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FY2012-2015
Prepared by:Bureau of Business and Economic ResearchUniversity of MontanaMissoula, Montana 59812
Prepared for:Montana Chamber Foundation
The State of Entrepreneurship in Montana
BUREAU OF BUSINESS AND ECONOMIC RESEARCHU N I V E R S I T Y O F M O N TA N A
August 2018
AcknowledgementsThisreportwasproducedandauthoredbyBryceWardformerlyoftheUniversityofMontana’sBureauofBusinessandEconomicResearch.AllstatementsandconclusionsincludedinthisreportbelongtotheauthoranddonotrepresentthepositionoftheUniversityofMontana.Wewouldliketothankthefollowingpartnersforsupportingthisresearch:
Formoreinformation,contact:BureauofBusinessandEconomicResearchGallagherBusinessBuilding,Suite231Missoula,MT59812(406)543-5113www.bber.umt.edu orBryceWardABMJConsulting(406)219-0694bward@abmjconsulting.comwww.abmjconsulting.com
TableofContentsI.Introduction.......................................................................................................................................1
II.Theentrepreneur’sroleinaregionaleconomy...................................................................1
III.Montana’sentrepreneurialecosystem..................................................................................2A.Indicatorsofsuccess.................................................................................................................................3B.Indicatorsofweakness.............................................................................................................................5
III.MontanaChamberofCommerceStateofEntrepreneurshipIndicators....................9A.Capitalinvestment.....................................................................................................................................9B.Patents.........................................................................................................................................................10C.Entrepreneurialsupport........................................................................................................................11D.Start-upemployment..............................................................................................................................12
IV.Conclusion......................................................................................................................................16
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I.IntroductionMontanareceivesmanyplauditsforitsentrepreneurialculture.Forseveralyears,
Montanahasrankedat,ornear,thetopoftheprestigiousKauffmanIndexofEntrepreneurship.Montanahasmoreentrepreneurspercapitathananyotherstate;itcontinuestocreatemoreentrepreneursthanmoststates,andMontana’sbusinesssurvivalrate(theshareofnewbusinesseswhosurvivetheirfirstfiveyears)ranksinthetop10.Thesefactsareencouraging.TheysuggestthatMontana’sentrepreneurialecosystemisstrong.
However,adeeperdiveintoentrepreneurshipdatarevealsamorecomplicatedstory.Montanaentrepreneurstendtostartverysmallbusinessesthatdonotscaleupquickly.Theyaremorelikelytostartseasonalbusinessesand/orbusinessesthatserveonlylocalmarkets.Theyarelesslikelytohaveapatent,trademark,orcopyright.
Furthermore,consistentwithnationaltrends,entrepreneurshipinMontanaiswaning.TheshareofMontananswhoownabusinessastheirmainjobhasfallenbynearly50percentsince1998.Similarly,theshareofMontananswhoworkforyoungbusinesseshasfallenfromroughly20percentinthe1990sto12percentinrecentyears.
Inthisreport,weprovideabriefoverviewofentrepreneurshipandentrepreneursinMontana.Then,weprovidedataonahandfulofkeyindicatorsthatspeaktothestateofMontana’sentrepreneurialecosystem.
II.Theentrepreneur’sroleinaregionaleconomy
Asimplemodelofregionaleconomicsuccessarguesthatregionswithgreatercapacitydobetter.Aregion’scapacitydependsonitsstocksofthefourformsofcapital–natural,physical,human,andsocial.Assuch,economistsexpectplaceswithmorevaluablenaturalresources,betterphysicalinfrastructure,moretalentedpeople,andbettersocialnetworksandinstitutionstoperformbetter.
However,capacityisinsufficientforexplainingperformance.Thereisafifthkey
elementtolocaleconomicsuccess–theentrepreneur.Entrepreneursarenecessary.Eachregionhassomecapacitytoproducegoodsandservices.Entrepreneursarethepeoplewho
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figureouthowtousetheavailablecapacitytocreateproductsorservicesthatconsumerswant.
Formanyyears,economists(andothers)ignoredentrepreneurs.1Theyassumedthatthesupplyofpotentialentrepreneurswassimilareverywhere.Ifaregionhadmoreopportunities,moreentrepreneurswouldemerge.However,overthepastseveraldecades,appreciationfortherolethatentrepreneursplayhasgrown.Regionswithmoreskilledentrepreneursmaybemoresuccessful.2Thatis,intwosimilarareas,theareawiththemoreskilledentrepreneursmayhavebettereconomicoutcomes.
Thereareseveralreasonswhytheroleforentrepreneurshasgrownmoresalient.First,
intheknowledgeeconomy,thesuccessofmanyfirmsdependsonthequalityofthefounders’idea.Manyentrepreneurshavegainednotirityforthemselvesandtheirbusinessesduetothequalityoftheidea.Thishasincreasedawarenessofentrepreneurs.Furthermore,giventhatmanyknowledgeindustryfirmscanlocateanywhere,theabilitytoattractorcreateskilledentrepreneurscandirectlyboostaregionaleconomy.Regionsdobetteriftheyhavemorepeoplewhobothhavegoodideasandcanexecutethem.
Second,thegrowthofthehistoricrecordhasshownthatlocaleconomicchangeis
inevitable.Inallplaces,keyindustriesinevitablywaxandwane.Localentrepreneurshelpredirectexistingcapacitytowardhighervalueuses.Areaswithmoreandbetterentrepreneurstendtoadjustmorequicklyandtobemoresuccessful.3
Thus,itisimportantforregionstocreatelotsofpotentialentrepreneurs,tosupport
themastheypursuetheirideas,andtoreducethesetoflocalconstraintsthatmaylimittheirabilitytosucceed.Thatis,itisimportanttocreateaviableentrepreneurialecosystem.
III.Montana’sentrepreneurialecosystem
Montanacreateslotsofentrepreneurs.Assuch,itseemsfairtoassumethatMontanahasarelativelyrobustentrepreneurialecosystem;however,otherdatasuggestssomeweaknesses.
1Chinitz,B.(1961).Contrastsinagglomeration:Newyorkandpittsburgh.TheAmericanEconomicReview,51(2),279-289.2Glaeser,E.L.,Rosenthal,S.S.,&Strange,W.C.(2010).Urbaneconomicsandentrepreneurship.JournalofUrbanEconomics,67(1),1-14.3Gleaseretal(2010).
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A.Indicatorsofsuccess
1. Montanahasmoreentrepreneurs.4TheshareofMontana’spopulationthatownsabusinessastheirmainjobisthehighest
inthecountry.Asof2015,10.2percentofMontanansownedabusinessastheirmainjob.Nationally,only6percentofAmericansownedabusinessastheirmainjob.TherateofbusinessownershipinMontanawasmorethandoubletheratein11states.
Figure1–Shareofworkingagepopulationwhoownabusinessastheirmainjob
Source:2017KauffmanIndexofMainstreetEntrepreneurship
2. Montanacreatesmorenewentrepreneurs.5
Consistentwithitshighrateofbusinessownership,Montanansbecomeentrepreneurs
atahigherrate.Approximately0.43percentofMontanansbecomeentrepreneurseachmonth.Thismeansthatapproximately3,400Montanansstartabusinesseachmonth.Montanaranked4thonthismetricin2016,andMontanarankedfirstonthismetricin2013,2014,and2015.
42017KauffmanIndexofMainStreetEntrepreneurshipRateofBusinessOwners52017KauffmanIndexofStartupActivityRateofNewEntrepreneurs
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Thismetricfluctuatesovertime.TheshareofMontananswhostartabusinesseachmonthhasrangesbetween0.4percentand0.6percent,butthereisnotacleartrendinthesedataoverthepast20years.
3. NewMontanafirmssurvive.6
Thefive-yearsurvivalratefornewMontanafirmsisgood.In2016,51.8percentof
Montanafirmsformedin2011werestilloperating,thisranked9thamongallstates.Montanahasrankedinthetop10forsurvivalrateinsixofthelasttenyears.However,thefive-yearsurvivalratefluctuatesovertime.Only42percentofMontanafirmsformedin2009survivedtheirfirstfiveyears.ThisrankedMontanainthebottom12states.
Theseindicatorsareconsistentwithahealthyentrepreneurialecosystem.ThefactthatadisproportionateshareofpeopleinMontanapursueentrepreneurship,andamajorityofthemsucceedatcreatingabusinessthatsurvivesatleastfiveyearsindicatesthatatleastsomepartsofMontana’sentrepreneurialclimateworkwell.
However,itisunclearexactlywhatdrivestheseresults.Economistshaveidentifiedfour
broadreasonswhythesupplyofentrepreneursmayvaryacrossplace7:
(1) Thereturnstoentrepreneurshipvary:Inplaceswherepursuingentrepreneurshipgeneratesahigherincomerelativetothealternative,moreentrepreneurswillemerge.
(2) Differentialavailabilityoftheinputstoentrepreneurship:Inplaceswithbetteraccesstocapital,betteraccesstokeyworkers,betteraccesstootherinputs,orsimplybetterresourcestolearnhowtobeanentrepreneur,morepeopleshouldpursueentrepreneurship.
(3) Differencesinthesupplyofideas:Someplacesarebetteratgeneratingideas;places
thatgeneratemoreideasshould,allelseequal,havemoreentrepreneurs.
(4) Differencesinlocalculture,politicalsystems,orendowments:Placeswithculturesandpoliciesthatsupportentrepreneursorwithnaturalendowmentsthatincreasethechancesofsuccesswillalsolikelyhavemoreentrepreneurs.
62017KauffmanIndexofMainStreetEntrepreneurshipSurvivalRate7AdaptedfromGlaeser,E.L.,Rosenthal,S.S.,&Strange,W.C.(2010).Urbaneconomicsandentrepreneurship.JournalofUrbanEconomics,67(1),1-14.
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WhichofthesefactorsdrivesentrepreneurshipratesinMontanaremainsunclear.Highentrepreneurshipratescouldreflecthigherreturnstoentrepreneurshiphere.Alternatively,Montana’shighratesofentrepreneurshipcouldreflectbetteraccesstotheinputsneededtostartabusiness,amoresupportiveculture,orsomeothercombinationoffactors.Whiledistinguishingamongpotentialexplanationsisbeyondthescopeofthisreport,wenotethatarecentreportexaminedtheentrepreneurialecosysteminMissoulaandBozemaningreaterdepth,particularlyforhightechfirms.8Thisreportfoundsupportformanyofthesefactors.Inparticular,itarguedthatthesecommunitiesoffereddensenetworksandamplesupportfrommentors,government,andbusinessresources,thattheyattractskilledentrepreneurs,andthattheyofferreasonableaccesstoskilledworkers.However,thisreportdidnotseektoexplainMontana’shigherratesofentrepreneurshiprelativetootherplaces.
B.Indicatorsofweakness
1. NewMontanabusinessestendtobesmall.9Theaveragenewemployerbusiness--i.e.,afirmlessthan1yearoldthathas
employees--inMontanahas3.9employees.Thisisthesmallestnewfirmsizeamongallstates.Thisisnotnew.NewemployerbusinessesinMontanahaveconsistentlybeenamongthesmallestinthecountryforthepast25years,rankingamongthe5smallesteachyearsince1992.
Furthermore,evenafterfiveyears,newMontanabusinessesaresmall.In2014,fiveyearsafteropening,theaverageemployerbusinessemployed6.6people.Thiswasthesmallestaverageamongallstates.
8Hendersonetal(2017)ANewFrontier:EntrepreneushipEcosystemsinBozemanandMissoula,Montana.92017KauffmanIndexofGrowthEntrepreneurshipunderlyingdataforRateofStartupGrowth.
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Figure2–Averagenumberofemployeesatnewfirms
Source:2017KauffmanIndexofGrowthEntrepreneurship2. NewMontanabusinessesarelesslikelytoscale-upquickly.10
Asof2014,0.8percentofnewMontanafirmsthatstartedwithfewerthan50
employeesgrewtohavemorethan50employeesduringtheirfirst10years.Whilescale-upsaregenerallyrare–inthemedianstateonly1.4percentofstart-upsscaletomorethan50employeeswithin10years–thepercentofMontanafirmsthatscale-upwasthelowestinthecountry.Montanahasconsistentlyrankedinthebottomfivestatesonthismetricfornearly20years.3. Montanabusinessownershaveloweraspirations.11
AccordingtotheAnnualSurveyofEntrepreneurs–aCensusBureausurveythat
providesinformationaboutemployerbusinesses(i.e.,businesseswithemployees),only54percentofrespondentemployerbusinessesinMontanasaythattheyaspiretogrowthebusiness'profitsorsales.Thisisthesecondlowestpercentageamongallstates.Nationally,64percentoffirmswanttogrow.However,firmswithlowaspirationstendtobesmall.Overall,75percentofMontana’semployeesworkforfirmshopingtogrow(thisranksMontana43rd).
102017KauffmanIndexofGrowthEntrepreneurshipShareofScaleups.112015AnnualSurveyofEntrepreneurs,CharacteristicsofBusinesses,BusinessAspirationsofOwners(SE1500CSCB04)
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4. Montanahasalowerdensityofhighgrowthfirms.12ThenumberofprivateMontanafirmswithatleast$2Minrevenuewhoalsohave
grownbyatleast20percentayearforthreestraightyearsisrelativelylow.Montana’shighgrowthdensityontheKauffmanindexofhighgrowthentreprenurialshipreached26in2017,thehighestit’sbeeninthe10yearstheKauffmanFoundationhasproducedthismeasure.However,thisstillrankedMontana43rdamongallstatesandislessthanhalftheaverageormedianstate.5. Montanahasarelativelysmalltradedsector.13
WhileMontanahasarelativelylargeshareofemployerfirmsthatsellprimarilytocustomersoutsidetheirregion--localcustomersrepresentlessthan25percentofsalesat11percentofMontanafirms(rank18th);manyofthesefirmsaresmall.Montanarankslastintheshareofemploymentinfirmsthatsellprimarilytonon-localcustomers.Only11.5percentofMontanaemploymentisinfirmswherelocalsalesrepresentlessthan25percentofthetotal.Incontrast,inthemedianstate,over22percentofemploymentisinfirmsthatsellprimarilytonon-localcustomers.
6. Montanahasadisproportionateshareofseasonalorpart-timebusinesses.14
Twenty-threepercentofMontanaemployerfirmsoperatedlessthan40hoursper
week,operatedlessthan12monthsperyear,operatedoccasionally,orwereseasonal.ThisisfourpercentagepointshigherthantheUSlevel(19percent).However,thesepart-time/seasonalfirmsaresmall.Theyemploylessthan8percentofMontana’sworkers.7. Montanafirmsarelesslikelytohaveapatent,trademark,orcopyright.15
Montanarankstowardthebottomintheshareofemployerfirmswithapatent,trademark,orcopyright.Only1.3percentofMontanafirmshaveapatent(rank47th),and0.9percenthaveapatentpending(rank42nd).Fourpercenthaveacopyright(rank41st),and6.6percenthaveatrademark(rank41st).Intotal,only8.6percentofMontanafirmshaveanyofthesewhichranksMontana47thamongallstates.
122017KauffmanIndexofGrowthEntrepreneurshipHighGrowthCompanyDensity132015AnnualSurveyofEntrepreneursLocationofBusinessCustomers/Clients(SE1500CSCB15)142015AnnualSurveyofEntrepreneurs,CharacteristicsofBusinesses,SeasonalorPart-TimeBusinessStatus(SE1500CSCB26)152015AnnualSurveyofEntrepreneurs,CharacteristicsofBusinesses,Type(s)ofIntellectualProperty(SE1500CSCB25)
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Figure3–ShareoffirmswithIP(patents,trademarks,orcopyrights)
Source:2015AnnualSurveyofEntrepreneurs
Thesedatasuggestsomeweakness.Ataminimum,theysuggestthatMontana’sentrepreneurialecosystemdoesnothavealargeshareofbig,highgrowthfirmswithlotsofintellectualproperty.ThiscouldreflectthefactthatMontanaentrepreneurshavelowerambitions.ItcouldalsoindicatethatitishardertocreatethesetypesofbusinessesintherelativelysmallandisolatedtownsinMontana.Inparticular,totheextentthatMontanahasmoreentrepreneurswhocreatebusinessestoservelocalmarketsinsmalltowns,itisdifficultfortheseentrepreneurstocreatelargebusinessesbecausetheirprospectsforgrowtharelimitedbythesizeoftheirlocalmarket.Thesefactscouldalsobeanartifactofthedata.Thedatadonotallowustoparsetheresultsbykeyfactors(e.g.,industryorpart-time/seasonal).Thismakesitdifficulttocreatetheapples-to-applescomparisonsneededtoexploredifferentexplanations(likeindustrycompositionorlocation).Assuch,wedonotattempttoexplainthesefindingsinthisreport.WehighlightthemassomethingMontanansshouldbeawareofandseektounderstandmore.
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III.MontanaChamberofCommerceStateofEntrepreneurshipIndicators
InanefforttobettertrackMontana’sentrepreneurialecosystem,theChamberaskedtheBureauofBusinessandEconomicResearch(BBER)tocompiledataonanhandfulofkeyindicators:capitalinvestment,patents,entrepreneurialsupport,andjobcreationatyoungfirms.Inpart,thesecorrespondtoseveralofthesourcesofvariationinentrepreneurshipdiscussedinsectionIII.A.,capitalinvestmentspeakstotheavailabilityofcapitaltobuildaventure.Thenumberofpatentsspeakstothelevelofideacreation.Entrepreneurialsupportspeakstobothcultureandtheavailabilityofinputstohelpnascententrepreneurssucceed.Thefourthindicator(jobsandpayroll)speakstooutcomes.Asshownbelow,accesstoventurecapital,patents,andentrepreneurialsupporthaveallimprovedinrecentyears,buttheyremainlowrelativetootherplaces.ThesetrendssuggestsomerecentimprovementsinkeyaspectsofMontana’sentrepreneurialecosystem.However,Montana,liketherestofthecountry,hasseensignificantdeclinesinthenumberofentrepreneursandtheshareofworkerswhoworkatstartups.
A.CapitalinvestmentUnfortunately,dataoncapitalinvestmentbyallfirmsarenotavailableatthestatelevel.
However,therearesomeotherdatathatprovidesomeevidenceonthelevelandroleofventurecapitalinMontana’sentrepreneurialecosystem.
PricewaterhouseCoopers/CBInsights’MoneytreeReporttracksventurecapital(VC)
investmentbystate.16Thesedatatrackboththenumberofdealsandthetotalinvestment.Figure4showsthesedataforthepast16years.ThesedataindicatethatVCinvestmentinMontanahasincreasedinrecentyearsasmeasuredbyboththenumberofdealsandthetotalamountinvested.However,VCinvestmentinMontanaremainslow.Onapercapitabasis,Montanaranks33rdintheaveragenumberofdealsperyearbetween2012and2016and43rdintheamountinvested.
Whilethisindicatorisinformative,itisincomplete.ArelativelysmallshareofMontanafirmsrelyonventurecapitalforfinancing.Lessthan1percentofMontanaemployerfirmsreportusingventurecapitaltostartoracquiretheirbusiness.Inconstrast,85percent 16https://www.pwc.com/us/en/industries/technology/moneytree.html
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reportusingpersonalfunds,and27percentreportthattheyreceivedfinancingfrombanksorfinancialinstitutions.17Similarly,only5percentofMontanaentrepreneursreportthatlackaccesstofinancialcapitalhadanegativeimpactontheirprofitability.Thiswashalfthenationalrateof10percent.18(Incontrast,33percentreportthataccesstoqualifiedlabornegativelyaffectedprofitability;thiswas5percentagepointshigherthanthenationalrate).
Figure4–NumberofdealsandamountinvestedinMontanabyventurecapitalistsovertime
Source:PricewaterhouseCoopers/CBInsights’MoneytreeReport
B.Patents
AsdiscussedinsectionIII.B.7,Montanafirmsarerelativelyunlikelytohavepatents,copyrights,ortrademarks.Dataonannualpatentfilingsconfirmsthis.Montanansaregrantedrelativelyfewpatentseachyear.In2015,Montananswereawarded142patents.Thisrepresentsasignificantimprovementovertherecentpastandisjustshyofthehigh
172015AnnualSurveyofEntrepreneurs,CharacteristicsofBusiness,SourcesofStart-UporAcquisitionCapital(SE1500CSCB07)182015AnnualSurveyofEntrepreneurs,CharacteristicsofBusiness,NegativeImpactsonProfitability(SE1500CSCB13)
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point(145)thatMontanareachedin2001.19However,thisremainslowrelativetootherplaces.Onapercapitabasis,Montanaranked40thamongallstates,anditsreceivedlessthanhalfthenumberofpatentsperpersonasthemedianstate.Figure5–NumberofpatentsawardedtoMontanansovertime
Source:USPatentandTrademarkOffice,PatentTechnologyMonitoringTeam,ExtendedYearSet–PatentCountsbyCountry,State,andYearUtilityPatents(December2015)
C.Entrepreneurialsupport
Inrecentyears,Montanahasdevelopedseveralformalprogramsthathelpsupportentrepreneurs,e.g.,theLaunchpadsattheUniversityofMontanaandMontanaStateUniversityand406labs.Theseprogramshelppotentialentrepreneursthroughthepre-entrepreneurialprocess.Theyhelpindividualsdeveloptheirentrepreneurialskills,theyhelpconnectpotentialentrepreneurstoresources,andtheyhelpfosteracultureofentrepreneurship.
19USPatentandTrademarkOffice,PatentTechnologyMonitoringTeam,ExtendedYearSet–PatentCountsbyCountry,State,andYearUtilityPatents(December2015)https://www.uspto.gov/web/offices/ac/ido/oeip/taf/cst_utlh.htm
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Whileweknowthattheseentitieshaveaidedhundredsofpotentialentrepreneurs,they
havenotyetdevelopedaconsistentmonitoringsystemthatallowsforconsistentquantificationoftheentrepreneurstheyhavehelped.However,arecentreportontheentrepreneurialecosysteminBozemanandMissoulafoundthatatleastfiveintervieweesmentionedeachofthefollowingbusinessresources20:
• MontanaHighTechBusinessAlliance• HellgateVentureNetwork• BlackstoneLaunchpad–UniveristyofMontana• BusinessStartupChallenge–UniversityofMontana• MonTEC• BlackstoneLaunchpad–MontanaStateUniversity• MissoulaEconomicPartnership• UniversityofMontana(otherunitsandfunctions)• MontanaPhotonicsIndustryAlliance• MontanaStateUniversity(otherunitsandfunctions)• TechRanch• MontanaCodeSchool• MontanaManufacturingExtensionCenter• 1MillionCups–Missoula• Dorsey&Whitney
Thisreportalsohighlightedthatentrepreneursreceivedsupportfromanumberofmentorsatotherbusinessesandutilizedanumberofgovernmentalresources.ThissuggeststhatMontanahasareasonablyrobustsetofresourcestohelpentrepreneurs.
D.Start-upemployment
Approximately1outofevery8jobsinMontanaisatafirmthatislessthan5yearsold.21ThisisslightlyhigherthantheUSlevelof1outof10.Youngfirms,though,compriseamuchhigherproportionofnetjobcreation(totaljobcreationminusjobdestruction).In2016,over60percentofnetjobcreationoccurredatyoungfirms,andoverhalfwasatstartups(firmslessthan1yearold).TheselevelsareslightlyhigherthantheUSlevel.
20Hendersonetal(2017)ANewFrontier:EntrepreneushipEcosystemsinBozemanandMissoula,Montana.21AnalysisofdataobtainedfromUSCensusBureau,QuarterlyWorkforceIndicators
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Figure6presentstheshareofworkerswhoworkatyoungfirmsbyindustryforMontanaandtheUS.Withtheexceptionofmanufacturing,theindustrypatternsinMontanaandtheUSaresimilar.Youngfirmscomprisemuchlargersharesofemploymentinindustrieslikeaccomodationandfoodservice,agricultureforestryandfishing,realestate,construction,andartsentertainmentandrecreation.
Figure6–Shareofemploymentatyoungfirms(<5years)byindustry
Source:QuarterlyWorkforceIndicators
AsshowninFigure7,though,theshareofemploymentatstartupsandyoungfirmshasdeclinedsubstantially.Throughoutmuchofthe1990s,over20percentofMontanaworkerworkedforyoungfirms.ThiswassubstantiallyhigherthantheUSlevel(roughly16percent).However,sincetheyear2000,theshareofworkersatyoungfirmshasdeclined,andthedeclineinMontanahasbeenmuchsharperthanintheUS.
0.000 0.050 0.100 0.150 0.200 0.250
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Similarly,therateofbusinessownershipinMontanahasfallensubstantially.22In1998,14.2percentofMontanansownedabusinessastheirmainjob.Thiswasalmostdoublethenationalrateof7.7percent.Whiletherateofbusinessownershiphasdeclinedinallstates,Montana’sdeclineranks4thandistwo-and-a-halftimeslargerthanthenationaldecline.Similarly,thescale-uprateforMontanafirmshasdeclinedsteadilysincethemid-1990.Therateinrecentyearsisroughlyhalfwhatitwas20yearsago.Figure7–Shareofemploymentatyoungfirmsovertime
Source:QuarterlyWorkforceIndicators
Figure8showshowtheshareofworkersatyoungfirmschangedbyindustryinMontanabetween1996and2006.Consistentwiththeoveralldeclinedescribedpreviously,thesharedeclinedfornearlyeveryindustry.However,thedeclinesarenotuniform.Industrieslikeadministrativesupportandwastemanagementservices,agricultureforestryandfishing,artsentertainmentandrecreation,andconstructionsawthelargestdeclines.
Economistshavenotyetidentifiedthesourceofthedeclineinentrepreneuship.
Severalhypotheseshavebeensuggested.Theseinclude:marketconcentration(largerfirmshavecometodominatemoreindustriesmakingitmoredifficultforentrepreneursto 222017KauffmanIndexofEntrepreneurshipMainStreetEntrepreneurship,RateofBusinessOwners
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entermarkets);difficultyfindingresources/financing(perhaps,inpart,duetogrowingstudentdebt);slowingpopulationgrowth(whichimpliesslowerexpectedgrowth);corporationsdoingmoreentrepreneurshipin-house;andgenerationaleffects(babyboomersweremorelikelytopursueentrepreneurshipthangenXandperhapsmillenials).Otherfactorslikelycontribute,andtheremaybeidiosyncraticfactorsthathelpexplainMontana’sdecline.Figure8–Changeinshareofemploymentatyoungfirms(<5years)inMontana,1996-2016
Source:QuarterlyWorkforceIndicators
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Arts,Entertainment,andRecreationAgriculture,Forestry,Fishingand
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IV.Conclusion
Insum,thestateofentrepreneurshipinMontanaisamixedbag.Montanacontinuestogeneratemoreentrepreneursthanotherstates,andtheseentrepreneurstendtocreatebusinessesthataremorelikelytosurvive.However,Montanafirmstendtobesmall,theyhaveloweraspirations,andtheyarelesslikelytogrowrapidly.Recentgrowthinaccesstoventurecapital,patenting,andinsupportforentrepreneurssuggestthatMontanamaybeonthevergeofdevelopingmorehighgrowthstart-ups.
Montana–liketherestoftheUS–isalsosufferingfromalossofdynamism.Theshare
ofpeoplestartingbusinessesandtheshareofpeopleworkingforstart-upshavedeclinedsubstantiallyinMontanaandelsewhere.Itisimportanttodevelopadeeperunderstandingofthesourcesofthisdecline.
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