Collaborative Investing in Local Clusters Leads to Economic Development

Group investment is not a novel idea but can be significant in developing stronger local growth models. A “hot” market is one that draws substantial investment interest that encourages growth among market relevant businesses. Pack investing offers opportunities to create multiple points of capital infusion that lead to the growth of a battery of related companies.

Companies do not work in a vacuum and rely on different local stakeholders to feed the building of their business. They need resources, human capital, science, facilities, suppliers, partners, and customers to develop momentum. If they lack the right environment, their business is doomed to failure before it gets started.

Pack investing offers the opportunity to take a local core competency with a solid industry base and infuse large amounts of capital at various points to encourage mutual growth. Multiple investors may work together to invest in complementary businesses that have market relevance but are not operating at peak performance.

The potential for quick growth and higher market returns is greater for companies that work together. Network relationships and alliance capitalism can create higher growth records among businesses (Eng, 2007). Sharing resources and knowledge during the growth stages with peer companies seems to make a difference.

Pack investing, and allied companies develop a stronger competitive stance. Industry alliances, even when money is not transferring between them, earned abnormally high local returns (Wang & Der-Jin, 2005). Getting businesses to support each other’s growth trajectories with shared services lead to stronger intra-firm alliances.

Collaborating on an investment level and working on a firm level creates two forms of potential synergy. Infusion of cash allows individual companies to expand their operations. Sharing knowledge and resources with other businesses helps them learn and adapt. Together investment and development create clusters of competitive firms that lead to jobs and economic wealth.

Investing in a pack and encouraging mutual growth is different than standard competitive strategies and requires a new way of thinking. Competitiveness is in the American blood, but collaboration can sometimes supersede this instinct to create greater value. Persuading investing institutions and company CEO’s to work together is a challenging game.

Pack investing relies on transparent city data that allows investors to find underperforming clusters and explore them. Seeing the opportunities and sharing those opportunities with like-minded investors may be against culture but can be lucrative, in the long run, when investment returns rises. Greater revenue is followed by new investment, tax income and jobs that can raise living standards of residents.

Eng, T. (2007). Relationship value of firms in alliance capitalism and implications for FDI. International Journal of Business Studies, 15 (1).

Wang, Y. & Der-Jin, M. (2005). Using strategic alliances to make decisions about investing in technological innovations. International Journal of Management, 22 (4).

Confidence in the Economy Grows as Holidays Near

The holiday season is nearly upon us and people are a little more optimistic about the economy then they were just a few months ago. People are slowly starting to feel good about their future prospects and the potential for their incomes. According to the Gallop Poll a -6 is a significant improvement over the -20’s experienced throughout the year. 

Economic confidence is a beneficial metric but isn’t a very conclusive one. Much of economic confidence is based in how people perceive the environment and their opportunities within it. New reports and the general impressions of reports does have an impact on economic impression (Barsky & Sims, 2012). Some have called positive economic beliefs part of our animal spirits. 

Animal spirits are more psychological images and impressions than objective data. If you buy more on days when you feel good than on days you don’t then this is your animal spirits coming to play. What we read and how we read the environment will naturally have some impact on our animal spirits. 

This perspective can add up to a lot over time. Cultural-ecological perspective across 45 countries has an impact on economic development (Chou & Loafsson, 2011). How we perceive our environment has an impact but that impact is not a one for one economic tally. Simply feeling confident about the environment may encourage people to spend more but may not impact long term growth. 

Positive consumer beliefs may be part of the holiday season or could a growing trend. As consumers improve their outlook for their own prospects they will naturally spend more over the holiday season. Hopefully this translates into greater sales and hiring throughout the year. Sometimes the economy has a self-fulfilling prophecy spirit where positive impression leads to sales and activity.

Read the Gallop Poll

Barsky, R. & Sims, E. (2012). Information, animal spirits, and the meaning of innovations in consumer confidence. American Economic Review, 102 (4). 

Chou, L. & Olafsson, S. (2011). Confidence as an economic indicator: a cultural-ecology perspective. Brussels Economic Review, 54 (4).

The U.S. Moves Up in Global Competitiveness but Still Needs Improvement to Claim #1 Spot

The U.S. is becoming more competitive according to the Global Competitiveness Report 2014-2015. For two years in a row the U.S. has been improving and has moved into 3rd place with improvements in institutional framework, business sophistication, and innovation. The process of development is moving forward but lags behind due to perceptions of governmental efficiency and decision-making. As the nation aligns around core principles and values, it will better be able to foster the right pro-growth environment.

Strengths: 

The U.S. has strong infrastructure, flexible labor, advanced business, and a progressive use of new information. The report cites the willingness of businesses to work with universities to create innovation and development. This innovation turns into new products, services, and operations that strengthens the entire system. 

Weaknesses:  

The business community is skeptical of government, believe that government officials play favorites, and waste their tax resources. The macro environment continues to be weak and deficits have only started to move in the right direction. 

Innovation can occur on many different fonts ranging from the individual all the way up to government operations. It is a process of sharing knowledge and collaborating with mental and physical resources to build stronger frameworks of understanding for the development of marketable products and services. When businesses and entrepreneurs have strong virtual and physical networking opportunities matched with the right business environment they can create higher levels of innovative activities. 

Government still lags behind the needs of the business community and arguably its population. There are many tools and new developments that could make government stronger. The Internet affords opportunities to develop more responsive and cost effective services for people. Transparency, stronger data management, and responsive politicians to the needs of both the business community and the average citizen are desired to develop a pro-growth environment. 

http://www.weforum.org/reports/global-competitiveness-report-2014-2015

Small Business Owners Optimistic but Still in Need of Financial Resources

Small business development is an important contributor to national growth. Recent polls by the Fargo/Gallop Small Business Index and the HR services company TriNet show that small businesses are more optimistic than at nearly any time since the recession started. At present the trend appears to be growing and small businesses will need additional access to credit, investment, and other financial services to ensure their businesses continue to grow.

A Fargo/Gallop Small Business Index of 600 small business owners conducted on March 31^st, 2014 indicates that small business owners are more optimistic now and for the next 12 months than at any other time since 2008. The numbers help support the idea that small business owners feel their chances of growth are improving and may be willing to invest more of themselves into their businesses to further their opportunities. 

The numbers have been generally rising since 2010 but are now at a level that indicates optimism is growing at a significant rate. This positive momentum is still about half what was experienced during the pre-recession times of 2004-2007 but do highlight the idea that there is still plenty of room for economic growth. You may obtain more information HERE. 

Another recent metric called the Small Business Confidence Survey conducted for TriNet by Harris Poll found that 74% of small business owners feel that their business will grow in 2014 (2).  Of the 206 small participating businesses who have10-49 employees 50% indicated they plan on hiring more employees in the next year. They were generally concerned with obtaining new business, controlling expenses, and ensuring steady cash flow. 

Why foster small business? Small business has a huge impact on economic growth in society. According to the Small Business Administration 66% of all new jobs since the 1970’s and 8 million jobs (big business eliminated 4 million jobs) since the 1990s were generated from small business (3).  Small business has the mobility to adjust to the market even though they often lack the financial resources found in investment capital and credit. 

Research by Lahm, et. al (2011) shows that a lack of capital for small businesses during the recession has forced many small entrepreneurs to rely heavily on credit cards. Changes within the cash equivalent market have impacted their ability to maintain that credit which further hampered their growth. Finding methods of improving small business credit scoring and access to capital helps in furthering the economic recovery.

The optimism within the small business market and difficulties in securing credit to expand their businesses help emphasize the problem that small investors and larger pool investors may benefit by being connected to small business entrepreneurs. Risk can be hedged over many small businesses in multiple sectors while new technology makes it possible to pool many small investors that seek to grow their portfolios.  New technology is changing the way investment and business is conducted. When proper tools are available and well known it very well may have an impact on the economy.

Lahm, J. (2011). Small business and credit cards: new rules for plastic in an economic recession. Journal of Marketing Development & Competitiveness, 5 (5).