Instead of trying to lure in employers with incentives, cities and states would be better off fostering something like Minneapolis-St. Paul’s medical device cluster, if a new report out from the U.S. Small Business Administration is to be believed.
Researchers for the SBA studied which areas of the country dominated when it came to nurturing startups so that they grow fast enough to make an initial public offering.
They studied IPO filings from 1996 through 2006 and found – no surprise here — that California is dominant. The state has a storied entrepreneurial support network of law firms, venture capitalists and lead investment bankers — the core of the team needed to launch an IPO.
Massachusetts had the highest per capita IPOs, and New York, Florida and Texas were also active. (Ohio, Michigan, Indiana and Wisconsin were actually not.)
But Minneapolis-St. Paul surprised when it came to medical devices:
Minneapolis-St. Paul is significant with 10 percent of the national total. This is significant, because Minneapolis is not normally considered an entrepreneurial hot spot.
In a research summary with the report, they suggest that university support is a crucial piece when it comes to keeping the medtech cluster alive. Here’s one of their suggestions when it comes to encouraging more high-growth companies in a community:
Increase the strength of university linkages to potentially high growth startups. Linkages are very important for areas not considered an entrepreneurial hot spot, e.g., Minneapolis-St. Paul, with its numerous medical instrument startups.
The Twin Cities’ medical device cluster goes beyond the University of Minnesota. There are major medical device companies including Fridley-based Medtronic and Little Canada-based St. Jude Medical.
The largest health insurer in the United States, UnitedHealth Group, is in Minnetonka. And Mayo Clinic, one of the top-ranked health providers in the United States, is an hour and a half drive south in Rochester.
Nurturing this cluster and the support networks it produces – and using the university and other organizations to encourage clusters in other industries – should arguably be the top economic development goal in Minnesota, or anywhere else in the country for that matter.
The SBA report summary also has some choice words on economic development incentives:
Evidence has shown that this is not the best economic development policy. Rather, efforts should be made to encourage entrepreneurship and cluster formation.
