THE DEANS OF BUSINESS

Prosperity starts with business

Posted Feb. 12, 2011, at 1:48 p.m.
Last modified Feb. 14, 2011, at 2:34 p.m.

Editor’s Note: This column marks a new offering of the Bangor Daily News’ business page. The Deans of Business column will rotate among three business schools deans: Ivan Manev of the University of Maine, Ronald Nykiel of Husson University and James Shaffer of the University of Southern Maine.

This past fall, the state of Maine fell to the last place in Forbes Magazine’s national ranking of business climates. On a combination of criteria that include regulatory climate, taxation, incentives, and available and qualified labor force, our state fell to rock bottom.

One perhaps can find flaws or question if a slide from 41 down to 50 over the course of a single year was justified. However, it is undeniable that our state has been among the less attractive to business in the country for a long time. Other rankings of economic conditions, such as those by the Tax Foundation and the Beacon Hill Institute, invariably place it below the national median and indeed often near the bottom among the 50 states.

What is wrong with the conditions for business in Maine? Those working in private business know the weaknesses all too well. The tax burden is high, especially the corporate tax and unemployment insurance, as well as individual income tax. The state is still dependent on manufacturing and processing of natural resources, which are in decline due to cost competition from overseas. Utility costs are high. R&D is small relative to the size of the state economy, leading to lower productivity. Alone among the contiguous 48 states, Maine borders only one other state, which isolates local business from major economic hubs. Regulations often are seen as cumbersome, and in the public discourse, business is often regarded with suspicion.

For some, poor business conditions may just be the price to enjoy a good quality of life in the pristine woods and on the beautiful coastline. However, for those without jobs or living on not much more than minimum wage, natural beauty is little consolation. Maine’s per capita income trails the national average by close to a tenth. Leaving aside the pockets of affluence along the coast and in the southern part of the state, the disparity looms even larger.

As in many other states, much of the manufacturing base has withered away over the past two or three decades, taking away livelihoods and nearly devastating whole communities. In contrast to other states, however (think the Carolinas for example), little came to replace it.

Maine has largely been missing out on the opportunities presented by today’s creative economy, high technology, and value-added services. As a result, job opportunities are hard to come by, and too many of the young and qualified are leaving.

The only way to create jobs and opportunities is to dramatically improve the climate for business. The path to prosperity is business, and it is high time to set the right conditions in the state. Maine has a lot of potential for improvement, but we cannot and should not delay. Improving the competitiveness of the state — developing and offering products and services that others would pay for, is a major issue of public interest.

Here are some avenues for improving the business climate:

  • Encourage an entrepreneurial climate through linking and leveraging the networks of small development centers, incubators, universities, the state’s venture capital fund and local economic development agencies. Small-business owners and prospective entrepreneurs should have easy access to business and legal training and advice, as well as forums to meet and exchange ideas.
  • Consider targeted lowering of the tax burden by providing incentives for every job created, especially in selected sectors with high potential for job creation. This should be available both to local businesses and out-of-state corporations that consider investing in Maine.
  • Enhance R&D efforts, especially in attracting federal funds. The University of Maine has a particularly strong base among the academic institutions in the state. Provide an easy bridge to business acumen and entrepreneurial networks, which is needed to commercialize innovations and bring new products and services to market.
  • Review and streamline the set of regulations and compliance processes that business faces. While quality of life is a strength that Maine has and should preserve, regulations can be updated and simplified.
  • Focus economic development efforts in industry sectors in which Maine already has strong positions, such as composites, marine technology and aquaculture, clean energy, heavy construction, hospitality and financial services.

No magic wand will improve business conditions overnight. The solution lies only in much harder work and joint efforts by state economic agencies, the legislature, entrepreneurs, incubators, universities, business people, corporations and local government.

Entrepreneurship theorists talk of “bootstrapping” — raising oneself in adverse conditions, as if by the bootstraps, by creating ingenious ways to acquire and combine resources. This is our challenge. We can respond by placing business conditions in the center of the public agenda, and then encouraging dialogue between the various economic actors to develop practical and workable measures, both radical and incremental.

Ivan Manev, an accomplished scholar in international business and entrepreneurship, joined the faculty of the University of Maine in 1997 and currently serves as dean of the Maine Business School.

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