A Bank's Gift Demonstrates the Power of Small Business Innovation
Today on Capitol Hill, I joined leaders of JP Morgan Chase as they announced a five-year, $30 million philanthropic investment to support the pioneering work of American small businesses joining “regional clusters.”
Clusters are public-private partnerships that convene a region’s corporations, small businesses, universities, investors and regional economic organizations to achieve synergies and productivity levels that a single company could not. Chase’s commitment is believed to be the largest private-sector contribution to date in support of clusters.
SBA was the very first federal agency supporting this regional growth strategy back in 2010. Since then, we’ve played a leading role in interagency efforts to create and support clusters. We’ve provided more than $21 million in government grants and contracts, and we’ve organized forums for cluster leaders to discuss strategies to increase the commercialization of new technologies created by small businesses.
Clusters are supporting entrepreneurs who work in some of the key emerging industries of the 21st century. This matters, because it’s our small businesses that have emerged as America’s leading innovators, producing 13 times more patents per employee than large firms. Small businesses employ more than 40 percent of America’s high-tech workers, and their size and nimbleness allows them to quickly adapt to emerging science and changing commercial realities.
While smaller firms house some of this nation’s brightest minds, what they usually don’t house are large development departments that specialize in securing grants and new contracts. As a result, highly qualified small businesses often miss out on opportunities to gain entry into promising new markets.
That’s where clusters come in. They convene all the major players, who pool resources and expertise to attract funding and research dollars, which in turn helps small firms scale up and hire. Clusters also train the local labor pool in specific skills sets that are in high demand – usually, in the STEM disciplines (science, technology, engineering and math). In short, clusters help regions harness what makes them special to drive breakthroughs in emerging industries with the potential to help power the American economy for generations.
The SBA currently supports clusters focused on advanced power and energy in Minnesota, geospatial technologies in Mississippi, defense and aerospace in Alabama, smart grid technologies in Illinois, electrochemical energy storage in Connecticut, cyber security and defense technologies in San Diego, and flexible electronic products in Ohio.
A third party evaluator just completed the third year of a performance report, comparing small businesses that participated in an SBA-funded cluster with their local competitors that did not. Entrepreneurs in clusters created jobs and grew their payrolls four times faster than their industry peers. And over the three-year period, they attracted an additional $161 million in private capital and grants to support their work. Nearly 9 in 10 entrepreneurs said they were unable to obtain similar support outside of the cluster.
Chase’s commitment is powerful evidence that major players in the finance world are now seeing the light on clusters. And that’s good news for the small businesses that are quietly powering our economy’s high-tech transformation. These are exciting times to be both an innovator and an entrepreneur in America. Who knows where the next Silicon Valley may spring up?