How SEAD Network can advance Experimental Economics: A Case Study of Innovation and Entrepreneurship in Support of Rural Community and Economic Development

Authors: Joan Quintana and Jose Quintana

 

BACKGROUND

Since 2004, Advent GX has been researching and developing approaches to spur economic growth and job creation in America’s rural regions. Advent GX identified gaps, studied best practices and evaluated tools for their potential application to rural settings. By providing access to relevant tools and using approaches that foster innovation and spur entrepreneurship and small business enterprise, Advent GX seeks to remove barriers and set communities on a path to prosperity.

Relevance of tools is fundamental. Too often well-meaning rural leaders attempt to employ methods that have proven effective in urban settings. Vastly different local dynamics, engagement and funding levels mean many conventional tools are out of reach and inapplicable. By modifying proven systems to the rural situation, facilitating creative collaborations, and allowing both local vision and market dynamics to drive strategy formation and implementation, Advent GX is moving beyond traditional rural development strategies and realizing success in assisting rural communities to achieve sustainable growth.

Toward this end, in 2011 Advent GX established the Innovation Underground in Historic Downtown Bryan, TX. A privately owned business incubator, the Innovation Underground is a place for entrepreneurs to grow businesses. Advent GX deliberately located the incubator in the heart of downtown. The Innovation Underground leverages cultural and heritage assets – including coffee shops, galleries, churches, restaurants – that are a natural draw to the area. Well promoted and supported, these assets become an even greater draw and can form the foundation for a cultural hub which in turn attracts more traditional and tourism business to the area. The result is economic growth and enhanced quality of life.

APPROACH

Advent GX uses a multi-disciplinary approach to support the development of businesses through the Innovation Underground.

Community-Based Entrepreneurship

Location within the heart of the community is essential. So too is a deliberate focus on serving the needs of both entrepreneurs seeking to start a business and freelancers in search of a quiet place to work. Serving both populations creates an ecosystem whereby freelancers feed off start-ups’ need for affordable services.  Start-ups have access to affordable services, low rent, shared meeting facilities and Advent GX’s version of entrepreneurial support systems. Unlike traditional business incubators and small business innovation centers, Advent GX advocates for a more aggressive and experimental brand of start-up employing the following approaches.

Experimental Economics: Using experimental methods to evaluate theoretical predictions of economic behavior, Advent GX encourages entrepreneurs to give their ideas a chance. Rather than expend large amounts of money on complex business plans that are often irrelevant before they are complete, we encourage entrepreneurs to instead invest in prototype products with which they can test markets and product features.

Behavioral Economics: Understanding the effects of social, cognitive and emotional factors on the economic decisions of individuals and institutions is fundamental to business planning and modeling. Advent GX tools support rapid evaluation of market prices and returns, and serves to support wise allocation of resources through the business and product development process.

Financial Engineering & Business Analytics: This cross-disciplinary field relies on computational intelligence, mathematical finance, numerical methods and computer simulations to make trading, hedging and investment decisions, all the while managing risk. Advent GX provides this support to start-ups to inform both financial models and fundraising decisions.

To encourage sustainable businesses, Advent GX assesses opportunities based on three primary considerations:

  • Economic considerations for financial viability
  • Ecological considerations for environmental sustainability
  • Social considerations for quality of life impacts

Support for Cultural and Heritage Tourism

Tourism development is often considered to offer the best potential for attracting outside investment and generating sales tax revenue in rural communities. Experiential tourism– including heritage, cultural, nature tourism, to name a few–does in fact present a significant opportunity for rural places to expand the economic base and enhance quality of life. But tourism is just a beginning.

The natural attractants that bring visitors to local downtowns also serve to improve the quality of life. Establishing unique shopping experiences, live music venues, quality dining and the arts in a defined downtown district provides a venue for intellectual cultural engagement. The small setting and relatively low population creates a sense of community. Soon the creative class of artists and performers are mingling with engineers, lawyers and other professionals seeking respite after a long day of work.

This experiential lifestyle—typically only available in urban settings—is a key attractant for innovators and entrepreneurs seeking the rural quality of life. The Innovation Underground leverages the natural tourism attractants and provides a catalyst for entrepreneurial initiatives.

OUTCOMES

Advent GX set out to achieve break-even financial status of the Innovation Underground within its first year of operations. Though still in the development phases, the physical incubation offices at the Innovation Underground are fully occupied and Advent GX achieved break-even operations by month six. In addition to supporting a wide range of start-up activities, the Innovation Underground is home to a number of independent freelance professionals who work in the Creative Space, a co-working space for creative professionals. Start-up members of the Innovation Underground include:

  • Rock the Republic
  • Kootzin Apps
  • Imani-Tumani-Upendo
  • Blazing Forge Games
  • Beautiful Abilities
  • SEAD Gallery
  • Texas A&M Statistical Services
  • Maroon Weekly
  • Hog Abatement Management Systems
  • Grand Stafford Theater
  • TripleStat
  • Sideshow Creative

In addition to start-up activities, Advent GX is facilitating the development of community development projects that will add to the financial sustainability of the Innovation Underground and, once established, serve as ready models for replication in other communities. These initiatives include:

  • DUFi (Distributed Urban Farming Initiative)
  • SEAD Gallery (exploring collaborations in Science, Engineering, Art and Design)
  • SEADAcademy (a conceptual education initiative focused on K-12)

LESSONS LEARNED

Through the first year of operations and several years of research prior to the opening of the incubator, Advent GX documented best practices and lessons learned. These findings inform suggested actions for further action that will follow in the next section.

Location Matters: The old adage – location, location, location – is true and perhaps even more so for communities seeking to spur entrepreneurial activity. Innovators want to be where the action is. Most communities place business incubators in the cheapest possible real estate or in the middle of the fledgling business park where opportunities for inspiration and collaboration are, with only a few exceptions, scarce.

Follow the Passionate and Purpose Driven. Ignore the rest. Every successful initiative, be it a business, a charity event or the next disruptive technology, is championed by an individual willing to give life and limb for his or her great idea. Agility and an opportunistic mindset enable companies to follow the passionate to success, whether inside their own company or in the greater community.

Establish a compelling mission. The Innovation Underground supports start-up companies but the mission is community and economic development through heritage preservation. By choosing a 100-year-old building as its home, the Innovation Underground is supporting heritage preservation. This is compelling to local community thus fostering local engagement and adds to the sustainability of the project as a whole.

Engage, challenge and empower youth. Advent GX was able to accomplish a great deal in a short period of time and with a limited investment in large part because Advent GX makes interns a central part of company operations. By reaching out to student organizations and hiring both college and high school aged self-learners, Advent GX acquires affordable talent, gains insight into current and future trends and contributes to the development of a well-skilled workforce.

Reach out to and engage university leaders: Advent GX places high priority on providing support to the academic community. By reaching out to university leaders, supporting academic programs as lecturers, offering private sector perspectives and seeking opportunities for collaboration, Advent GX created a bridge between the campus and local communities. Resources and expertise are shared and innovation results.

Offer unique and meaningful programming: Advent GX launched the first in what will become a series of intimate lectures and recitals at the Innovation Underground with the goal of compelling intellectually motivated innovators to come together socially. Bringing together entrepreneurs, academics and community leaders sparks new ideas that become the catalysts for innovation. Local economic development is the result.

Provide access to technical resources and expertise:Entrepreneurs seeking to generate new business models and capitalize on emerging technologies need access to technical resources. The opportunity to learn the latest tools and experiment with new products is key to market penetration.

Embrace partnerships and collaboration: Leveraging resources, expertise and networks is central to the success of the Innovation Underground. Partnerships with academia, industry, government and non-profits must be formed with attention to the value each party will gain. SEAD Gallery, for example, provides a presence in downtown Bryan for the local arts council, gives a physical presence to and demonstrates the potential of the Network for Science, Engineering, Art and Design and provides an enhanced experienced and source of revenue to contribute to economic viability of the Innovation Underground.

Private sector operations: Advent GX is a private company operating a business incubator. As in any private business, decisions are based on survival and long-term sustainability. By privatizing incubation, the Advent GX approach eliminates decision making based on political whim and provides start-ups the freedom to take risks and learn from failures without the threat of those failures being politicized. Additionally, the company’s flat organization, focus on providing support as needed (avoiding one-size-fits-all services), and leaderships’ inherent understanding of the entrepreneurial condition makes the operation viable from a practical perspective.

SUGGESTED ACTIONS

Suggested Action #1: Employ independent private sector company to direct and manage business incubation efforts.

 

Stakeholder(s): Local Governments, Economic Development Organizations, Economic Development Administration

 

Obstacle/Opportunity Addressed: Maximize entrepreneurship at the local level. Avoid injecting politics into start-up landscape.

Suggested Action #2: Fund faculty in residence to work alongside entrepreneurs in rural business incubators like the Innovation Underground.

 

Stakeholder: National Science Foundation, Economic Development Administration, Academia, Economic Development Organizations

Obstacle/Opportunity Addressed: Overcome barriers to meaningful academic engagement in the local community. Take advantage of opportunities for applied research; foster interdisciplinary collaboration.

Suggested Action #3: Fund the expansion of the Innovation Underground model to rural communities, creating a growing network of small businesses supporting rural innovation and economic vitality.

Stakeholder: Kauffman Foundation, Economic Development Administration

Obstacle/Opportunity Addressed: Overcome financial barriers to establishing Innovation Underground locations in rural communities that are most in need of entrepreneurial support and yet lacking resources to seed initiatives. Employ proven systems in use by Advent GX and build a supportive network of start-ups, all benefiting from private sector expertise.

Suggested Action #4: Establish Collaboration Lab at the Innovation Underground showcasing the latest technology tools and making them available for innovators seeking to build new skill sets and engage technology in the marketplace.

Stakeholders: Private industry; manufacturers of disruptive technologies, new software, developer kits, etc.

Obstacle/Opportunity Addressed: Overcome financial barriers that limit start-ups’ access to new technology; provide a showcase opportunity for manufacturers who will also gain advocates/sales people in the process. Membership in the Innovation Underground network takes on a new level of value.

Suggested Action #5: Establish an exchange program to bring urban artists and entrepreneurs to rural communities and facilitate international cultural exchange.

Stakeholders: National Endowment for the Arts, Economic Development Administration, Department of State

Obstacle/Opportunity Addressed: Cultural exchange has long been recognized as an effective means to foster understanding and promote economic activity. By bringing international and urban artists and entrepreneurs to rural communities, the rural community will gain access to expertise and cultural resources that are otherwise out of reach. The exchange will develop networks for symposiums and events in unique locations, such as historic venues, creating intellectually engaging experiences and resulting in economic vitality.

Suggested Action #6: Establish an apprenticeship program at the Innovation Underground that funds high school student workers who provide technical design and development support to start-up companies under the direction of a qualified professional.

Stakeholders: Department of Labor, National Science Foundation, Private Industry

Obstacle/Opportunity Addressed: High school vocational programs are often effective but lack the resources to provide students with access to the latest technology tools; likewise, project work is approached as homework and thus lacks the intensity and rigor of real work products. Still, many high school students have both the aptitude and the interest in working with technology tools. In rural communities in particular, there is a lack of qualified technical workforce. An apprenticeship program at the Innovation Underground will contribute the development of well trained workforce while creating advocates for technology among students. Furthermore, student labor will provide affordable services to Innovation Underground start-up companies.

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