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 Pittsburgh lags in new business March 7, 1999 By Steve Massey, Post-Gazette Staff Writer
There’s no good way to say it. When it comes to business starts, the Pittsburgh region is a laggard. It’s not in last place — St. Louis claimed that spot last year, as it has for each of the past four, based on research concern Dun & Bradstreet’s count of new business incorporations. But whether a cellar dweller or just an also-ran, Pittsburgh has consistently ranked among the bottom rungs in business starts when compared with the 14 other PG Benchmarks regions. Since 1995, its best showing has been eighth place; its average ranking in the four-year span is 11th. That’s not to say it should be all doom and gloom. For one, the issue of how much business starts matter as a gauge of a region’s economic health is a matter of some debate. It’s true that business starts are a good barometer of a region’s economic activity and attractiveness, says Donald Smith, executive director of Carnegie Mellon University’s Center for Economic Development. "They’re a signal of both entrepreneurial climate and the confidence of entrepreneurs in the growth potential of a market,’’ says Smith. Yet it’s also true business starts often simply represent economic inertia — if a region’s population is growing, it’s a good bet its business starts are growing too. "Places that are growing are going to start more companies,’’ Smith observes. It’s no coincidence that the PG Benchmarks regions that have consistently ranked at or near the top in business starts — Miami, Denver, Phoenix, Atlanta — also have relatively fast growing populations. This year, PG Benchmarks has changed its startups measure and recalculated the numbers back through 1995. Instead of measuring startups as a percentage of overall business in the region, the project has begun looking at startups as a function of the population in each region most likely to actually start a business — those people between the ages of 18-64. The changes help account for the effects of population growth on business starts, but the outcomes really haven’t changed. When a region is booming, so is demand for fast food, stores, housing and other goods and services. Another way to measure business starts is the quality of the businesses being created. By that measure, Pittsburgh can take some comfort. A number of its business starts fall in the technology, business service and finance arenas — sectors of the economy where the goods and services that are provided are more reliant on national and even global demand than on local customers. In other words, these types of startups tend to have more staying power, and often provide more economic oomph than a local grocer or dry cleaner that may open to serve a neighborhood only to see a competitor open across the street or on an adjacent block. A study in the mid-1980s by sociologist Paul Reynolds illustrates how much a difference there can be between startups geared to serving a local market and those aiming beyond regional borders. Reynolds found that a quarter of business startups in Minnesota from 1978 through 1986 accounted for 60 percent of jobs and 80 percent of sales of all new businesses created in that state during the nine-year span. It is an encouraging finding for Pittsburgh, where a number of new companies serve state, national and global markets — and not just the region. It also fits with the vibes Smith and many other observers of the local economic scene are getting. "It just feels like things are getting better, even if the numbers don’t show it,’’ he says.
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