The Southern Culture of Risk Capital: The Path Dependence of Entrepreneurial Finance

By Graves, William | Southeastern Geographer, Spring 2011 | Go to article overview

The Southern Culture of Risk Capital: The Path Dependence of Entrepreneurial Finance


Graves, William, Southeastern Geographer


The U.S. South has experienced remarkable job growth over the past quarter century; however few of these jobs were endogenously created. While the primary economic development strategy in the region has been to rely on branch plants to create locally-owned spillovers, recent efforts have shifted to the promotion of entrepreneurship via industrial district spillover (e.g., North Carolina's Research Triangle Park). Despite these efforts, rates of entrepreneurship remain low throughout the U.S. South. This research identities elements of the dominant regional culture which contribute to this entrepreneurial weakness in North Carolina's Research Triangle Park. A series of interviews with regional venture capitalists were conducted to identify the role of culture in their industry. The significance of regional culture on this form of entrepreneurial finance is identified via inter-regional comparisons and surveys of entrepreneurs. Finally, the iterative effects of Southern culture are traced through the four phases of entrepreneurial finance.

El sur de los EE.UU. ha experimentado un crecimiento notable en materia de empleos en el ultimo cuarto de siglo, sin embargo algunos de estos puestos de trabajo fueron creados endogenamente. Si bien la estrategia principal de desarrollo economico en la region ha sido el depender de plantas subsidiarias para que incentiven la economia local, los effuerzos recientes se han desplazado a la promocion empresarial a traves de los incentivos que ofrece un distrito industrial (por ejemplo, el Research Triangle Park de Carolina del Norte). A pesar de estos esfuerzos, las tasas de iniciativa empresarial siguen siendo bajas en todo el sur de los EE.UU. Esta investigacion identifica los elementos dominantes de la cultura regional que contribuyen a esta debilidad empresarial en el Research Triangle Park de Carolina del Norte. Una serie de entrevistas con inversionistas regionales de riesgo se llevaron a cabo para identificar el papel de la cultura en su industria. La importancia de la cultura regional en este tipo de financiacion empresarial se identifica a traves de comparaciones inter-regionales y encuestas a empresarios. Finalmente, los efectos iterativos de la cultura del sur se trazan a traves de las 4 fases de la financiacion empresarial.

KEY WORDS: Southern Culture, Risk Capital, Finance

INTRODUCTION

The financial collapse of 2007 triggered much discussion over international variations in capitalism. Comparing the market-led capitalism of the United States and Britain to the corporate-led capitalism of Japan and Korea, to the state-led capitalism of France and Germany confirms that economic systems are products of the cultures in which they operate (Mitchell 1995). This cultural contingency in capitalism has caused economists to default to the nation as their preferred scale of analysis of economic systems (Storper 1997). Unfortunately, nations are rarely atomistic elements of the global economy since few countries are culturally and therefore economically, homogenous. The disconnect between theory and reality leads to the misapplication of national-scale economic policy on heterogeneous regional economies. Fortunately, geographic studies such as Saxenian's 1994 examination of the cultural uniqueness of Silicon Valley and dames' 2005 documentation of the role of Mormon culture in shaping the Salt Lake City innovation complex have begun to illustrate the extent to which regional cultural factors can impact economic systems.

Perhaps no region of the United States is more culturally distinct that the South. The former Confederate states have been readily identified as exceptional via dialect (see Reed 1986), foodways (see Edge and Hobbs 2002), politics (see Webster 2007) and social proclivities (see Alderman 2007). While numerous studies have documented the historic economy of the region (Cobb 1999; Vance 1932), few have examined the interplay between the culture and the post-industrial economy of the region. …

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