Innovation, homegrown enterprises key to growing Michigan economy
What do economies and forests have in common? A lot it seems. I recently attended a seminar where John E. Jackson, a professor in political science at the University of Michigan, used a forestry analogy to detail his work studying market economies.
Jackson has spent years studying the cycles of job creation and loss, in the state of Michigan and in Poland. The similarities between the two are striking: Michigan has been struggling with the loss of jobs in large automobile companies, and Poland has struggled with the downfall of large state-owned enterprises.
Jackson has studied quarterly employment figures for every firm in Michigan over a 20-year period from 1978 to 1998, which includes the 1982-1983 recession. He divides job creation and loss into three categories, labeled for their analogous forest counterparts:
1) Towering oaks: the large automobile companies that shed nearly 500,000 jobs during these decades.
2) Transplanted trees: outside firms who set up branch operations in Michigan
3) Seedlings: newly formed companies established in the state.
Particularly interesting is the data comparing the 50,000 new “seedlings,” which appeared at some point during the 20-year time period and the 140 “transplant” firms that also arrived during this timeframe. Both the small businesses and the transplants initially created about 150,000 jobs.
By 1998, while only 17,000 of the new businesses remained, those survivors accounted for 190,000 jobs. But only 62 of the 140 transplanted non-native companies grew lasting Michigan roots, with total employment among them declining to about 61,000 by 1998.
So, while the auto industry appears on a path to recovery, and while transplanted firms remain important to Michigan’s economy, our primary focus should be spurring innovation and nurturing the growth of new, homegrown enterprises.
Just as a forest requires new seedlings appropriate to the soil and climate of its region, the future of Michigan’s “economic forest” depends on the nurture of native talent, ideas and entrepreneurship.
Daryl Weinert is the Executive Director of the University of Michigan’s Business Engagement Center.