Today’s guest columnist is John Whitman.
I’m an entrepreneur and a business academic from the northeast who happily married into Birmingham.
Prior to Birmingham, I spent four years helping to build an entrepreneurial ecosystem in Huntsville to cultivate high-tech, high-growth startups.
I even started a film company and produced a short film on Birmingham innovators making America’s roads safer.
Then I dedicated another four years to building capacity among nonprofits in Birmingham.
So, when I read Daniel Bolus’ guest column in ComebackTown, I got super excited.
He’s right: Birmingham can become “America’s leader in medical device manufacturing.” And, as Bolus states, we already have key elements in place, like a logistics hub, a history of manufacturing, and a medical ecosystem. But before returning to this shared hope, which we both agree can happen, consider this …
We have a few historical constraints making the hope harder to achieve. In spite of its history of cotton wealth, Alabama, with its low taxes and “right to work” policy, remains one of the poorest and most unequal states in the country. And it shows.
You might think that low taxes would attract entrepreneurs. But no. Taxes, even lofty taxes, invested well for society––as in high quality education for all, infrastructure, including affordable, high speed communications, healthcare, and regulations to ensure a safe workplace––create attractive conditions for businesses, especially those that want a smart, creative, and healthy workforce. California and Massachusetts, both hotbeds of entrepreneurship, are hardly tax havens.
Consider also how the state’s paucity of tax resources affects those with power and influence. Not to name names or to cast blame, but some in positions of power and influence jealously guard their fiefdoms.
This is rational behavior because there are just not enough resources to go around, so complacency with the status quo is more likely to result in keeping one’s job than upsetting folks with talk about higher taxes or workforce benefits that might spook corporations that provide so many low-paying jobs.
Beyond scarce resources, there is also the large, industrial corporation legacy of the city. In 2015, several economists (E. Glaeser, S. P. Kerr, and W. R. Kerr) published an empirical study on entrepreneurship and urban growth, which found that places with a history of mining were entrepreneurial laggards.
Birmingham is a case in point.
Mismatch of industry and entrepreneurship
Generally, the mining industry is dominated by large corporations with command and control management systems, hardly conducive to innovation and entrepreneurship (with the possible exception of ACIPCO, now AMERICAN, an employee-owned company since 1924).
The very success of such hierarchical corporations crowds out the emergence of entrepreneurs and entrepreneurial thinking.
Looking further back, the same was true in the time of cotton plantations, centrally-controlled, hierarchical organizations dependent on free labor, conditions that all but smothered innovation and entrepreneurship (with the darkly ironic exception of the cotton gin), giving the north and west a great advantage in technology and diversification.
A similar effect characterizes contemporary banking, insurance, and other staid business sectors in which large corporations and their shareholders may thrive, but dampen the entrepreneurial impulse and unwittingly preempt building entrepreneurial capacity.
This mismatch of industry and entrepreneurship is reflected in BLS statistics, showing Birmingham way below the national average in the CEO location quotient metric, which indicates the number of CEOs relative to the rest of the nation (currently .30 for Birmingham-Hoover, but 1.26 for Silicon Valley and 1.27 for the Boston-Cambridge innovation region).
These constraints are real, but can be overcome.
When I did a comparative analysis of the emergence of environmental ecosystems in several metros around the country, several key factors stood out.
One was the role of a single influencer in the power elite, a person of significant prestige with an abundance of commitment and drive to achieve a vision of an entrepreneurial ecosystem.
Mayor Andy Berke of Chattanooga launched the city’s entrepreneurial strategy and formed its Technology Gig and Entrepreneurship Task Force. Look at Chattanooga now, despite having a fraction of Birmingham’s population.
Collaboration between Texas Governor Mark White, the Chamber of Commerce, and the University of Texas (a so-called triple helix) brought the Microelectronics and Computer Technology Corporation to town, which hired Stanford Research Institute to prepare a long-range economic plan. The rest is history.
Dean Frederic Terman’s vision and ties between Stanford University and industry earned him the reputation as the Father of Silicon Valley.
MIT alumni hounded their alma mater to promote entrepreneurship, eventually spearheaded by academic entrepreneurship evangelist Ed Roberts. By 2014, 20% of incoming students wanted to start a new business or nonprofit––while still undergraduates! And Professor Robert Langer, with his Langer Lab, is a legend of intellectual property commercialization.
Another key factor was the role played by just one or two large corporations of the right kind, which could stimulate both supply and demand for entrepreneurship. Yet another factor was the role of universities in promoting a culture of entrepreneurship. For example, MIT and Stanford could do so because they had ample resources.
All of which leads me back to Mr. Bolus’ proposition that Birmingham can become a leader in medical manufacturing. Yes, but it will take a champion from the Birmingham elite with the vision, political courage, and commitment to power through until success is achieved.
It will also take recruiting a major medical device manufacturer to locate in Birmingham, one that will both spin-off medical equipment entrepreneurs and create demand for the products and services provided by other, local entrepreneurs.
Such a manufacturer should have its own culture of entrepreneurial support, including on-the-job training for personnel, mentor-managers who exemplify entrepreneurial behavior, and venture capital contacts eager to expand their portfolio of new medical technology projects.
Other factors could be important, such as policy reform to eliminate non-compete clauses in employment contracts and a greater willingness by founders to share equity with employees. Like starting a new venture, building an entrepreneurial ecosystem is not easy, and pivots may be necessary.
So yes, Bolus’ hope can move from the reality-free zone to the reality zone in Birmingham. I especially like that he focuses on the specific niche of medical device manufacturing rather than the unlikely aspiration to become the next Silicon Valley overnight.
But success will require an energetic champion, a realistic strategy to overcome Birmingham and Alabama’s challenging legacy, and a bit of luck. With success, Bolus’ dream might indeed pave the way for Birmingham to become a truly entrepreneurial city.
John R. Whitman teaches and consults in entrepreneurship and nonprofits. A former software startup founder from Cambridge, he has interests in Birmingham, Huntsville, Chicago, and Washington, DC.
David Sher is the founder and publisher of ComebackTown. He’s past Chairman of the Birmingham Regional Chamber of Commerce (BBA), Operation New Birmingham (REV Birmingham), and the City Action Partnership (CAP).
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