The days of small towns landing a big company are in the past. Amazon didn’t look at Yuba, Wisconsin, or Baxley, Georgia, for its newest headquarters. So how does a rural community create new businesses and the economic growth and wealth that comes with it? Our new research points to newcomers as a valuable source of entrepreneurship.
We looked at the way migration patterns affected start-ups within rural counties. In other words, what happens when new folks move to town. Our research suggests they start new businesses or at least grow the population enough for other locals to start businesses.
Specifically, migration into rural counties across nearly all age groups – from recent college graduates to retirement age – results in greater entrepreneurship. The effect is especially pronounced for people between the ages of 50 to 75.
“Nice, Clean Arc of People Moving in and out”
Rural communities often have this nice clean arc in terms of people moving in and out. A kid who grows up in a small town leaves after high school, sometimes for college, and maybe spends a few years working in the city. Then, when it’s time to slow down and possibly raise a family, they move back to the country. Finally, in their later years, when they want the companionship of their friends at the local diner or simply don’t want to drive too far to get groceries, they move back into whatever downtown they still call home.
That arc showed up in our research, but now we can see how that migration can lead to entrepreneurship. Our study period was 1990 to 2000 in order to rule out the radical effects on migration and entrepreneurship created by the Great Recession. During our decade-long study period, rural net migration grew across all age groups from 30 to 74, with the two age groups that left rural communities being 25 to 29-year-olds and those 75 and older. Within that big middle of people moving to rural areas, we also find a bit of a U-shape. People in their 30s and 60s make up the bulk of total migration, while the true middle-aged movers in their 40s and 50s make up a smaller portion of total migration into rural counties.
Turning to the effect of rural migration on entrepreneurship, the results were clear: migration leads to new business formation. Across every single age group, except those older than 75, the net migration rate led to a statistically significant increase in rural business startups. More importantly, this is true after we control for all the nice things in a community that would make people want to move there or start a new business in the first place, like education, income, community organizations, and environmental amenities.
Looking through the lens of migration, the bulk of new business creation in rural counties is made by people between the ages of 50 to 74. Even though people in their 30s may be moving to rural areas, they are not often doing so as readily as the older generation. On the other hand, an older population with a near-lifetime of work experience may be looking at becoming their own boss, and they are moving to the country to do so.
There are a few reasons why these numbers could play out this way. An older population moving to rural communities increases the demand for services, and they have the retirement and pension income to pay for them. A younger cohort that leaves for college campuses and cities to gain knowledge and experience may bring that back to a rural community in the form of new ideas and business ventures. People who are willing to uproot and move to a rural area may be revealing an appetite for risk and uncertainty that is nearly required by any good entrepreneurial venture.
Whatever the cause, rural communities would be well served by shifting their focus away from landing a tech giant’s new headquarters and toward attracting new people. Those new people will bring ideas and experience, which drive new business and economic development.