An even more exciting opportunity presents itself when we realize that the needs and tastes of inner-city buyers represent trends that often cross ethnic and socioeconomic strata. For example, products, such as Parks Sausage, originally tailored to the tastes of African American consumers have entered the mainstream.
To capitalize on that large market opportunity, the new breed of inner-city businesses cannot be small high-cost companies. They must quickly build themselves into efficient, high-quality businesses that use the latest in technology, marketing, and professional management techniques.
Integration with regional clusters. A third potential competitive advantage of the inner city is a company's ability to leverage access to nearby regional business clusters. Boston's inner city, for example, is next-door to clusters of world-class financial-services and health-care providers. While inner-city companies are currently isolated from the regional economy, those unique regional clusters represent promising opportunities for economic growth. They create opportunities for new or growing companies to provide services and production inputs as well as the opportunity to sell downstream products and services. Proximity to Detroit's large cluster of automotive companies, for example, enabled $103-million Mexican Industries, a 1,000-person inner-city manufacturer of armrests, headrests, and air bags, to become a respected supplier by forging close relationships to General Motors, Ford, and Chrysler.
The inner city's proximity to regional clusters also offers employment opportunities to appropriately trained residents. Those jobs are usually far more practical and accessible than jobs in distant suburbs. With training and other work-force development programs tailored to cluster needs, both the regional firms and the inner city benefit.
Human resources. The fourth potential competitive advantage of the inner city lies in its human resources. Inner-city workers are often more motivated and loyal in businesses that suffer high turnover. For instance, a bakery in the heart of Boston's inner city supplies decorated cakes to supermarkets. It attracts and retains residents from the area at $7 to $8 an hour (plus contributions to pensions and health insurance), and its labor pool is one factor that has allowed the company to thrive. Those entry-level, hourly jobs represent a starting point in building a sustainable inner-city economy.
Furthermore, research reveals a substantial capacity for entrepreneurship in inner cities. However, most legitimate inner-city entrepreneurship is now invested in the provision of social services, for which there is strong local demand. Boston's inner city, for example, hosts a remarkable number of social-services providers as well as social, fraternal, and religious organizations. Behind the creation of those organizations is a cadre of minority entrepreneurs who have responded to the local demand for social services and to funding opportunities provided by government, foundations, and private-sector sponsors. The challenge is to redirect some of that entrepreneurial talent toward the building of for-profit businesses and wealth creation.
Another potential human-resource advantage of the inner city is the growing pool of highly trained and experienced minority managers available today. About 4,000 African American and almost 2,000 Hispanic students graduated from M.B.A. programs last year, compared with just a handful two decades ago. More and more minority M.B.A.s are gaining work experience in highly regarded companies. To date, few of those talented people have started or acquired businesses at all, much less businesses in the inner city. But many of them have developed the skills, network, capital base, and confidence that will allow them to join or found entrepreneurial companies. In addition, many young people still attending or just leaving business school are attracted to entrepreneurship and to community involvement. They are eager to apply their talent and training to economic development. A new pool of founders and managers of inner-city businesses, then, is poised for action.
The businesses that are present and that remain in inner cities invariably draw on one or more of the four competitive advantages described above. That suggests that substantial numbers of new inner-city jobs could be created if public policies were to shift from providing subsidies to businesses and welfare to residents to developing and reinforcing the economic advantages of the inner city.
Overcoming Inner-City Disadvantages
The economic potential of the inner city will be realized when companies leverage the competitive advantages and when the disadvantages are confronted directly. Most of the disadvantages of locating businesses in the inner city can be eliminated, moderated, or overcome.
Land. A large percentage of companies moving out of the inner city would stay but can't for lack of space. Inner cities lack adequate parcels of land for construction and expansion. For instance, Rebuild L.A. estimates that only 9 of 200 vacant or underutilized lots in South Central Los Angeles are larger than one acre. Wal-Mart requires four to six acres to build a new store. Even when land is available in the inner city, it's often broken into small, unusable lots. The development of Jeffery Plaza, a shopping center on Chicago's South Side, required eight years and substantial government involvement to assemble 21 contiguous parcels. Even after they're assembled, inner-city sites often require expensive demolition and environmental cleanup. Private developers and banks tend to avoid sites with even a hint of environmental problems, because of punitive liability laws.
Building costs. The price of building in the inner city is significantly higher than the price of building in the suburbs because of complex logistics, restrictive zoning and architectural codes, permits, inspections, community group negotiation, and government-required union contracts and minority set-asides. Equally if not more damaging to inner-city development is the uncertainty that regulations create for potential investors. Developers in Boston, Los Angeles, and Chicago all expressed frustration at the three-to-five-year regulatory process required to obtain the necessary approvals to expand, build, or improve their facilities. Cities need to dismantle regulatory and bureaucratic mazes if they hope to compete with suburban locations.
