Research by many has shown that young and new companies are the primary source of job creation in the United States, as the Kauffman Foundation points out in their report, The Importance of Young Firms for Economic Growth. The key takeaway from the report is that not only are entrepreneurs and young companies the key drivers of economic growth but that entrepreneurship is vital to jobs and economic progress and the best way to revitalize a city’s economy is through entrepreneurship and startup ecosystem building.

The finding in the Kauffman Foundation report is corroborated by the Startup Genome Report, in which they find:

“Startups are the key vehicle by which regions and their citizens can take advantage of technological change, and startups depend on strong ecosystems.”

“Those places that fail to boldly and immediately invest in startup ecosystems, and thus fail to produce startups, will experience economic stagnation.”

Additionally, in their paper How the Startup Economy is Spreading Across the Country — and How It Can Be Accelerated, TechNet,  the national, bipartisan network of technology CEOs and senior executives that promotes the growth of the innovation economy, wrote:

“Recent research from academic economists suggests that regions that produce more high-quality startups show better economic performance. The report cites that a doubling of entrepreneurial quality in a region predicted an increase of 6.8% in GDP 11 years in the future.”

The Kauffman Foundation recently kicked off a new research focus on how entrepreneurial ecosystems drive local economic growth in communities around the country.

“We need a new economic model that infuses entrepreneurship into the economy more broadly than ever and removes barriers to starting and growing a business. It begins with creating entrepreneurial ecosystems—local, inclusive cultures of entrepreneurship in communities across the country.”

The realization that startups are engines of growth is happening at all levels of government, from federal, to state, down to the city level. In 2011, President Obama kicked off Startup America to “to celebrate, inspire, and accelerate high-growth entrepreneurship throughout the nation.”

The support for entrepreneurship as an economic driver needs to happen at all levels of government. While support from the federal level like that initiated by the Obama administration is crucial, the real nitty gritty work needs to happen at the local level. Cities need to adopt programs and initiatives that foster innovation and cultivate entrepreneurship.

But, though support from civic leaders at the city level for building entrepreneurial ecosystems is important and helpful, civic leaders should not make the mistake of trying to lead the ecosystem building effort.  As Brad Feld points out in his book Startup Communities: Building an Entrepreneurial Ecosystem in Your City, although governments can play a key role in startup ecosystems, they shouldn’t be the leaders of startup ecosystems.

Rather than trying to be a top-down leader of startup ecosystem building, cities should focus on facilitating and catalyzing entrepreneurship and innovation in the community by removing barriers to entry, facilitating connections, empowering and highlighting the enablers and the startups in the community. City leaders can also be influential in developing a culture of entrepreneurship in their communities.  

I think there’s another key way that city leaders everywhere can facilitate the growth of startups and innovation in their communities. City leaders are often well-connected to the established business community. There is a need to get that existing business community plugged into and excited about entrepreneurship as a driver of economic growth in the region. Using those existing relationships, city leaders can help to connect entrepreneurs, innovators, and startup enablers to existing businesses to get the community at large aware of and excited about entrepreneurship and supporting the growth of the ecosystem.

Getting the existing business community – real estate developers,  bankers, restaurateurs, car dealership owners, – the existing movers and shakers in the community, activated and engaged in the effort to grow entrepreneurship could have a profound impact on economic growth in a city.