Kauffman study raises questions about the impact of external factors on the success of job-creating "gazelle" firms
(Kansas City, Mo.) Sept. 10, 2015 – Successful high-growth businesses in Indianapolis are not constrained by the lack or availability of external capital, yet took advantage of leveraging different regional assets in the area, according to a research paper released today by the Ewing Marion Kauffman Foundation.
The report, which has implications for medium-tier cities around the country, shows that most successful entrepreneurs in and around Indianapolis started or grew their businesses in the area because they already lived there or had personal and social ties to the region.
“The Regional Environment in Indianapolis: Insights from High-growth Companies” was released as part of the Kauffman Foundation Research Series on City, Metro and Regional Entrepreneurship. Previous reports in the series focus on the entrepreneurial ecosystems in Kansas City, Mo., and St. Louis, as well as ways to measure and support ecosystems.
“This study raises questions in the debate about location attractiveness, which perceives that only a few places, such as New York, Silicon Valley and Washington DC, can attract successful entrepreneurs who are deciding where to start their businesses,” said Yasuyuki Motoyama, director of Research & Policy at the Kauffman Foundation, and one of the paper’s authors.
The report notes that, similar to other Midwestern cities, Indianapolis often is overlooked in studies but has much to offer in terms of entrepreneurial research. And, while most research on regional environment focuses on a handful of places, such as Silicon Valley, Boston and Austin, few studies have examined how businesses were able to scale up in other parts of the country.
While the study reported mixed results regarding Indianapolis’ overall economic ecosystem, it identifies several regional advantages Indianapolis offers to high-growth firms – known as “gazelles” – including its central location and “Midwestern work ethic.”
Report highlights include:
- Indianapolis’ high-growth firms have grown largely without external angel or venture capital investment, two financial vehicles conventionally recognized as important sources of business growth.
- High-growth firms in Indianapolis face challenges in recruiting and retaining the right talent. This is particularly the case for entry-level, recent college graduates and those with specific technological skills.
- Owners of high-growth firms in Indianapolis did not move there to start their companies.
- A “boomerang effect” draws many former residents back to the Indianapolis region after living elsewhere, often for personal reasons such as raising children and being close to family.
- High-growth firms in Indianapolis generally do not have strong direct business ties with other companies in the region.
“The findings of this report go against some of the conventional ideas of the economic development sphere,” said Sameeksha Desai, assistant professor, School of Public and Environmental Affairs at Indiana University, and one of the paper’s authors. “This study demonstrates the need for further research into the conditions that nurture high-growth businesses in medium-sized cities around the country; information that will help policymakers formulate strategies that can support such growth.”