The French term entrepreneurship has become permanently American, driven by its association with start-ups and venturesome business men and women risking much in pursuit of greater gain in the future from meeting customer’s needs and wants. At its heart is a process driven by innovation in which the old is replaced by the new. Rather than subtle or marginal improvements, the leaps in change associated with the innovation are generally “game changers” where rules are rewritten rather than bent.
Austrian economist, Joseph Schumpeter coined the phrase capturing the turmoil that results in meaningful innovation as “creative destruction” in 1942. The idea simply reflects that as new products and innovations come to the market, old products and paradigms are abandoned. Harvard Professor Clayten Christenson is credited with contemporary attention to creative destruction in his numerous works, including “The Innovator’s Dilemma.” The destruction and creation of ideas, products, and methods is necessary to stimulate economic growth and expansion. In order to carry these new products to market, there must be an individual who is willing to incur the risk of the unknown in exchange for the potential reward of economic gain. This person is known as the entrepreneur, and entrepreneurship is part of a cultural identity that has defined American success and to which economies both large and small aspire.
It is an understatement to say that the model of economic growth in the United States depends upon the entrepreneur. The entrepreneur that navigates new knowledge into an economically viable proposition is, in fact, vital to our economic well being.
Entrepreneurs do three things that we need more of. First, they create new technologies, products and services. Secondly, they create jobs- almost 3 million new jobs per year nationally. Lastly, they create new net wealth in society, which makes us all better off. Creating the conditions for individuals to pursue successful and sometimes failing ventures is key to an economy that is based upon continuous improvement of ideas through creative destruction. Here at the Florida Chamber of Commerce and the Florida Chamber Foundation, we honor the roll of the entrepreneur through the policies that are advocated as well as the outcomes that are reported at www.TheFloridaScorecard.com.
In order to promote an entrepreneurial environment, the Florida Chamber of Commerce recently supported the Small Business Jobs Act which promises to create $1 billion in new capital for firm creation and expansion in Florida. We also championed the creation of the Florida Growth Fund which will provide up to $400 million in new venture capital funding for Florida based firms. The Florida Chamber Foundation also provides measurement on the condition of Florida’s innovation economy, which currently encompasses both positive and negative aspects for a culture of entrepreneurship. For instance, the Kaufmann Foundation reports that the rate of entrepreneurial activity among Florida adults is higher than the U.S. population as a whole. However, the cost of doing business in Florida has become increasingly high and currently ranks as the 41st most expensive state as reported in a combined measure that includes property and business taxes, worker’s compensation, insurance and utility costs.
In honor of Global Entrepreneurship Week, we join our fellow citizens in recognizing the entrepreneurial spirit of Americans that have improved our quality of life and changed the limit of the possible through their pursuit of creative destruction. In Florida, let’s continue the awareness and support of the individuals and mechanisms that will continue our progress towards an innovation economy and together, secure Florida’s future.
Note: This piece was adapted with the input of Dr. Dale A. Brill after being previously published with co-author Tim Giuliani in The Miami Herald, The Gainesville Sun, The Sun Sentinel, and The South Sun Suntinel.
Note from the author: This piece was originally written for publication in Florida’s Bottom Line, a quarterly economic review of Florida’s Chief Financial Officer, Jeff Atwater
Trade has driven economic advancement for centuries, representing the exchange of goods and services that enter and leave an economy. Trade is increasingly recognized as an opportunity for business growth and job creation as perspectives shift from Florida’s characterization as a domestically isolated peninsula to that of a critical and geographically advantageous state from which to facilitate the international exchange of goods and services.
Likewise, Florida’s economic diversification is evolving toward a global model with the tangible effects of this evolution showcased as communities come out of the recession into the stalled recovery. Florida’s metropolitan
areas that are experiencing positive economic growth largely have ties to global markets where international demand outpaces domestic demand for products. Florida’s business community also stands to make tremendous gains related to the growth of international trade because trade is expected to grow faster than the United States’ economy as a whole. Today, the combined value of U.S. imports and exports is equivalent to 24 percent of the U.S. real Gross Domestic Product (GDP), whereas forecasts value U.S. imports and exports as equivalent to 55 percent of GDP in 2035. Existing businesses play a large role in international trade with nearly two-thirds of Florida exports generated by small and medium sized firms.
Further, projections show that 80 percent of worldwide economic growth will occur outside of the United States over the next 50 years. As demonstrated by the Florida Chamber Foundation’s Florida Trade and Logistics Study, the support and subsequent investment in enhancing Florida’s position as a global hub for business investment, manufacturing and domestic and international distribution is essential. Florida currently has two related trade imbalances that must be addressed: the total tonnage of imports exceeds the tonnage of exports via Florida, as well as the overall value of imports exceeds the value of exports via Florida. With Florida’s trade imbalance reaching almost one billion dollars in 2010, strategies to fill that billion dollar gap represents the next opportunity for Florida – manufacturing.
Manufacturing in Florida comprises only four percent of total employment and five percent of Florida’s economic output compared to seven percent of employment and 11 percent of GDP nationally. Exclusive business data on The Florida Scorecard (www.TheFloridaScorecard.com) also points to manufacturing as an area for growth with the industry representing nine percent of high sales volume, high employment growth firms known as second stage firms. This growth potential combined with the fact that an estimated 50 percent all trucks, rail cars, ships and planes that bring goods into Florida leave the state empty presents a compelling case to focus on manufacturing. While Florida’s large consuming population of 18.8 million residents and over 80 million annual visitors is in part responsible for the imbalances in trade, it also highlights Florida’s opportunity to create jobs that produce exportable goods in industries such as manufacturing, technology, mining and agriculture. Growing Florida’s manufacturing base to a greater share of employment and economic output will create jobs that are well above the average annual wage, as well as address the problem of added supply chain costs associated with the empty trucks, rail cars, containers and planes that leave this state.
An economic strategy focused on international trade and manufacturing is also consistent with the statewide goals identified by the Florida Chamber Foundation’s Project 2030 Plan, which include doubling Florida’s exports by 2015 and enhancing our position as a global hub. These goals are attainable if stakeholders work together to increase the amount of export producing manufacturing activities and utilize Florida-based infrastructure of highways, rail, air and seaports to distribute those exports. When we accomplish these objectives, we will put tens of thousands of Floridians back to work while creating diversity and new economic opportunities within our state. Global competitiveness and prosperity for Florida is within our reach, and international trade and manufacturing are two complementary approachestoward achieving this vision.
As the fourth and second most populous states with economic output to rival most nations, many look to make comparisons between Florida and Texas along dimensions such as government performance, job creation and business tax climate. A recent report by the Annie E. Casey Foundation uncovers potentially overlooked similarities between these southern states in terms of child well-being. In a combined measure that includes indicators of education, poverty, health and housing Florida ranks 36thin the nation and Texas ranks 35th for overall child well-being in 2011 (1 = best). Florida’s score has been mostly stagnant over the last ten years, and has slightly worsened from a high ranking of 32nd in 2007. The report indicates that both Florida and Texas have comparable outcomes in areas such as:
|Percent of Low Birth Rate||8.80%||8.40%|
|Infant Mortality (per 1,000)||7||6.3|
|Teens Age 16-19 Not in School||7%||7%|
|Children in Poverty||21%||24%|
In Florida, the Six Pillars framework recognizes the importance of child well-being by regularly reporting on issues such as High School Graduation Rate and Percent of Low Birth Weight Babies. Through strategic planning and collaboration with statewide partners, The Florida Chamber Foundation strives to move the dial towards progress for child well-being and other important issues that will effect Florida’s Future. To see a full list of the Six Pillars indicators, please visit www.thefloridascorecard.com
Fueled by projections of adding another five million residents in Florida by 2030 and a tourism industry that will continue to attract over 80 million visitors per year, the long-term outlook for Florida’s economy remains optimistic. While businesses must meet the demand driven by the population and consumption growth in the years to come, Florida should not miss the opportunity to make gains in additional sectors to diversify the state’s economy including, manufacturing, information services and wholesale trade industries. An analysis of June’s employment figures by industry shows positive movement among some of Florida’s traditional economic engines with real estate and accommodation/food services posting sizeable employment gains over the year at 3.2% and 5.0%, respectively. Meanwhile other facets of the economy that would contribute to the diversification of Florida’s economic base showed disappointing employment figures, with manufacturing, information and trade posting a combined decline of -4.4% year over. At the crux of the recent recession, construction employment continues to feel the effects of a weak housing market, posting year over attrition of -2.7% overall and losing as much as -13.7% of employment related to specific activities, such as the construction of buildings.
Source: Florida Agency for Workforce Innovation, Labor Market Statistics
There is a reason why the Economics Department is housed in the Social Science colleges of most Universities. The economy, like politics, sociology and geography is susceptible to manipulation through human activity and choice. In fact, the economy is the aggregation of a specific kind of human choice, broadly the consumption of goods and services.
One thing that a financial crisis tends to reveal is that we are perhaps more tied to each other than we thought, where the daily judgment calls of key individuals can impact the lives of millions of people, as well as the global economy. The fact of interrelation in and of itself is not to be bemoaned. It is the result of a necessary shift away from tangible assets that backed transactions (bartering a goat for animal hides, for instance) as we increased our reliance upon representational value to facilitate business and personal transactions. The move to representational forms of value required sophisticated mechanisms to track and record the ownership of a new class of items such as stocks and bonds, currency not tied to physical deposits of gold, insurance policies, etc. While this representational value leads to gains in the economy due to an influx of previously latent capital, it also leaves some exposure to economic fluctuations which were mitigated when people’s activity was limited to dealing in tangible items. Thus the choices we make play out in ways that we may not know the full impact of in a modern economy, and the economic issues of our time – austerity, stimulus, industrial policy, fiscal controls – are then in some ways the refinement of our experience with this representational form of value and choice.
There are promising tools on the horizon, however, that may inform the economic policy levers that we pull. Efforts being championed by the Pew Center for the States, attempt to make sense out of state-level economic policy options by creating cost benefit models based on actual programs that have been implemented across the country, as well as the program’s results. So perhaps there is hope that we are not destined to relive mistakes of unintended economic impacts, but that future choice may be informed by experience based knowledge whose success is measured by results
At the end of May, a new economic alliance in South America is poised to find its legs. The plan to integrate the stock markets of Colombia, Chile and Peru has flown relatively under the radar, with only the most devout readers of economic periodicals or South American news getting an inkling of what lies ahead for the proposed Integrated Latin American Market (MILA, in Spanish). MILA aims to enhance access to capital for businesses within these countries as well as to expand the available investment tools for local and international markets. So why should Floridians take notice of MILA?
2. MILA will further diversify investment options. To date, Brazil has been the seat for international investment in South America. The integrated markets of MILA will provide the economies of scale needed for global investors, such as China and the United States, to take notice by adding approximately 560 businesses in which to invest. A successful integration would secure MILA as South America’s second largest stock exchange with a reported $720 billion in market capitalization (i.e., the total value of company shares represented on the integrated exchange).
3. South America currently plays an important role in the Florida economy, and there is room to grow. In 2010, Colombia, Chile, Peru were in the top ten countries that purchase Florida products representing $5.5 billion dollars in Florida exports, and Colombia is Florida’s fifth largest partner for imported goods. Not only is the trade relationship significant, but South America also represents the largest proportion of international vistor spending in Florida at approximately $2.4 billion in 2010.
As the global economy moves toward increased coordination, the flow of goods, people and capital persistently break down socio-geographic boundaries to find the best opportunities for business and investment. The opportunity presented by the formation of MILA, then, translates into the a new avenue for Florida investors as well as closer economic ties with our neighbors to the South.
Sources: Reuters, The Economist, International Monetary Fund, U.S. Census Bureau
The level of spending is frequently cited as a measure of relative well-being for programs across the country. Spending alone, however, is often not sufficient to secure the outcomes we desire. Case in point: I have a continuous problem with my 80 pound shepherd getting into the trash, which I keep under the kitchen sink. To keep her out, I have moved from the relatively cheap $2 plastic child safety locks to the more expensive $15 child safety locks, and with neither of those solutions working I am considering buying a $50 steel trash can. But I pause; despite the increased resources that I contribute to the issue, my trash is currently sitting outside of the house.
Likewise, a recent article in the St. Petersburg Times reported that Florida ranked 10th highest in the terms of research spending among private and public colleges and universities in the United States (link to article here. While spending is one measure of comparison that is relatively easy to determine and quantifiable, the focus should be inclusive of the outcomes related to spending, such as the numbers of patents issued, new business creation and overall employment in high wage occupations. Thus, the second case in point: The most recent figures show that Florida represents 2.6% of total patents and 8% of business starts in the United States, and 19% of employment in Florida is in high wage occupations. When the perspective expands to include outcome measures, one can see that Florida is in decent standing, but also has plenty of room for growing its share of the nation’s innovation economy.
Florida United States (total)
2,197 patents (2009) 82,258 patents
73,549 business starts (2007) 905,761 business starts
19 % employment in high wage jobs (2009) 21% employment in high wage jobs
Sources: St. Petersburg Times
The Florida Scorecard (www.thefloridascorecard.com)
Finally. There is reason for optimism in Florida’s employment future. In addition to the recent decline in the unemployment rate to 11.5 percent, there are currently over 240,000 jobs posted online to be filled in the Florida economy. Of the positions advertised online in March, 71% are full-time employment opportunities, with positions for registered nurses, retail salespersons and physical therapists as the top advertised occupation categories.
On the national level, a similar uptick in employment is underway. The United States Labor Department reported that 3.1 million jobs were advertised in February, which is the most since September 2008. And with the employment freefall stabilized there is a strong likelihood for improvement in other sectors of the economy, such as consumer spending and home sales. Also, with projections signaling economic growth at both the national and state level into 2012, all eyes should be focused on the one element that could significantly stall forward progress – the price of oil.