For too long, Michigan lost sight of the role of entrepreneurship in fostering job growth, creating wealth and building our communities. But times have changed.

Policy leaders have embraced the Small Business Association of Michigan’s belief that economic and community reinvention depends on innovative entrepreneurship. Economic gardening—a business retention/expansion hybrid—can significantly enhance this process. Now in its seventh year, the annual Michigan Entrepreneurship Score Card (download at sbam.org/action) continues to measure our progress toward that goal.

2011 Entrepreneurship Score Card findings

Each year the Entrepreneurship Score Card is used to help policymakers understand how entrepreneurship is faring in a Michigan economy that, while struggling, nevertheless displays hopeful signs of recovery. Some important positive developments over the past year:

• Michigan’s fast-growing “stage two” small businesses are weathering the economic storm and are continuing to lead the way in the state’s economic reinvention.

• The University of Michigan has launched a new master’s degree, entrepreneurial education, representing an important educational commitment to entrepreneurship development.

• Michigan continues to maintain high marks in those areas necessary for a vibrant global economy, such as high-tech workforce and quality of higher education.

Compared to the previous year, this year’s Entrepreneurial Score Card shows Michigan generally holding steady relative to the other 49 states. This can be taken with some relief given that Michigan was the state worst hit by the 2007-2009 recession. Two of the three entrepreneurial (primary) drivers, entrepreneurial vitality and entrepreneurial climate, show little change from last year. Entrepreneurial change improved by four ranks. However, ranking on the Entrepreneurship Sensitivity Index, a composite score developed last year to detect very recent (annual) changes in small business formation and growth, fell from 22 in 2009-10 to 33 in 2010-2011. Again, such a result could be expected given the state’s recessionary predicament.

On secondary drivers Michigan’s ranks and star ratings changed very little from last year. The most notable differences were: Quality of life improved seven ranks; both productivity and labor supply and digital connectivity dropped seven ranks.

National ranking compares Michigan to all 50 states, with 50 being last. Stars under rating are an indication of overall quality—five stars is an excellent rating, one star is poor. Together, the measures describe both relative performance and qualitative performance.

Explanation:

• Entrepreneurial change (the amount of entrepreneurial growth or decline in an economy over the recent three years)

• Entrepreneurial vitality (the level of entrepreneurial activity—pace and robustness of entrepreneurial activity)

• Entrepreneurial climate (the capability of an economy to foster entrepreneurship)

A fourth measure—entrepreneurial dynamism—was used in previous reports, but has been replaced by the State Entrepreneurial Sensitivity Index (introduced last year). More volatile than entrepreneurial dynamism, this index is a combination of six metrics—three measuring different aspects of entrepreneurial job creation, two measuring business creation/growth and the sixth measuring proprietor income growth. These six metrics capture key aspects of a dynamic innovation economy, where entrepreneurship is present in all layers of the private economy from new business activity to expansion of existing firms and across all sectors.

Where do we go from here?

The annual score card has proven invaluable in defining the state’s situation and identifying strengths and weaknesses. It has sparked much constructive discussion, gradually resulting in recognition by the state’s leaders that entrepreneurial growth is critical to the state’s turnaround.

Our challenge now, while continuing with the score card, is to initiate an action agenda in support of economic gardening and fast-growing second-stage companies. In 2010 the Small Business Association of Michigan released a white paper and a blueprint for “Propelling a New Economic Direction for Michigan”—two major efforts to highlight the importance of economic gardening as a complementary growth strategy to large business attraction (these papers may be downloaded at sbam.org/action). The goal is to free up the talents, ideas, research, technology and capital embedded in the Michigan economy for the betterment of jobs and personal wealth and to integrate these efforts with the state’s sense of place initiatives.

		Michael Rogers can be contacted at This e-mail address is being protected from spambots. You need JavaScript enabled to view it and followed on Twitter @mwrogers. The Small Business Association of Michigan can be found online on Facebook, LinkedIn and at www.sbam.org.