m

fg.

NAICS 8

14 P

rivat

e ho

useh

olds

NAICS 3

15 A

ppar

el m

anuf

actu

ring

NAICS 3

12 B

ever

age

and

toba

cco

prod

uct m

anuf

actu

ring

NAICS 3

37 F

urni

ture

and

rela

ted

prod

uct m

anuf

actu

ring

NAICS 5

15 B

road

casti

ng, e

xcep

t Inte

rnet

NAICS 2

36 C

onstr

uctio

n of

bui

ldin

gs

NAICS 3

24 P

etro

leum

and

coal

pro

ducts

man

ufac

turin

g

NAICS 4

43 E

lectr

onics

and

app

lianc

e sto

res

NAICS 3

26 P

lasti

cs a

nd ru

bber

pro

ducts

man

ufac

turin

g

NAICS 4

47 G

asol

ine

statio

ns

NAICS 5

11 P

ublis

hing

indu

strie

s, ex

cept

Inte

rnet

NAICS 4

45 F

ood

and

beve

rage

stor

es

NAICS 5

62 W

aste

man

agem

ent a

nd re

med

iatio

n se

rvice

s

NAICS 4

52 G

ener

al m

erch

andi

se st

ores

Base

Indu

stry:

Tota

l, all i

ndus

tries

NAICS 6

23 N

ursin

g an

d re

siden

tial c

are

facil

ities

NAICS 3

36 T

rans

porta

tion

equi

pmen

t man

ufac

turin

g

NAICS 5

22 C

redi

t inte

rmed

iatio

n an

d re

late

d ac

tivitie

s

NAICS 4

51 S

ports

, hob

by, m

usic

instr

umen

t, boo

k sto

res

NAICS 2

21 U

tilitie

s

NAICS 7

11 P

erfo

rmin

g ar

ts an

d sp

ecta

tor s

ports

NAICS 3

22 P

aper

man

ufac

turin

g

NAICS 4

42 F

urni

ture

and

hom

e fu

rnish

ings

stor

es

NAICS 4

88 S

uppo

rt ac

tivitie

s for

tran

spor

tatio

n

NAICS 4

92 C

ourie

rs a

nd m

esse

nger

s

NAICS 3

23 P

rintin

g an

d re

late

d su

ppor

t acti

vitie

s

NAICS 5

17 T

elec

omm

unica

tions

0

0.5

1

1.5

2

2.5KC: only two sectors above 2.0

Location Quotient

Diversity: Economic SpecializationKC

© 2013 Ewing Marion Kauffman Foundation

Diversity: Economic Mobility

• Kansas City’s “Absolute Mobility” measure is 40.2.1 o This ranks 231st out of 381 MSAs.

• If we take a look at the entire ladder, the picture that emerges is that Kansas City is slightly above average for the intergenerational mobility of wealthy families, and a little below average for poorer families.

1 “Absolute upward mobility (AM) is the expected rank of children whose parents are at the 25th percentile of the national income distribution”

Source: Equality of Opportunity Projecthttp://www.equality-of-opportunity.org/index.php/data

© 2013 Ewing Marion Kauffman Foundation

Diversity: Immigration

Kansas City has roughly 128,000 immigrants, which is 41st among all MSAs, and immigrants make up 6.3% of Kansas City’s total population, which is 268th among all MSAs.

Source: ACS, tabulation and map by Migration Policy Institutehttp://www.migrationpolicy.org/programs/data-hub/charts/us-immigrant-population-metropolitan-area

© 2013 Ewing Marion Kauffman Foundation

Immigrant High-Tech Entrepreneurs, 2011

Source: Cathy Yang Liu, Gary Painter, and Qingfang Wang, “Lessons for U.S. Metro Areas: Characteristics and Clustering of High-Tech Immigrant Entrepreneurs,” Kauffman Foundation, March 2014.

© 2013 Ewing Marion Kauffman Foundation

Immigrant High-Tech Entrepreneur Growth, 2000-2011

Source: Cathy Yang Liu, Gary Painter, and Qingfang Wang, “Lessons for U.S. Metro Areas: Characteristics and Clustering of High-Tech Immigrant Entrepreneurs,” Kauffman Foundation, March 2014.

© 2013 Ewing Marion Kauffman Foundation

Progressing the “measuring” conversation

• What new data can be developed?• Other theoretical frameworks?• How do we measure impact of specific programs,

policies, or interventions?

© 2013 Ewing Marion Kauffman Foundation

Thank you

[email protected]

[email protected]