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Rural and Urban Entrepreneurship – Are there differences?

Posted: December 17, 2012

This article explores challenges faced by entrepreneurs in rural communities.

Think about the following questions for a minute or so. (1) Is there such a thing as rural entrepreneurship? (2) Do rural entrepreneurs face different challenges than their urban counterparts?

Is there such a thing as rural entrepreneurship?

There is little support in the academic community for either a yes or a no answer to this question. The few articles written on rural entrepreneurship borrowed their definitions for entrepreneurship from similar urban studies. These definitions for rural entrepreneurship included concepts like “risk taking,” “successfully undertaking a business venture,” “innovation,” and “drive, capabilities and organizational skills”. In 1992 researchers replicated a business and personality psychology study in northern Florida that was originally conducted around Boston. These researchers found that psychological traits of rural business founders were not greatly different than those of rural non founders, urban founders, or managers reported in other studies. Based on this research one can conclude that entrepreneurs in rural and urban communities are more alike than different.

Do rural entrepreneurs face different challenges than their urban counterparts?Entrepreneurs in rural communities do face a number of challenges that aren’t common in urban communities. These challenges are largely due to the characteristics we associate with and often seek out in rural places: remoteness, small towns and less dense populations. Some of the major challenges resulting from the remoteness and small and less dense populations in rural communities are limited local demand for the products or services, entrepreneurs are removed from important business networks, a lack of diversity and economic ideas, limited access to capital for start-ups and lop-sided power relationships that strip local citizens of their sense of control.
Let’s spend a couple of minutes thinking about why how these challenges impact rural entrepreneurs and how entrepreneurs and leaders in rural communities might be or are working to addressing these challenges. 

Access to Markets - It is obvious that entrepreneurs cannot be successful unless they can sell enough products or services to pay the bills. Many of today’s rural entrepreneurs are using internet based tools to market and sell their products or services across the county and even worldwide. It is likely that some entrepreneurs are using internet based tools to increase their market. In some communities entrepreneurs and the local vo-tech school or high school business classes or Chamber of Commerce have set up meetings and hands on training to help entrepreneurs learn how they can use internet based tools improve their bottom line.

Networks - It is no secret that successful entrepreneurs are plugged into a number of networks that help them keep up on the latest trends, innovative ideas, processes, tools and techniques for developing or delivering their products and services to customers and emerging markets. It is also recognized that the entrepreneurial sector is larger and more successful in communities with a strong network of local entrepreneurs that engage with community organizations (government, education, Chamber of Commerce, economic development organizations,) to develop and implement projects that will improve entrepreneurs’ ability to do business. Many rural entrepreneurs are using social media such as Linked-in or Facebook to build their networks within and outside of their communities. Are there programs or activities in your community that connect entrepreneurs to existing networks or help entrepreneurs establish and participate in networks with other entrepreneurs within or outside the community?

Diversity and Openness to new Ideas - Numerous research articles demonstrate that communities that are open to diverse populations and welcoming to new residents have a stronger entrepreneurial sector. A quick look at Census reports for show that the vast majority of rural America’s rural counties lack diversity. Immigrants from other parts of our country or other countries bring new ideas with them. Furthermore many rural communities are losing population, especially millennials – ages 18-34 –, due to shrinking employment opportunities. Fifty four percent of the nation’s millennials want to, or have already started a business. NPR Morning Edition on December 14, 2012 titled “Farewell, Bosses: A wave of Young Entrepreneurs” features two millennials that have started their own businesses. Is your community open and welcoming to immigrants? How might organizations and businesses in your community work together to embrace immigrant entrepreneurs and millennials looking for a place to start new businesses?

Access to Capital - There is limited access to capital for start-up businesses, even small micro-loans, in today’s economy. This is especially true in rural communities. An Internet search for “Rural Micro Loan Programs” finds a number of micro-loan programs available to rural entrepreneurs. Some of these funds are supported by USDA or EDA (Economic Development Administration) and administered by regional or county economic development organizations. Others are supported by foundations, such as the Utopia Foundation’s micro-lending program in Leelanau County, Michigan to support agrogoods based business ventures. North Carolina Rural Economic Development Center’s Small Business Credit Initiative helps make capital available for business start-ups and expansions. What programs are available to start-ups in your community? Are entrepreneurs encouraged to use these programs? Is assistance available to help entrepreneurs secure microloans?

Historical Dependence on One Industry or Industry Sector - Historically many rural communities have been dependent on one large industry or one industry sector. In many communities this has resulted in a culture where institutional leaders and residents are adverse to change and risk. Entrepreneurs find little support in communities where the local power structure in and unwilling or unable to meaningfully undertake projects or initiatives that use their existing assets to diversify their economy.
Rural entrepreneurs and leaders can work together to overcome or mitigate some of these challenges over time.

For more information contact Bill Shuffstall, Sr. Extension Educator – shuffy@psu.edu