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Small Biz Matters

Welcome to Small Biz Matters, where IBJ discusses issues of interest to small-business owners and entrepreneurs. I'm your host, Associate Editor Andrea Davis.

Small Business

Is it hard to build a thriving company in Indianapolis?

February 9, 2011
KEYWORDS Small Business

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?

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