Financing Entrepreneurship in Distressed Areas

The persistent economic distress of inner cities in the United States challenges us to find more innovative approaches to economic opportunity for inner-city residents…Sustainable economic development will occur only as it has elsewhere, by employing an economic strategy that emphasizes private, for-profit business growth and job development (www.questia.com).

Entrepreneurship is the way the economy takes advantage of new wealth-creating opportunities that arise daily from constant change. In 2002 alone, more than 500,000 new employer businesses were created. (SBA) Entrepreneurs are responsible for 67 percent of inventions and 95 percent of radical innovations of existing technologies (www.entrepreneur.com).

On the other side of the social-financial return spectrum are socially screened investments. In contrast to the “affirmative” investments described above, in which investments are made to affirmatively create social value, socially screened investment portfolios screen out things that are considered negative for society, such as companies that pollute, have negative labor practices, or produce socially harmful products, such as tobacco or alcohol (unpan1.un.org).

Current economic development strategies that focus on attracting industries have not successfully turned around economies in distressed areas because the primary drivers of these efforts revolve around the needs of metro or core areas (Sharp & Flora, 1999; Humphrey et. al., 1988, Wall & Luther, 1987). These approaches not only rely on outside solutions, but also reinforce the dependent nature of development in distressed areas. The growing attention to regional economic strategies, while shifting the focus of economic development to regional cores, does not substantially change the impact of these efforts on distressed communities, particularly in rural areas (www.questia.com).

As alternatives for small communities, economic developers have promoted such strategies as tourism development and import substitution, neither of which produces large numbers of jobs with self-sustaining wages. Implementing strategies that are not geared to the needs of metro cores or regional core economies but are competitive in the global economy remains a challenge. In this paper, we propose a new approach to helping distressed communities escape the clutches of dependency, an approach that effectively utilizes existing resources to strategically focus interventions that make a measurable difference (www.entrepreneur.com).

Despite a heavy weight of evidence to the contrary, economic development professionals and state and federal agencies associated with community economic development programs continually assert attracting industry as the most effective strategy for job creation. While this strategy has produced positive results in some communities, for those that are small, off the beaten track, and graced with less rather than more of the popular amenities, this strategy has often shown few results. Indeed, for many rural areas, this strategy often "lines the pockets" of the real estate development community while creating less than living wage jobs in big box stores that undermine local retail and service enterprises (unpan1.un.org). The social impact of these job development efforts shows up in the relative decline in per capita income in these rural areas.

Changes in the U.S. economy and the advent of the Internet and e-commerce have increased awareness of the importance of enterprising skills and ...