Rural Economic Development: How Small Towns Drive Innovation and Growth
Economic diversification and innovation is a fairly Big Picture topic. In the context of rural economic development, it’s also the kind of conversation that works just as well over friendly debate with libations as it does at a mid-morning coffee club down at the co-op.
That conversation is different on Main Street than on Wall Street. Urban America thrives on density and network effects, where somebody is always coming while somebody else is going. Big cities around the world have agglomeration economies, where people seem to become productive when they cluster together.
In Rural America and small towns across the Western world, local economies tend to be more concentrated in specific sectors — agriculture, resources, manufacturing. Diversification and innovation here is a project of building a broader, more resilient local economy, and a core challenge of rural economic development. Back in the old days, this might mean recruiting an industrial plant. Today, it’s more likely to mean retention and expansion of existing employers while fostering local entrepreneurship.
Rural Economic Development Strategies for Small Town Growth
Observers have noted rural innovation is often informal, people- and place-driven — built on networks, know-how, and incremental improvements — rather than formal Research & Development. Local leaders who want their home towns to become more resilient can try a few different ideas.
- Shift local investment from subsidies to place-based innovation strategies building on local strengths.
- Build infrastructure for innovation in skills, broadband, mobility, and access to services.
- Support the people who know rural entrepreneurs, especially for microbusiness.
- Build networks and linkages for regional clusters, cross-border cooperation, and getting the know-how out from behind college walls into our rural communities.
How do we put these ideas into practice? Well, maybe…
- Entrepreneurship support: incubators, maker spaces, co-working hubs, training, mentoring, “one-stop shops” for development permits.
- Finance: Build on that old Revolving Loan Fund with seed grants, micro-loans, crowdfunding, and blended finance for small projects.
- Sector Strategies: Develop new value chains in the industries you are good at, be it value-added ag, wood products, or cultural experiences.
- Network, network, network: Don’t try to do it alone.
What’s the next step? Well, I was reading about a couple places in Ohio — Holmes County and Mercer County, featured in a case study from the Department of Agriculture, Environmental and Development Economics at The Ohio State University. On the east side of the state, Holmes County’s strong entrepreneurial culture, including many Amish businesses, underpins a diverse base of small manufacturing, construction, and retail firms. On the west side, Mercer County operates seed‑grant and loan programs to help small firms start and expand, combined with active brokering between employers, schools, and workforce programs to align training with local industry needs.
I can point you towards other folks I’ve worked with, like Ord, Nebraska; or Aztec, New Mexico, or many others. Taken together, we get an idea how rural communities can show deliberate support for small businesses, flexible local policy, and workforce networks to shift rural economies toward greater resilience.
How is your small town taking on economic diversification and innovation?
Cross-posted with the Small Town, Real Ideas newsletter on Medium.com.
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