Entrepreneurship is something we traditionally associate with large cities.  Indeed, a few years ago, entrepreneur James Liang argued in his latest book The Demographics of Innovation, that as cities grow, they enjoy numerous advantages.

He argues that demographics have a huge part to play in innovation, and outlines three core ways they impact a country’s creative output:

• The scale factor – Economies of scale are well known in business, but Liang argues that scale is also vital for innovation.  Not only do countries with high populations have more researchers etc., but crucially, they have a large domestic market for budding innovators to sell to.
• The agglomeration factor – This can be seen with the emergence of innovation hubs, such as Silicon Valley, in recent decades.  Liang argues that a large population is not enough if that population is not fairly well concentrated.  Cities and hubs benefit from the concentration of talent and resources in one place.
• The age factor – The age of the population is also important.  Liang suggests that 72% of the greatest inventions in history were made by inventors in their 30s and 40s.  This is because they have had time to gain an education but are not sufficiently embedded into the status quo to see no other way of working.

Things aren’t quite that straightforward, however, with research highlighting how entrepreneurship can flourish in small towns as well as big ones.

The authors believe that how entrepreneurs view where they live is central to their views of entrepreneurship, and therefore policies have to be made with this perception of place in mind.  The researchers distinguish four different types of entrepreneur based upon their relationship to the location they have based their startup in.

Locally born entrepreneurs are those who have created their business in the place they have lived their entire lives.  Returnees by contrast left, often for studying, before returning to the place of their childhood.  The third category were ‘in-migrants’, who were born elsewhere in the UK before moving to the area they created their business, and then immigrants who came from another country.

Rural entrepreneurs

What’s more, research from Penn State suggests that even rural places can be hotbeds of innovation.  The researchers argue that these hidden innovators bring a wide range of social and economic benefits to not only the local businesses and communities, but also the wider economy.  As such, they urge policy makers to look again at rural communities as potential hubs for innovation.

“The way we traditionally measure innovation is very narrow, and focuses primarily on new products or processes that result in a patent or involve R&D spending. This overlooks another kind of innovation–the incremental improvements that businesses make to their products and processes as a result of information they obtain from outside their firm,” the researchers explain. “Our measure shows that this latent, or hidden, innovation is at least as important to local income and employment growth as patent-level innovation.”

It’s a finding shared by a recent study from The Business School (formerly Cass), which explored how Mirandola, a small town in North Eastern Italy has risen to become a major player in the medical devices sector.  In doing so, the researchers believe they have provided a roadmap for other small towns and communities to follow.

A roadmap for innovation

The researchers highlight how Mirandola was a struggling town as recently as the 1960s, with little to attract tourists and poor transport links to connect it with nearby cities.  Their fortunes were transformed by Mario Veronesi, who began his entrepreneurial life by making simple medical kits, which contained disposable plastic tubing for use in blood tests and transfusions.

He made the kits in his parents’ garage, while tapping into the skills of friends to develop a network within the Mirandola community to help scale up manufacturing.  This was helped by a pool of residents who were loyal to the town, and a relatively low salary level in the community.

The authors describe three key stages of Veronesi’s journey:

• Genesis, in which his ideas and formulae were conceived.  This is a stage in which a lack of resources meant he had to bootstrap a lot of his operations.  It was also crucial to tap into his network of scientists and skilled workers to help him get the business moving.
• Expansion, in which he shifted from individual-level to organizational-level outcomes.  Veronesi was able to bring together people into the sector, and even to form their own independent companies or take senior roles in multinationals that were acquiring his companies.  This became a virtuous circle, as these people then inspired others.
• Attraction, which was a period defined by exponential growth, in which the region gained an international reputation in the medical devices field.  This made the area an attractive hub for investment, with in-demand products coupled with a skilled labor force.

Anchor entrepreneurship

It’s a case study that the researchers believe highlights the key role so called “anchor entrepreneurs” can play in the growth of entrepreneurship in a small community.

“Mario Veronesi himself was not a specialist in the medical field but he had a vision, and he knew how to persuade others to buy into this vision,” the researchers say.  “He plugged gaps in his own medical knowledge by developing relationships with medical specialists and encouraged tradesmen to leverage their skills towards the production of medical equipment.”

The success has enabled Mirandola to become the home of 20% of the medical device manufacturers in Italy, who between them generate around 30% of the medical equipment revenues in Italy.

“The story of Veronesi and Mirandola shows us how charismatic leadership and a strong sense of community can revitalize entire regions,” the researchers conclude. “Although Mario Veronesi is no longer with us, his legacy has put a small rural town on the map as an industrial hotbed for medical supplies. He has done this by simply recognizing the raw potential of an idea and the talents of residents, using every resource at his disposal to get this idea off the ground.”