The State of Entrepreneurship in Montana · The State of Entrepreneurship in Montana 3 A. Indicators of success 1. Montana has more entrepreneurs.4 The share of Montana’s population

FY2012-2015

Prepared by:Bureau of Business and Economic ResearchUniversity of MontanaMissoula, Montana 59812

Prepared for:Montana Chamber Foundation

The State of Entrepreneurship in Montana

BUREAU OF BUSINESS AND ECONOMIC RESEARCHU N I V E R S I T Y O F M O N TA N A

August 2018

AcknowledgementsThisreportwasproducedandauthoredbyBryceWardformerlyoftheUniversityofMontana’sBureauofBusinessandEconomicResearch.AllstatementsandconclusionsincludedinthisreportbelongtotheauthoranddonotrepresentthepositionoftheUniversityofMontana.Wewouldliketothankthefollowingpartnersforsupportingthisresearch:

Formoreinformation,contact:BureauofBusinessandEconomicResearchGallagherBusinessBuilding,Suite231Missoula,MT59812(406)543-5113www.bber.umt.edu orBryceWardABMJConsulting(406)[email protected]

TableofContentsI.Introduction.......................................................................................................................................1

II.Theentrepreneur’sroleinaregionaleconomy...................................................................1

III.Montana’sentrepreneurialecosystem..................................................................................2A.Indicatorsofsuccess.................................................................................................................................3B.Indicatorsofweakness.............................................................................................................................5

III.MontanaChamberofCommerceStateofEntrepreneurshipIndicators....................9A.Capitalinvestment.....................................................................................................................................9B.Patents.........................................................................................................................................................10C.Entrepreneurialsupport........................................................................................................................11D.Start-upemployment..............................................................................................................................12

IV.Conclusion......................................................................................................................................16

TheStateofEntrepreneurshipinMontana

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I.IntroductionMontanareceivesmanyplauditsforitsentrepreneurialculture.Forseveralyears,

Montanahasrankedat,ornear,thetopoftheprestigiousKauffmanIndexofEntrepreneurship.Montanahasmoreentrepreneurspercapitathananyotherstate;itcontinuestocreatemoreentrepreneursthanmoststates,andMontana’sbusinesssurvivalrate(theshareofnewbusinesseswhosurvivetheirfirstfiveyears)ranksinthetop10.Thesefactsareencouraging.TheysuggestthatMontana’sentrepreneurialecosystemisstrong.

However,adeeperdiveintoentrepreneurshipdatarevealsamorecomplicatedstory.Montanaentrepreneurstendtostartverysmallbusinessesthatdonotscaleupquickly.Theyaremorelikelytostartseasonalbusinessesand/orbusinessesthatserveonlylocalmarkets.Theyarelesslikelytohaveapatent,trademark,orcopyright.

Furthermore,consistentwithnationaltrends,entrepreneurshipinMontanaiswaning.TheshareofMontananswhoownabusinessastheirmainjobhasfallenbynearly50percentsince1998.Similarly,theshareofMontananswhoworkforyoungbusinesseshasfallenfromroughly20percentinthe1990sto12percentinrecentyears.

Inthisreport,weprovideabriefoverviewofentrepreneurshipandentrepreneursinMontana.Then,weprovidedataonahandfulofkeyindicatorsthatspeaktothestateofMontana’sentrepreneurialecosystem.

II.Theentrepreneur’sroleinaregionaleconomy

Asimplemodelofregionaleconomicsuccessarguesthatregionswithgreatercapacitydobetter.Aregion’scapacitydependsonitsstocksofthefourformsofcapital–natural,physical,human,andsocial.Assuch,economistsexpectplaceswithmorevaluablenaturalresources,betterphysicalinfrastructure,moretalentedpeople,andbettersocialnetworksandinstitutionstoperformbetter.

However,capacityisinsufficientforexplainingperformance.Thereisafifthkey

elementtolocaleconomicsuccess–theentrepreneur.Entrepreneursarenecessary.Eachregionhassomecapacitytoproducegoodsandservices.Entrepreneursarethepeoplewho


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figureouthowtousetheavailablecapacitytocreateproductsorservicesthatconsumerswant.

Formanyyears,economists(andothers)ignoredentrepreneurs.1Theyassumedthatthesupplyofpotentialentrepreneurswassimilareverywhere.Ifaregionhadmoreopportunities,moreentrepreneurswouldemerge.However,overthepastseveraldecades,appreciationfortherolethatentrepreneursplayhasgrown.Regionswithmoreskilledentrepreneursmaybemoresuccessful.2Thatis,intwosimilarareas,theareawiththemoreskilledentrepreneursmayhavebettereconomicoutcomes.

Thereareseveralreasonswhytheroleforentrepreneurshasgrownmoresalient.First,

intheknowledgeeconomy,thesuccessofmanyfirmsdependsonthequalityofthefounders’idea.Manyentrepreneurshavegainednotirityforthemselvesandtheirbusinessesduetothequalityoftheidea.Thishasincreasedawarenessofentrepreneurs.Furthermore,giventhatmanyknowledgeindustryfirmscanlocateanywhere,theabilitytoattractorcreateskilledentrepreneurscandirectlyboostaregionaleconomy.Regionsdobetteriftheyhavemorepeoplewhobothhavegoodideasandcanexecutethem.

Second,thegrowthofthehistoricrecordhasshownthatlocaleconomicchangeis

inevitable.Inallplaces,keyindustriesinevitablywaxandwane.Localentrepreneurshelpredirectexistingcapacitytowardhighervalueuses.Areaswithmoreandbetterentrepreneurstendtoadjustmorequicklyandtobemoresuccessful.3

Thus,itisimportantforregionstocreatelotsofpotentialentrepreneurs,tosupport

themastheypursuetheirideas,andtoreducethesetoflocalconstraintsthatmaylimittheirabilitytosucceed.Thatis,itisimportanttocreateaviableentrepreneurialecosystem.

III.Montana’sentrepreneurialecosystem

Montanacreateslotsofentrepreneurs.Assuch,itseemsfairtoassumethatMontanahasarelativelyrobustentrepreneurialecosystem;however,otherdatasuggestssomeweaknesses.

1Chinitz,B.(1961).Contrastsinagglomeration:Newyorkandpittsburgh.TheAmericanEconomicReview,51(2),279-289.2Glaeser,E.L.,Rosenthal,S.S.,&Strange,W.C.(2010).Urbaneconomicsandentrepreneurship.JournalofUrbanEconomics,67(1),1-14.3Gleaseretal(2010).


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A.Indicatorsofsuccess

1. Montanahasmoreentrepreneurs.4TheshareofMontana’spopulationthatownsabusinessastheirmainjobisthehighest

inthecountry.Asof2015,10.2percentofMontanansownedabusinessastheirmainjob.Nationally,only6percentofAmericansownedabusinessastheirmainjob.TherateofbusinessownershipinMontanawasmorethandoubletheratein11states.

Figure1–Shareofworkingagepopulationwhoownabusinessastheirmainjob

Source:2017KauffmanIndexofMainstreetEntrepreneurship

2. Montanacreatesmorenewentrepreneurs.5

Consistentwithitshighrateofbusinessownership,Montanansbecomeentrepreneurs

atahigherrate.Approximately0.43percentofMontanansbecomeentrepreneurseachmonth.Thismeansthatapproximately3,400Montanansstartabusinesseachmonth.Montanaranked4thonthismetricin2016,andMontanarankedfirstonthismetricin2013,2014,and2015.

42017KauffmanIndexofMainStreetEntrepreneurshipRateofBusinessOwners52017KauffmanIndexofStartupActivityRateofNewEntrepreneurs


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Thismetricfluctuatesovertime.TheshareofMontananswhostartabusinesseachmonthhasrangesbetween0.4percentand0.6percent,butthereisnotacleartrendinthesedataoverthepast20years.

3. NewMontanafirmssurvive.6

Thefive-yearsurvivalratefornewMontanafirmsisgood.In2016,51.8percentof

Montanafirmsformedin2011werestilloperating,thisranked9thamongallstates.Montanahasrankedinthetop10forsurvivalrateinsixofthelasttenyears.However,thefive-yearsurvivalratefluctuatesovertime.Only42percentofMontanafirmsformedin2009survivedtheirfirstfiveyears.ThisrankedMontanainthebottom12states.

Theseindicatorsareconsistentwithahealthyentrepreneurialecosystem.ThefactthatadisproportionateshareofpeopleinMontanapursueentrepreneurship,andamajorityofthemsucceedatcreatingabusinessthatsurvivesatleastfiveyearsindicatesthatatleastsomepartsofMontana’sentrepreneurialclimateworkwell.

However,itisunclearexactlywhatdrivestheseresults.Economistshaveidentifiedfour

broadreasonswhythesupplyofentrepreneursmayvaryacrossplace7:

(1) Thereturnstoentrepreneurshipvary:Inplaceswherepursuingentrepreneurshipgeneratesahigherincomerelativetothealternative,moreentrepreneurswillemerge.

(2) Differentialavailabilityoftheinputstoentrepreneurship:Inplaceswithbetteraccesstocapital,betteraccesstokeyworkers,betteraccesstootherinputs,orsimplybetterresourcestolearnhowtobeanentrepreneur,morepeopleshouldpursueentrepreneurship.

(3) Differencesinthesupplyofideas:Someplacesarebetteratgeneratingideas;places

thatgeneratemoreideasshould,allelseequal,havemoreentrepreneurs.

(4) Differencesinlocalculture,politicalsystems,orendowments:Placeswithculturesandpoliciesthatsupportentrepreneursorwithnaturalendowmentsthatincreasethechancesofsuccesswillalsolikelyhavemoreentrepreneurs.

62017KauffmanIndexofMainStreetEntrepreneurshipSurvivalRate7AdaptedfromGlaeser,E.L.,Rosenthal,S.S.,&Strange,W.C.(2010).Urbaneconomicsandentrepreneurship.JournalofUrbanEconomics,67(1),1-14.


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WhichofthesefactorsdrivesentrepreneurshipratesinMontanaremainsunclear.Highentrepreneurshipratescouldreflecthigherreturnstoentrepreneurshiphere.Alternatively,Montana’shighratesofentrepreneurshipcouldreflectbetteraccesstotheinputsneededtostartabusiness,amoresupportiveculture,orsomeothercombinationoffactors.Whiledistinguishingamongpotentialexplanationsisbeyondthescopeofthisreport,wenotethatarecentreportexaminedtheentrepreneurialecosysteminMissoulaandBozemaningreaterdepth,particularlyforhightechfirms.8Thisreportfoundsupportformanyofthesefactors.Inparticular,itarguedthatthesecommunitiesoffereddensenetworksandamplesupportfrommentors,government,andbusinessresources,thattheyattractskilledentrepreneurs,andthattheyofferreasonableaccesstoskilledworkers.However,thisreportdidnotseektoexplainMontana’shigherratesofentrepreneurshiprelativetootherplaces.

B.Indicatorsofweakness

1. NewMontanabusinessestendtobesmall.9Theaveragenewemployerbusiness--i.e.,afirmlessthan1yearoldthathas

employees--inMontanahas3.9employees.Thisisthesmallestnewfirmsizeamongallstates.Thisisnotnew.NewemployerbusinessesinMontanahaveconsistentlybeenamongthesmallestinthecountryforthepast25years,rankingamongthe5smallesteachyearsince1992.

Furthermore,evenafterfiveyears,newMontanabusinessesaresmall.In2014,fiveyearsafteropening,theaverageemployerbusinessemployed6.6people.Thiswasthesmallestaverageamongallstates.

8Hendersonetal(2017)ANewFrontier:EntrepreneushipEcosystemsinBozemanandMissoula,Montana.92017KauffmanIndexofGrowthEntrepreneurshipunderlyingdataforRateofStartupGrowth.


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Figure2–Averagenumberofemployeesatnewfirms

Source:2017KauffmanIndexofGrowthEntrepreneurship2. NewMontanabusinessesarelesslikelytoscale-upquickly.10

Asof2014,0.8percentofnewMontanafirmsthatstartedwithfewerthan50

employeesgrewtohavemorethan50employeesduringtheirfirst10years.Whilescale-upsaregenerallyrare–inthemedianstateonly1.4percentofstart-upsscaletomorethan50employeeswithin10years–thepercentofMontanafirmsthatscale-upwasthelowestinthecountry.Montanahasconsistentlyrankedinthebottomfivestatesonthismetricfornearly20years.3. Montanabusinessownershaveloweraspirations.11

AccordingtotheAnnualSurveyofEntrepreneurs–aCensusBureausurveythat

providesinformationaboutemployerbusinesses(i.e.,businesseswithemployees),only54percentofrespondentemployerbusinessesinMontanasaythattheyaspiretogrowthebusiness'profitsorsales.Thisisthesecondlowestpercentageamongallstates.Nationally,64percentoffirmswanttogrow.However,firmswithlowaspirationstendtobesmall.Overall,75percentofMontana’semployeesworkforfirmshopingtogrow(thisranksMontana43rd).

102017KauffmanIndexofGrowthEntrepreneurshipShareofScaleups.112015AnnualSurveyofEntrepreneurs,CharacteristicsofBusinesses,BusinessAspirationsofOwners(SE1500CSCB04)


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4. Montanahasalowerdensityofhighgrowthfirms.12ThenumberofprivateMontanafirmswithatleast$2Minrevenuewhoalsohave

grownbyatleast20percentayearforthreestraightyearsisrelativelylow.Montana’shighgrowthdensityontheKauffmanindexofhighgrowthentreprenurialshipreached26in2017,thehighestit’sbeeninthe10yearstheKauffmanFoundationhasproducedthismeasure.However,thisstillrankedMontana43rdamongallstatesandislessthanhalftheaverageormedianstate.5. Montanahasarelativelysmalltradedsector.13

WhileMontanahasarelativelylargeshareofemployerfirmsthatsellprimarilytocustomersoutsidetheirregion--localcustomersrepresentlessthan25percentofsalesat11percentofMontanafirms(rank18th);manyofthesefirmsaresmall.Montanarankslastintheshareofemploymentinfirmsthatsellprimarilytonon-localcustomers.Only11.5percentofMontanaemploymentisinfirmswherelocalsalesrepresentlessthan25percentofthetotal.Incontrast,inthemedianstate,over22percentofemploymentisinfirmsthatsellprimarilytonon-localcustomers.

6. Montanahasadisproportionateshareofseasonalorpart-timebusinesses.14

Twenty-threepercentofMontanaemployerfirmsoperatedlessthan40hoursper

week,operatedlessthan12monthsperyear,operatedoccasionally,orwereseasonal.ThisisfourpercentagepointshigherthantheUSlevel(19percent).However,thesepart-time/seasonalfirmsaresmall.Theyemploylessthan8percentofMontana’sworkers.7. Montanafirmsarelesslikelytohaveapatent,trademark,orcopyright.15

Montanarankstowardthebottomintheshareofemployerfirmswithapatent,trademark,orcopyright.Only1.3percentofMontanafirmshaveapatent(rank47th),and0.9percenthaveapatentpending(rank42nd).Fourpercenthaveacopyright(rank41st),and6.6percenthaveatrademark(rank41st).Intotal,only8.6percentofMontanafirmshaveanyofthesewhichranksMontana47thamongallstates.

122017KauffmanIndexofGrowthEntrepreneurshipHighGrowthCompanyDensity132015AnnualSurveyofEntrepreneursLocationofBusinessCustomers/Clients(SE1500CSCB15)142015AnnualSurveyofEntrepreneurs,CharacteristicsofBusinesses,SeasonalorPart-TimeBusinessStatus(SE1500CSCB26)152015AnnualSurveyofEntrepreneurs,CharacteristicsofBusinesses,Type(s)ofIntellectualProperty(SE1500CSCB25)


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Figure3–ShareoffirmswithIP(patents,trademarks,orcopyrights)

Source:2015AnnualSurveyofEntrepreneurs

Thesedatasuggestsomeweakness.Ataminimum,theysuggestthatMontana’sentrepreneurialecosystemdoesnothavealargeshareofbig,highgrowthfirmswithlotsofintellectualproperty.ThiscouldreflectthefactthatMontanaentrepreneurshavelowerambitions.ItcouldalsoindicatethatitishardertocreatethesetypesofbusinessesintherelativelysmallandisolatedtownsinMontana.Inparticular,totheextentthatMontanahasmoreentrepreneurswhocreatebusinessestoservelocalmarketsinsmalltowns,itisdifficultfortheseentrepreneurstocreatelargebusinessesbecausetheirprospectsforgrowtharelimitedbythesizeoftheirlocalmarket.Thesefactscouldalsobeanartifactofthedata.Thedatadonotallowustoparsetheresultsbykeyfactors(e.g.,industryorpart-time/seasonal).Thismakesitdifficulttocreatetheapples-to-applescomparisonsneededtoexploredifferentexplanations(likeindustrycompositionorlocation).Assuch,wedonotattempttoexplainthesefindingsinthisreport.WehighlightthemassomethingMontanansshouldbeawareofandseektounderstandmore.


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III.MontanaChamberofCommerceStateofEntrepreneurshipIndicators

InanefforttobettertrackMontana’sentrepreneurialecosystem,theChamberaskedtheBureauofBusinessandEconomicResearch(BBER)tocompiledataonanhandfulofkeyindicators:capitalinvestment,patents,entrepreneurialsupport,andjobcreationatyoungfirms.Inpart,thesecorrespondtoseveralofthesourcesofvariationinentrepreneurshipdiscussedinsectionIII.A.,capitalinvestmentspeakstotheavailabilityofcapitaltobuildaventure.Thenumberofpatentsspeakstothelevelofideacreation.Entrepreneurialsupportspeakstobothcultureandtheavailabilityofinputstohelpnascententrepreneurssucceed.Thefourthindicator(jobsandpayroll)speakstooutcomes.Asshownbelow,accesstoventurecapital,patents,andentrepreneurialsupporthaveallimprovedinrecentyears,buttheyremainlowrelativetootherplaces.ThesetrendssuggestsomerecentimprovementsinkeyaspectsofMontana’sentrepreneurialecosystem.However,Montana,liketherestofthecountry,hasseensignificantdeclinesinthenumberofentrepreneursandtheshareofworkerswhoworkatstartups.

A.CapitalinvestmentUnfortunately,dataoncapitalinvestmentbyallfirmsarenotavailableatthestatelevel.

However,therearesomeotherdatathatprovidesomeevidenceonthelevelandroleofventurecapitalinMontana’sentrepreneurialecosystem.

PricewaterhouseCoopers/CBInsights’MoneytreeReporttracksventurecapital(VC)

investmentbystate.16Thesedatatrackboththenumberofdealsandthetotalinvestment.Figure4showsthesedataforthepast16years.ThesedataindicatethatVCinvestmentinMontanahasincreasedinrecentyearsasmeasuredbyboththenumberofdealsandthetotalamountinvested.However,VCinvestmentinMontanaremainslow.Onapercapitabasis,Montanaranks33rdintheaveragenumberofdealsperyearbetween2012and2016and43rdintheamountinvested.

Whilethisindicatorisinformative,itisincomplete.ArelativelysmallshareofMontanafirmsrelyonventurecapitalforfinancing.Lessthan1percentofMontanaemployerfirmsreportusingventurecapitaltostartoracquiretheirbusiness.Inconstrast,85percent 16https://www.pwc.com/us/en/industries/technology/moneytree.html


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reportusingpersonalfunds,and27percentreportthattheyreceivedfinancingfrombanksorfinancialinstitutions.17Similarly,only5percentofMontanaentrepreneursreportthatlackaccesstofinancialcapitalhadanegativeimpactontheirprofitability.Thiswashalfthenationalrateof10percent.18(Incontrast,33percentreportthataccesstoqualifiedlabornegativelyaffectedprofitability;thiswas5percentagepointshigherthanthenationalrate).

Figure4–NumberofdealsandamountinvestedinMontanabyventurecapitalistsovertime

Source:PricewaterhouseCoopers/CBInsights’MoneytreeReport

B.Patents

AsdiscussedinsectionIII.B.7,Montanafirmsarerelativelyunlikelytohavepatents,copyrights,ortrademarks.Dataonannualpatentfilingsconfirmsthis.Montanansaregrantedrelativelyfewpatentseachyear.In2015,Montananswereawarded142patents.Thisrepresentsasignificantimprovementovertherecentpastandisjustshyofthehigh

172015AnnualSurveyofEntrepreneurs,CharacteristicsofBusiness,SourcesofStart-UporAcquisitionCapital(SE1500CSCB07)182015AnnualSurveyofEntrepreneurs,CharacteristicsofBusiness,NegativeImpactsonProfitability(SE1500CSCB13)


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point(145)thatMontanareachedin2001.19However,thisremainslowrelativetootherplaces.Onapercapitabasis,Montanaranked40thamongallstates,anditsreceivedlessthanhalfthenumberofpatentsperpersonasthemedianstate.Figure5–NumberofpatentsawardedtoMontanansovertime

Source:USPatentandTrademarkOffice,PatentTechnologyMonitoringTeam,ExtendedYearSet–PatentCountsbyCountry,State,andYearUtilityPatents(December2015)

C.Entrepreneurialsupport

Inrecentyears,Montanahasdevelopedseveralformalprogramsthathelpsupportentrepreneurs,e.g.,theLaunchpadsattheUniversityofMontanaandMontanaStateUniversityand406labs.Theseprogramshelppotentialentrepreneursthroughthepre-entrepreneurialprocess.Theyhelpindividualsdeveloptheirentrepreneurialskills,theyhelpconnectpotentialentrepreneurstoresources,andtheyhelpfosteracultureofentrepreneurship.

19USPatentandTrademarkOffice,PatentTechnologyMonitoringTeam,ExtendedYearSet–PatentCountsbyCountry,State,andYearUtilityPatents(December2015)https://www.uspto.gov/web/offices/ac/ido/oeip/taf/cst_utlh.htm

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Whileweknowthattheseentitieshaveaidedhundredsofpotentialentrepreneurs,they

havenotyetdevelopedaconsistentmonitoringsystemthatallowsforconsistentquantificationoftheentrepreneurstheyhavehelped.However,arecentreportontheentrepreneurialecosysteminBozemanandMissoulafoundthatatleastfiveintervieweesmentionedeachofthefollowingbusinessresources20:

• MontanaHighTechBusinessAlliance• HellgateVentureNetwork• BlackstoneLaunchpad–UniveristyofMontana• BusinessStartupChallenge–UniversityofMontana• MonTEC• BlackstoneLaunchpad–MontanaStateUniversity• MissoulaEconomicPartnership• UniversityofMontana(otherunitsandfunctions)• MontanaPhotonicsIndustryAlliance• MontanaStateUniversity(otherunitsandfunctions)• TechRanch• MontanaCodeSchool• MontanaManufacturingExtensionCenter• 1MillionCups–Missoula• Dorsey&Whitney

Thisreportalsohighlightedthatentrepreneursreceivedsupportfromanumberofmentorsatotherbusinessesandutilizedanumberofgovernmentalresources.ThissuggeststhatMontanahasareasonablyrobustsetofresourcestohelpentrepreneurs.

D.Start-upemployment

Approximately1outofevery8jobsinMontanaisatafirmthatislessthan5yearsold.21ThisisslightlyhigherthantheUSlevelof1outof10.Youngfirms,though,compriseamuchhigherproportionofnetjobcreation(totaljobcreationminusjobdestruction).In2016,over60percentofnetjobcreationoccurredatyoungfirms,andoverhalfwasatstartups(firmslessthan1yearold).TheselevelsareslightlyhigherthantheUSlevel.

20Hendersonetal(2017)ANewFrontier:EntrepreneushipEcosystemsinBozemanandMissoula,Montana.21AnalysisofdataobtainedfromUSCensusBureau,QuarterlyWorkforceIndicators


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Figure6presentstheshareofworkerswhoworkatyoungfirmsbyindustryforMontanaandtheUS.Withtheexceptionofmanufacturing,theindustrypatternsinMontanaandtheUSaresimilar.Youngfirmscomprisemuchlargersharesofemploymentinindustrieslikeaccomodationandfoodservice,agricultureforestryandfishing,realestate,construction,andartsentertainmentandrecreation.

Figure6–Shareofemploymentatyoungfirms(<5years)byindustry

Source:QuarterlyWorkforceIndicators

AsshowninFigure7,though,theshareofemploymentatstartupsandyoungfirmshasdeclinedsubstantially.Throughoutmuchofthe1990s,over20percentofMontanaworkerworkedforyoungfirms.ThiswassubstantiallyhigherthantheUSlevel(roughly16percent).However,sincetheyear2000,theshareofworkersatyoungfirmshasdeclined,andthedeclineinMontanahasbeenmuchsharperthanintheUS.

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Similarly,therateofbusinessownershipinMontanahasfallensubstantially.22In1998,14.2percentofMontanansownedabusinessastheirmainjob.Thiswasalmostdoublethenationalrateof7.7percent.Whiletherateofbusinessownershiphasdeclinedinallstates,Montana’sdeclineranks4thandistwo-and-a-halftimeslargerthanthenationaldecline.Similarly,thescale-uprateforMontanafirmshasdeclinedsteadilysincethemid-1990.Therateinrecentyearsisroughlyhalfwhatitwas20yearsago.Figure7–Shareofemploymentatyoungfirmsovertime


Figure8showshowtheshareofworkersatyoungfirmschangedbyindustryinMontanabetween1996and2006.Consistentwiththeoveralldeclinedescribedpreviously,thesharedeclinedfornearlyeveryindustry.However,thedeclinesarenotuniform.Industrieslikeadministrativesupportandwastemanagementservices,agricultureforestryandfishing,artsentertainmentandrecreation,andconstructionsawthelargestdeclines.

Economistshavenotyetidentifiedthesourceofthedeclineinentrepreneuship.

Severalhypotheseshavebeensuggested.Theseinclude:marketconcentration(largerfirmshavecometodominatemoreindustriesmakingitmoredifficultforentrepreneursto 222017KauffmanIndexofEntrepreneurshipMainStreetEntrepreneurship,RateofBusinessOwners

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entermarkets);difficultyfindingresources/financing(perhaps,inpart,duetogrowingstudentdebt);slowingpopulationgrowth(whichimpliesslowerexpectedgrowth);corporationsdoingmoreentrepreneurshipin-house;andgenerationaleffects(babyboomersweremorelikelytopursueentrepreneurshipthangenXandperhapsmillenials).Otherfactorslikelycontribute,andtheremaybeidiosyncraticfactorsthathelpexplainMontana’sdecline.Figure8–Changeinshareofemploymentatyoungfirms(<5years)inMontana,1996-2016


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IV.Conclusion

Insum,thestateofentrepreneurshipinMontanaisamixedbag.Montanacontinuestogeneratemoreentrepreneursthanotherstates,andtheseentrepreneurstendtocreatebusinessesthataremorelikelytosurvive.However,Montanafirmstendtobesmall,theyhaveloweraspirations,andtheyarelesslikelytogrowrapidly.Recentgrowthinaccesstoventurecapital,patenting,andinsupportforentrepreneurssuggestthatMontanamaybeonthevergeofdevelopingmorehighgrowthstart-ups.

Montana–liketherestoftheUS–isalsosufferingfromalossofdynamism.Theshare

ofpeoplestartingbusinessesandtheshareofpeopleworkingforstart-upshavedeclinedsubstantiallyinMontanaandelsewhere.Itisimportanttodevelopadeeperunderstandingofthesourcesofthisdecline.

Documents

The State of Entrepreneurship in Montana · The State of Entrepreneurship in Montana 3 A. Indicators of success 1. Montana has more entrepreneurs.4 The share of Montana’s population