Today’s post will be a summary of a 2002 paper by Richard Florida entitled “Entrepreneurship, Creativity and Regional Development”, available here.
The main thesis of the paper is that entrepreneurship, far from being spurred for the most part by lone, heroic individuals, “is a social process that stems from a broad set of social and cultural conditions.” Florida views entrepreneurship as an ethos that, according to a recent survey, the majority of Americans aspires to because it allows them to express their creativity. Florida distinguishes three mutually dependent types of creativity: (1) technological creativity (innovation), (2) economic creativity (entrepreneurship) and (3) artistic and cultural creativity.
The paper emphasizes “the role of places as incubators of creativity, innovation, and new firms and industries.” To this date, firms tend to cluster together. To explain regional growth, Florida resorts to the human capital theory of regional development, based on the ability of the most dynamic cities to attract highly educated and productive people. According to Florida, these regions share the following characteristics:
- Thick labor markets (if you need to leave your job for any reason, you want a reasonable assurance that you can probably find something similar in the same area).
- Quality of place (in terms of neighborhoods, the sort of people who live there and the amenities, such as sidewalk cafés or restaurants).
- Diversity.
Florida’s theory “suggests that places that are open to creativity… reflect an underlying environment or habitat which favors risk taking and thus will stimulate entrepreneurship and new firm formation.” Florida reiterates his model of economic development called the 3 T’s: technology, talent and tolerance, which occupies a prominent place in his book The Rise of the Creative Class. In his opinion, an unwillingness to be tolerant enough explains why, as of 2002 when the paper was written, places like Pittsburgh and Baltimore had failed to fulfill their potential as creative meccas.
Florida’s team members relied on the following metrics to develop their insights:
- High Tech Entrepreneurship Index
- Innovation Index
- Gay Index
- Bohemian Index (a measure of artistically creative people)
- Talent Index
- Melting Pot Index
- Composite Diversity Index
- Creative Class
- Creativity Index (based on High Tech Entrepreneurship, Innovation, Gay Indexes and the Creative Class).
The purpose of the paper was to study the correlation between high tech entrepreneurship and other variables. It turns out that:
- The correlation between the Creative Class and the High Tech Index is 0.38, and as such positive and significant. (Correlation is a number between -1 and 1, for those of you who forgot.)
- “The Bohemian Index correlates with the High Tech Index at 0.64 and the Innovation Index at 0.60.” (Correlations above 0.30 are high and above 0.50 are very high.)
- Correlation between the Melting Pot Index (measuring immigration) and the High Tech Index is 0.26.
- Correlation between the high-tech index and the gay index is 0.48.
Florida concludes: “In order to succeed as a region and promote innovation and entrepreneurship, a region must establish a multi-dimensional creative community.” He advocates the creation of a “people climate” rather than a “business climate.” Unfortunately, the paper ends before he can provide specific guidelines.
In particular, how can a region that has been left behind in the changing economic landscape catch up with its most prosperous counterparts? It’s a bit of a chicken-and-egg conundrum: before a critical mass of creative types has moved to an economically depressed area that is attempting reinvention, the sort of amenities that appeals to said creative types will fail to be economically viable (if they were, these amenities would already exist and would already have attracted creative people), but members of the creative class have few reasons to move to such an area – as opposed to an area where many creative people already live – until such amenities are in place. In addition, the influx of creative people might increase social inequality, as Florida mentions in his book The Rise of the Creative Class, leading to resentment from the locals – a sign of intolerance that goes against making the area attractive for creative newcomers.
The labor market in an area that struggles to reinvent itself will not be thick (if it was thick, the business community would not have to count on the creative class to bring renewal) and the area will most likely not be welcoming of newcomers, educated or otherwise, at least until unemployment comes down. Also, if we continue to focus on a depressed area, it is not clear that the nice-to-have amenities dear to the creative types would be the best use of that money, although it depends on whether this is public money or the money of real estate developers.
But the addition of a few large companies, with the vast array of employment opportunities they offer, could bring about enough positive change in the economic landscape to make the Creative Class more palatable to what Florida refers to in his book as the Working Class and the Services Class.
While all of Florida's ideas above can certainly be implemented in semi-creative areas that want to take positions of economic leadership in the near future, I can most easily picture high-tech entrepreneurship as the lead factor in the transformation of a formerly blighted area into a (sort of) creative community.
It seems that advanced or sustainable manufacturing would have a high chance of spurring growth in a depressed region by providing not only creative work (marketing, design, etc) but also entry-level jobs for local factory workers who can then rise through the ranks. As far as entrepreneurship is concerned, this requires the jump from tiny start-ups to companies with a bigger employment footprint, i.e., the successful scaling of high tech innovation. Then the factory workers can, maybe, even become members of the Creative Class.
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