Entrepreneurship is often considered synonymous with starting a business. This alone is, of course, an act of considerable courage as well as evidence of optimism, determination and, perhaps, a bit of foolhardiness. Starting a business is not, however, the element of entrepreneurship that conveys its full social benefits.

These benefits – creating radically new products and services, providing large numbers of jobs, transforming entire regions – derive not from starting a new business but from growing it into a thriving, dynamic enterprise, one whose effects flow out far beyond its founder(s).

It is interesting, therefore, to consider these two distinct elements – new business formation, and the continuing growth of young enterprises – over the recent past.

Consider three regions: first, the Boston metropolitan area, consisting of five counties in northeastern Massachusetts and Rockingham and Strafford counties in New Hampshire; second, the Portland metro area consisting of York, Cumberland and Sagadahoc counties in Maine; and third, the rest of Maine.

Next, consider the period from 2011 and 2014 – a time during which the worst effects of the Great Recession had faded and slow, choppy but steady growth in production and employment seemed to have taken hold.

Then consider the change in business count: the number of establishments filing payroll tax reports (i.e., enterprises “officially” providing jobs).

Between 2011 and 2014 in the Boston metro area, this number (which includes entirely new enterprises and those that re-opened after some time of not filing payroll reports) grew by 2,451, an increase of 1.7 percent. For the Portland metro area, that number was 393 new establishments, an increase of 2 percent. And for the rest of Maine, there were 560 additional establishments, representing an increase of 2.2 percent.

In short, based purely on growth in the number of “establishments” reporting that they employed one or more people, rural Maine is outpacing the Portland area, and the Portland area is outpacing the so-called entrepreneurial hotbed to its immediate south.

Yet looking at the growth of total employment, the exact opposite is true. Over the 2011-2014 period, total employment in the Boston area increased 6.2 percent. In the Portland area, it increased 2.9 percent, and in the rest of Maine, it increased 1.8 percent. In short, simply starting new businesses doesn’t ensure economic vitality.

Now, consider a measure of the second element of entrepreneurship: enterprise growth, the “create” part of start up and create.

In the Boston area in 2014, the net job creation (new hires minus departures) of companies less than 3 years old amounted to 11,475 jobs. This figure was 29 percent higher than in 2011 and nearly five times the 6.2 percent overall employment growth rate for the region.

Clearly, the vigorous employment growth of young enterprises in the Boston region is helping drive the overall employment growth of the region.

To say that it is the cause of the region’s overall economic vitality would be a stretch. The nearly 12,000 new jobs created by these young businesses represented barely more than one-half of 1 percent of the region’s more than 2.2 million jobs. But that percentage has been growing since 2011.

In the Portland area, the ratio of young-firm employment growth to overall employment growth is less encouraging. In 2014, the net job creation of firms less than 3 years old amounted to 938.

Nearly 1,000 new jobs is nothing to sneeze at, and it represents a 16 percent increase over the 2011 total, but at barely half the rate of employment growth of the young Boston firms, it is clear that the Portland area’s entrepreneurial ecosystem has room to improve.

Finally, consider the same figures for the rest of Maine. In 2014, the net job creation of firms less than 3 years old amounted to 914.

Again, such a gain is certainly important, but it amounts to an increase of only 1.9 percent over the 2011 figure of 897 new jobs, nearly indistinguishable from the 1.8 percent increase for overall employment in the area over the same period.

The takeaway here is that even though the increase in the pure number of new employing establishments in both the Portland area and the rest of Maine exceeded the rate for the Boston area, the contribution of young firms to the overall increase in employment in Maine is far less than in the Boston area.

Clearly, if entrepreneurship is to be the transformative force we all hope it can be in Maine, we need to increase the desire and ability of young companies to grow, to expand into their chosen markets, find more customers and add more employees.

Maine is doing pretty well in the “start up” part of entrepreneurship. We need to work on the “create” part of the process.

Charles Lawton is chief economist for Planning Decisions, Inc. He can be contacted at:

[email protected]

filed under: