Is there a workable blend of local business and national chain stores? The benefits of national chains, particularly big boxes, are short term and basically alter regional shopping patterns. Retail expenditures are shifted from local independents rather than attracting new dollars to regional economies. Shopping patterns trend from neighborhood to regional as an unmanaged big box culture captures regional market share.

Smaller communities in a region are first to experience negative effects. Given the importance of regional branding, robbing from neighboring communities does not foster regional cooperation. Over time the initial attractiveness of greater consumer options, increased jobs and property taxes prove to be short lived even for the communities where these chains are located. Are there methods of managing the negative impacts of chain stores on local economies?

Our competitive model for communities identifies quality place measures that are knowledge based, small scale and entrepreneurial. The New Rules Project has cataloged examples from a number of communities that are implementing retail development policies for better long-term community benefit. Two techniques for managing adverse impacts of retail development are establishing size standards and measuring long term economic impacts of proposed new development on regional/ local economies. As of this writing the New Rules Project has 32 examples of ordinances and policies from local, state, national and international governments.

The retail sector of community generally has a large impact on the physical appearance of communities. One of our measures of quality place is uniqueness value. A good gauge of community uniqueness is the percentage of independent / small retail business and strategies to support the locally owned economy.

Unique characteristics of communities attract brainpower. Santa Fe is one of those places. The artist culture and the unique qualities of the old town attract a national following. It has also attracted an audience that threatens the value of this uniqueness - national retailers with their formula businesses occupying prototypical buildings surrounded by large surface parking lots.

The impact of independently owned businesses on the local economy is two times that of national chains. The dollar leakage and reduction of retail sector jobs that result from a growing percentage of retail chain stores is a concern that all communities should address.

In 1998 the Santa Fe locally owned retail economy provided 68% of all retail employment. In 2003 the rise of chain stores had reduced the impact of locally owned retailers to approximately 43% of retail sector employment. This is dramatically altering the uniqueness value of Santa Fe. The success of the uniqueness of Santa Fe seems to attract an invasion of national chain stores that are hiding local character in a sprawling sea of national retailer corporate branding. National averages during the same period show that locally owned retailers lost ground from 55% to 53% of local retail employment. From this one example it seems that the more special a place the more national chains are drawn to the location; and if uncontrolled will likely alter the very values that made the place important and unique.

During the same time frame (1998-2003) the number of locally owned / independent retail firms dropped from approximately 84% to 42% of the total number of retail businesses in Santa Fe. This runs counter to national trends that show that the number of independent firms has grown during that time frame from 48% to 74% of all retail firms.

To learn more about what Santa Fe is doing to alter the trends check out the Santa Fe Independent Business and Community Alliance where you can download The Santa Fe Independent Business Report by Angelou Economics. This concise report provides statistics and strategies that are instructive for competitive communities that understand the importance of uniqueness and its impact on an innovation economy.

Turning brainpower into business is one of the innovation challenges for Competitive Communities. Connecting the quality place context that brings entrepreneurs together will increase the level of innovation.

Entrepreneurial activity in the U.S. is on the rise. This is good news after 2 years of decline. In the recently released 2003 Global Entrepreneurship Monitor (GEM) the U.S. ranked 7th in Total Entrepreneurial Activity (TEA) and 5th in Firm Entrepreneurship Activity (FEA).

Interesting facts from the report:

· Approximately 300 million people around the globe were trying to launch businesses in 2003.
· 95% of existing firms tend to replicate activities and are not entrepreneurial
· New firms account for 2-15% of new jobs
· Informal investors fund 99.96% of start-ups. Fewer than 37 of every 100,000 receive venture capital funding. VC-backed firms in the U.S receive approximately 80% ($25.6 billion) of all venture money.
· People with post-secondary and graduate education are twice as likely to be involved in entrepreneurial firms. Those with the highest level of household income are six times more likely to own an entrepreneurial firm than households of the lowest income level.
· Being around entrepreneurial people is contagious. Those who know someone who started a business in the last 6 months are 2 to 3 times more likely to become entrepreneurial.

The report also offers these key recommendations:

· Provide a more positive personal context – increase education and training including increasing contact with existing entrepreneurs.
· Reduce the cost and complexity of registering a new business.
· Increase in-migration.
· Increase cultural support for entrepreneurial career options.
· Reduce economic activities managed by government.
· Create incentives to encourage more informal investment.

The fifth annual Global Entrepreneurship Monitor measures the entrepreneurial activity of 41 countries. You can read more about the study and download a draft of the report at the Kaufman Foundation web site.