Writ large, entrepreneurial bullishness of this sort translates into the creation of whole new industries, which in turn lay the groundwork for future metro specialties. Orlando has spawned a budding film-and video-production industry, swelling from $2.5 million worth of activity in 1986 to more than $82 million last year. The Seattle area (Microsoft, Aldus) and Salt Lake City area (WordPerfect, Novell) have developed booming software industries. Burlington, Vt. -- thanks to an enabling state law -- has recently become home to some 215 "captive" insurance companies, self-insuring subsidiaries of large corporations or trade associations. The effect on entrepreneurship: most of the captives have hired newly formed management companies to handle their paperwork.
As a statistical matter, new-business creation follows population movements, which is why most of the "business starts" leaders on the accompanying charts are also growing in population. But every now and then entrepreneurship sprouts in some unexpected places, giving a boost to a metro area that would otherwise be unremarkable. Greater Philadelphia probably houses more biotech start-ups than any other place east of San Francisco Bay. Akron has christened itself Polymer Valley and has spawned dozens of new, growing plastics-related enterprises.
Then there's the unlikely case of the Utica-Rome metro area in central New York State. Like the rest of its region, Utica has seen grim times in recent years; factories have been closing, people leaving. The city's earnings growth between 1988 and 1990 was less than half the national average. But staying behind, explains one resident, are "hard-core Uticans," who have created a healthy number of high-growth businesses. Among them, Conmed Corp., a producer of medical devices and disposable products, is up to an estimated $35 million in sales this year, from less than $20 million two years ago.
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A Tale of Two Cities
All those factors play off one another, of course, creating virtuous (or vicious) cycles of growth (or decline). Take the examples of Boston and Charlotte, which illustrate the dynamics of boom and bust in today's economy.
For Boston, the Massachusetts Miracle came to an abrupt end: after years of expansion the region suddenly found itself an economic basket case. What happened? "A whole bunch of cycles came together at once," says Stanley Duobinis, "and they were all negative." Housing and commercial real estate were overbuilt. When the market turned, banks from tiny Blackstone to giant Bank of New England found themselves insolvent. Meanwhile, defense spending was shrinking and the minicomputer industry, headquartered in eastern Massachusetts, was in the tank. The result: rising unemployment, shrinking credit, and a state-government fiscal crisis, all feeding an increasingly sour outlook on the part of consumers and businesspeople. Between 1988 and early 1991, The Conference Board's widely watched consumer-confidence index for New England fell more than 75%.
Charlotte's story in recent years was different in every particular. For decades the city was a sleepy financial and commercial center for the cotton and textile industries, serving the Piedmont region and not much more. As the Southeast grew, however, Charlotte was well situated to cash in. Its biggest banks, solidly based in cotton and textiles -- and already operating statewide -- began moving into other parts of the region. National manufacturers and wholesalers began locating warehouse and distribution facilities around the city, taking advantage of its strategic location on I-77 and I-85. Today Charlotte is number four nationally in banking (as measured by assets) and number six in wholesaling. The population of surrounding Mecklenburg County grew by nearly 12% between 1985 and 1990, with employment up 22%.
The result of all that development: a cascade of economic benefits, each one feeding the other. Earnings up 5% and retail sales up 10% in the last two years, both figures well above the national average. More foreign companies locating in the region, thanks in part to a fast-growing international airport. And yes, the region's economy is increasingly diversified. Despite Charlotte's specialization in banking and distribution, manufacturing employment has increased nearly 10% since 1985. The city is also emerging as a major regional health-care center.
Maybe not surprisingly, Charlotte has become a great place to start a company, ranking third nationally in the number of start-ups and 11th in proportion of fast-growing businesses. Ten-year-old Broadway & Seymour, a $37-million software developer that counts banks among its major clients, has been growing by more than 30% a year. John Ketner's new Bank of Mecklenburg has crept into a local-banking niche vacated by ever-expanding giants such as First Union National Bank and NCNB National Bank. Power-plant operator Cogentrix Inc., twice the top-ranked company on Inc.'s annual listing of the 500 fastest-growing private businesses in America, is based in Charlotte. One factor in capital-hungry Cogentrix's early growth was the fancy financial resources it could find close to home. "We'd call investment bankers in New York, and they wouldn't even return our calls," says project manager Robin Spinks with a laugh. "Our banking relationship with NCNB was very important to us in our early days."
