Economist: Focus on family businesses to help rural economy


A UW-Madison economist argues that the state should focus more on developing “local” businesses rather than recruiting companies to move to Wisconsin.

“Going out and trying to recruit this company is not a good use of their time,” Professor Steven Deller said at a recent rural innovation event in Beloit. “It’s best to work with businesses that are already in your backyard and entrepreneurs who are considering starting a business.”

Deller pointed to research he and his colleagues have conducted showing that 97% of all businesses in the state “are in the same location as last year.” Moreover, the “vast majority” of businesses remain in the same place where they started, he said.

Panelists at yesterday’s event – held in the Irontek coworking space – discussed ways to support innovation and business growth in rural areas. Sam Rikkers, assistant secretary and chief operating officer of the Wisconsin Economic Development Corp., said rural innovation in the state “is not in a happy place.”

“I think that’s why we’re all here,” he said. “There are a lot of things we can do. … At WEDC, we’re doing pretty well, we tell ourselves, but still … 8.2% of our entrepreneurial investments go to counties and rural communities.

Deller described innovation as the “engine of economic growth,” but said efforts to drive it are often focused on disrupting the industry rather than the “mom and pop” end of the spectrum. That’s despite the fact that these local, often rural businesses are far more common in Wisconsin than those redefining an entire industry or market niche, he said.

“It could be in rural Wisconsin, as they now have reliable and affordable broadband, they have a social media marketing campaign in place,” he said.

“For these businesses, it’s new, it’s innovative… I think maybe we need to spend a little more time with these ‘mom and pop’ businesses, to make them more profitable and more efficient. .”

Phil Fonfara, president of Beloit-based Blue Line Battery, called the city an “incredible example” of local investment leading to innovation and success.

“You have a million square foot building here at the former Beloit Corporation headquarters,” he said. “This space has been abandoned for a very long time. It took an awful lot of capital to build what you see here today, but there are an incredible number of startups headquartered here that have found funding here and other resources.

He applauded Hendricks Commercial Properties and billionaire founder Diane Hendricks for their impact on the city, pointing to investments in apartment buildings, sports facilities and restaurants.

“Without that capital and that commitment to a community and that city…you’d drive past it and not stop unless you needed gas,” he said. “Now it’s becoming a destination, not just for tourism, but also for startups. It’s a great place to grow a business.

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