One of the hidden reasons for Kansas’ slow growth in recent decades is the changing nature of start-up companies here, a Wichita State University professor said Thursday.
Chris Broberg, associate professor of entrepreneurship, unveiled research at WSU’s conference on the State of Entrepreneurship in the Regional Market, held at the Hyatt Regency Wichita.
He said his analysis showed that while the total number of firms in Kansas continues to rise, the average size of firms is getting smaller and the average number of people they employ is falling. The trend started in about 2000, he said.
More entrepreneurs are starting “lifestyle” businesses, which are essentially designed to support the owner or a few employees. They aren’t interested in or capable of expanding these businesses rapidly.
They include businesses such as restaurants, tax prep services and pet grooming.
The shrinkage is true across different kinds of businesses in Kansas, Broberg said, and is especially true of women- and minority-owned firms.
In Kansas, the effect on the economy has been a slowing of job growth because these new lifestyle businesses add few workers and make little economic impact, he said.
“They are more perhaps home-based businesses and these lifestyle businesses,” Broberg said. “While they serve the entrepreneur, they are not high-growth, high-impact firms that create jobs.”
The stakes are critical, said Bob Litan, a Wichita attorney and researcher on entrepreneurship.
New firms are the ones that add jobs. Nearly all job growth came from new firms, while older firms remained flat or cut their workforces.
Start-up rates have declined in nearly all U.S. metro areas and in all sectors.
Wichita, despite its reputation as an entrepreneurial hotbed, has been even less entrepreneurial than the U.S. for 35 years at least, Litan said. Locals created a lower percentage of new companies in 1980, and still do today.
Solutions he pointed to: Admit high-achieving foreign students and entrepreneurs to the U.S. to start new companies; a nonpartisan effort to eliminate unneeded government regulations, similar to the federal commission that overseas military base closures; and local efforts such as 1 Million Cups, the e2e Accelerator and WSU’s Innovation Campus, among others.
“The national challenge we face is how to boost the entrepreneurship rate and get that mojo back that drove a lot of advances in living standard in previous decades,” he said.