Is it hard to build a thriving company in Indianapolis?

February 9, 2011
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Theories of why so many Indiana companies are acquired before they grow to dominate their industries abound—lack of financing, and owners and investors with modest aspirations, among others.

A notion that gins less discussion but still pops up from time to time goes like this: Indiana doesn’t have a large metropolitan center where businesses can grow big quickly and then springboard into other states and become the acquirers. It isn’t long before entrepreneurs exhaust their headquarters cities and are forced to branch into other markets just to keep growing, the logic continues.

But a blog post by Samuel Arbesman, a researcher who now is a fellow at Harvard, raises doubts about the density idea.

Arbesman‘s post isn’t necessarily about entrepreneurship. He’s discussing the relationship of city-states like Hong Kong and Singapore to the influence of huge U.S. cities within their respective spheres. But the post nevertheless sheds light on the point.

Arbesman ranks states by the percentages of their respective populations living in their largest metro areas. Thus Chicago effectively becomes a city-state in Illinois and Phoenix in Arizona.

Indiana comes in 36th. In other words, Hoosiers are scattered across a number of cities and the Indianapolis area is a relatively minor player within the state.

That suggests Hoosier entrepreneurs might indeed struggle for traction. And the ranking does place some powerhouse states, such as New York, toward the top. Also placing high are the entrepreneurship havens of Minnesota (Minneapolis-St. Paul) and Georgia (Atlanta).

But other states not exactly known for entrepreneurship are near the top, too—Hawaii and Rhode Island, for example.

Tying entrepreneurial success to population concentrations also falls apart toward the bottom of the scale. No. 41 Arkansas in recent decades birthed the world’s largest retailer (Walmart), a huge food business (Tyson) and a trucking empire (J.B. Hunt).

So, blaming the small base of Indianapolis—or any other metro area in Indiana for that matter—for the ongoing string of acquisitions is a tough argument.

What are your thoughts?

  • Very Complex Issue
    While I have admittedly not read Sam Arbesman's complete blog post, common sense would say that population density is just one of several complex factors that would figure into second-stage success & growth. Others could include density of educational institutions and "cultural" factors such as ethnicity mix, smoke-free environments, etc. Moreover, you will always have anomalies such as Wal-Mart and Tyson coming out of rural environments. I'm not sure they prove the point either way. The most important point is to at least get businesses started in the first place. To that end, Gov. Daniels and the IEDC have done a superlative job of creating a business-friendly climate in Indiana, including Indianapolis.

    Bob Neville
    Vice President of Marketing Strategy
    Mursix Corporation
    Muncie, Indiana
  • Small Town Thinking
    Too few Indiana entrepreneurs have exposure to mentors who have successfully built their companies into national and international successes. Much of this can be attributed to the desire of local financial institutions, government agencies, and local investment firms to control entrepreneurs- by getting them to believe that they offer all of the expertise that a growning entrepreneur will ever need. As a very successful entrepreneur (within Indiana, nationally and internationally), I speak from years of experience with these folks. Entrepreneurs need guidance from other entreprenurs who have "Been There and Done That." And, in Indiana, they are not getting that kind of exposure and guidance.
    • Talent direction?
      When I moved back here from Los Angeles in 1993, several commented then that the fact that Lilly was so stable and such a destination job that there were few real incentives for major tech/pharma entrepreneurs. When Guidant was sold and broken apart, several thought that perhaps that talent surplus would fuel high-end entrepreneurial growth (and did somewhat, see Aprimo, Marcadia Biotech). Now with Lilly and other major Indy-area employers seriously down-sizing in the region, will we see an influx of street talent making deals and building companies?

      Michael Snyder
      Managing Principal
      The MEK Group
    • I win you must lose
      Here in Indiana we are blessed with some amazing attributes that make starting and growing a business here incredibly easy. Low costs, a well educated and enthusiastic workforce, great infrastructure and a pro-business supportive government.

      Our main weakness from my vantage point is lack of support from the very business community we are trying to enter. I had this conversation just on Friday with a successful local attorney.

      In a lot of the places recognized as 'successful' (the bay area, Austin) you see an obvious recognition that a rising tide helps all ships. Here it seems that we compete with each other. That somehow this is a zero-sum game. If you win, somehow I must lose.

      The result is that we have local companies who don't buy from other local companies. We have media that is quick to focus on the negative or slow to embrace the new. And companies who eye each other warily vs. embracing, collaborating and growing the pie collectively.

      I'm sure this is a natural outcome for a community that has been somewhat historically insecure. A lot of folks treat success as a finite resource that we have to fight each other for. The reality that I think we are seeing playing out here is that success breeds more success and we should all do whatever it takes to help our fellow business achieve that success.

    • It's a CONSERVATIVE state
      I lived in Austin Texas for 10 years and the development there was full throttle for all types of deelopment. I've lived 25 years in downtown indy and it's taken that long to try and develop 5 blocks of Mass Av. They must be close to 65% finished. What gives? We are a conservative lot that still supports the good ol boy network of status quo. Entrepenurial efforts are very often frowned upon because anything new is judged as change. And change for Indiana is still considered a radical concept. Unless you have lots of money, or are politically connected... then forget it!
    • I agree
      As a small business owner, we have had to find creative ways of staying competitive. Our company just received it's Women Owned Business certification from the State and the City and this is beginning to open doors. I am not sure if it is business in general, but the customer wants margins cut so razor thin that you have to decide whether the business is even worth the credit risk. Banks are becoming more strict with lending and control provisions, and companies are finding ways to "Cut" budgets, which create problems down the road. With all of the building in Indianapolis each business should have a piece of the pie without having to give away the restaurant!
    • We Miss You
      The place isn't the same without Sue Ann and you, and I'm not the only one who says so.

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