Five Factors Driving Economic Growth in Small Cities

Written by Amanda Maher

One of the challenges of urban economic development is that most conferences and case studies profile efforts in large, internationally-known cities. While large cities tend to captivate America’s attention, there are small cities lurking in their shadows – and these places are proving to be some of America’s most beloved communities.

At last month’s National Main Streets Conference, researcher David Ivan of Michigan State University shared his research on over 300 small communities in 22 states in order to ascertain what makes a place “cool.” His multi-year research effort, funded by the Kellogg Foundation, found that places like Grand Rapids, Michigan and Dubuque, Iowa are laying the groundwork for sustainable economic futures. These communities have moved beyond focusing on attracting companies to attracting talent, moving from investments in physical infrastructure to investments in creative infrastructure – making the community more attractive for residents and businesses.

Not all small communities are realizing success. Many still struggle. After interviewing stakeholders in hundreds of communities across the U.S., Ivan concluded there are five key elements that differentiate communities experiencing economic success:

1. Development of the entrepreneurial ecosystem: Create an environment where people want to do business and then identify and support entrepreneurs. Entrepreneurs and other local champions should find ways to prop up local innovators. Support their risk-taking. Connect them to others in the entrepreneurial ecosystem. Give these entrepreneurs every chance to succeed.

Fairfield, Iowa has proven a leader in this regard. The local newspaper includes a column that features a local entrepreneur; an Entrepreneur “Hall of Fame” at the high school inspires students to pursue their own business ideas; its extensive peer-to-peer mentoring program pairs successful entrepreneurs with startups to help them navigate local bureaucracy and potential landmines they might encounter in the community; and a local angel/venture capital fund helps to seed nascent businesses. Over the past 15 years, this small city has created 3,000 new jobs and personal income has tripled.

2. Human investments driving new economy growth: Successful communities recognize their vitality is dependent on new innovations, enhanced educational opportunities and strong human capital. These communities identify human capital assets and leverage these opportunities for long-term economic success.

In the 1980s, Dubuque, Iowa led the Midwest in unemployment. Now, Dubuque is engaging young, university talent – despite the fact that this small city isn’t actually home to any colleges or universities. University of Wisconsin has a campus about 35 miles away; another small college is 30 miles away. In conjunction with its Chamber of Commerce, the City of Dubuque established Young Professionals organizations at each college and university within about a 60-mile radius. The YP Chapters offer an extensive internship program, and for graduates in certain high-demand fields who relocate to Dubuque, the city created a college loan repayment program.

3. Strong social capital: Successful small communities have cultivated a strong social fabric with relationships that are go deep and are durable over the long-term. Ivan’s research finds that successful communities identify and engage residents to help craft and implement a long-term vision. But not everyone likes to go to community meetings. That’s why Marshall, Michigan created a “meeting in a box” for those who have great ideas but don’t show up to meetings. Hundreds of people in this community of just 7,000 people participated through the “meeting in a box” mechanism.

It’s equally important to extend citizen engagement to the youngest of residents – including school children and young adults. Research shows that young people who have fond memories of their hometowns are more likely to get involved and return to that town when they’re ready to settle down and raise their own families.

4. Strong quality of place: Successful communities create vibrant downtown environments where people want to be. Ivan reminds us: “This next generation of talent is the first to identify more strongly with their communities with their employers,” which is why placemaking has become so essential to creating hip, lively cities. Communities that embrace their assets are viewed as authentic places that tend to become regional destinations.

5. Dedication to Progress: Repeatedly, the researchers found that successful, thriving and “cool” cities were proactive and determined to push their community forward, no matter how small the steps. “Sometimes it starts with the petunias,” says Ivan. Simple, short-term projects can test concepts and build momentum for larger revitalization efforts.

When the only grocery store in Argonia, Kansas closed, residents banded together and committed to opening their own grocery store as a community cooperative. They knew having a grocery store was critical to keeping people in their community. But keeping people wasn’t enough; they needed to attract people. They used the momentum from the grocery co-op and worked with local builders to create a housing development where new residents were offered homes at cost if they were willing to move to Argonia.

While many of these communities don’t regularly attract national attention, they show promise for revitalization. Even the smallest of efforts help generate support for larger scale projects that help to beautify Main Streets districts and support local businesses. Ivan and his team found that across the U.S., there’s plenty to learn from the places that are getting it right.