Can Birmingham become an entrepreneurial city?

John R. Whitman
John R. Whitman

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.

Change factors

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.

Deliberating success

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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6 thoughts on “Can Birmingham become an entrepreneurial city?”

  1. Birmingham has already been an entrepreneurial city, Before 2000, the city was full of major public and privately-held businesses, many if not most were self-starts from local people. I won’t insult your intelligence by listing the Harberts, McWanes, Thompsons, Bayers, and even the Schrushys. The question is where did it go and how did we lose it?

  2. Seems apropos: “I was reminded of an old remark by my cousin, ‘If we had ham, we could have ham and eggs —- if we had eggs!'”
    — Niranjan Ramakrishnan

    Sure, a singular individual heading a singular company could seed …

  3. Mr. Whitman,
    Please read the post on comebacktown entitled “The Ingenious Idea That Could Change the Perception of Birmingham Forever” and please let me know if you think it has any merit.

    Thank You,

    Vance Wesson

  4. There are likely more things going on in Birmingham that align with progress in this direction than people are aware.

    I would encourage to look into the Birmingham based start-up “Rampart IC”
    The idea of this radiation protection system was that of a local surgeon, Dr. Bob Foster. Their team has grown and scaled and manufacture in Birmingham.

    PUSH Product Design is a local product development firm doing some amazing work in the medical device development here in Birmingham.

    Fitz-Thors is a local engineering and manufacturing firm that is an ISO 13485 Certified Manufacturer for medical devices and products.

    DEFT Dynamics is another Birmingham based firm that has strong capabilities in electro-mechanical systems, electrical hardware design, firmware, and software that are supporting design and development for multiple med-tech products that have strong potential for commercialization.

    Alabama Launchpad has been a program that has been excellent in mentoring, coaching, and financially supporting start-ups through their program. Several medical products and software technologies have participated in this program.

    Hardware Park is a facility and non-profit organization downtown that is creating spaces within the historic Long-Lewis Hardware buildings, for product-based companies to office space and manufacturing/warehouse space for scaling production of new products (part of the focus within the organization is medical products).

    Then obviously you have the more well know resources in Birmingham – Southern Research & UAB (there are many things going on in the medical and education/engineering side with a focus on commercialization of new medical products).

    Additionally, there is a wealth of knowledge with the doctors, surgeons, nurses and other medical staff that call Birmingham home.

  5. The responses to “Can Birmingham Become an Entrepreneurial City?” posted here on ComebackTown indicate interest in this question, for which I am thankful. Some writers seek to clarify points made in the article. The clarifications offered here may generate even further dialogue.

    The type of entrepreneurship at issue focuses not on the many millions of small, medium, or large traditional businesses so valuable to the economy and that typically benefit from membership in their local Chambers of Commerce, but on high-tech, high-growth enterprises that, in effect, self-replicate (or spawn new, related firms) in a virtuous cycle, creating an entrepreneurial ecosystem or cluster, in other words, an entrepreneurial city.

    What causes this self-replication? The type of worker is key. While coal miners, construction workers, and grocery shoppers do not tend to run out and start new coal mining or construction or shopping companies, software engineers, electrical engineers, and even musicians do. They have knowledge and skills essential to spawning new enterprises that, in turn, use those same skills. John Maynard Keynes emphasized the magic of “the multiplier effect” when he promoted the virtues of government spending, which introduces dollars to a community that are then circulated from the recipient to a chain of follow-on product and service providers, so that the effect of a dollar spent is beneficially multiplied several times in the same community. A similar phenomenon takes place in certain types of entrepreneurship, in which workers have the knowledge and skills to replicate, or multiply, interrelated businesses, preferably in the same community.

    As important as finding the right businesses that can spawn is ensuring that there is growing demand for their products or services. Certainly, the supply-side of entrepreneurship through such modalities as incubators and accelerators is great as far as it goes. But increasing the supply of entrepreneurs without also creating demand is like pushing string. How many times have I coached aspiring entrepreneurs with great, new ideas to get out and prove that there is a demand for their idea. Without demand, there is no market.

    So, the catalyst for igniting the type of entrepreneurship addressed in the article is not to focus on real estate companies, or pipe manufacturing companies, or banks, however successful and valuable these companies are in Birmingham, or on creation of more supply-side entrepreneurship inspired by stories of one-off successful entrepreneurs. The key is to find entrepreneurially led businesses that employ the kinds of people who can and are incentivized (e.g., through stock option plans) to start spin-off firms and also create demand for their goods and services in a growth industry. It is also key to develop specialized sources of providing legal, accounting, and marketing expertise that understands such entrepreneurship.

    Two more crucial elements to growing such an entrepreneurial ecosystem might be considered. First, the firms that emerge from the replication/spawning process must stay in place. When a successful startup gets acquired by a larger company located elsewhere, it is not unusual to require the startup to relocate to the acquiring company. This creates a two-fold loss to the local community, first by losing the economic value of the startup and also by losing it as a multiplier, a potential source of even more startups. So, there must be incentives to stay in place. Second, the emphasis of the firm should be on creating software or hardware products rather than services or research. There is far greater growth potential from products. Also, selling products elsewhere brings new dollars to the city.

    As Daniel Bolus originally suggested, the high-tech medical device manufacturing industry is just such a candidate for an entrepreneurial city. And Birmingham already has key elements in place to grow such an industry. (But bear in mind, medical device manufacturing may not be the only candidate; others should be considered.

    As to the role of personal and corporate taxes in facilitating or obstructing entrepreneurship, clearly there are exceptional cases where high-tech clusters emerge in low-tax states such as Texas and Tennessee. But these (few) cases do not disprove the wide benefits of a strong tax base in cultivating the talents, lifestyles, and environments sought by creative workers and the resources available to state educational institutions to compete in training such a labor supply. My concern is that a state ideologically committed to low taxes, combined with low tax or no tax incentives and/or publicly-funded land and construction deals offered to compete with other states in attracting “investment,” might lock itself into an economic prison dependent on low-wage industries (further limiting the potential level of income taxes) that is hard to escape. Moreover, in Alabama, we also need to address tax fairness. The idea, if it can be believed, is to use tax dollars to invest in an environment that spurs greater productivity than that from tax cutting and tax holiday gimmicks and giveaways. Taxes, like all policies, are choices, not givens and should be seen as affording social and economic investment rather than as political prohibitions.

    It is gratifying to see the level of response to my ComebackTown article. There is much to celebrate in Birmingham both in its leadership and accomplishments. Looking forward, I would welcome a continuing discussion of how to widen the view toward promoting high-tech, high growth entrepreneurship beyond a supply side approach, led by an influential and energetic Birminghamian with an inspiring but grounded strategy. There is no cookbook for creating an entrepreneurial city. Birmingham, like other cities, has to find its own way.

  6. An old Chamber mentor told me once that if one does not harvest it, dig it out of the Earth, or build/construct it, there is no real production of wealth/value.

    An “entrepreneurial” company in the “services” industries produces little for anyone but the owners or shareholders.

    It’s an opinion, just that.

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