Innovation Online

By Aaron McKethan and Meenu Tewari

External recruitment of business has been the dominant economic development strategy of the southern U.S. in the postwar era. Political and development leaders have emphasized the state’s low production costs, resulting from low taxes, cheap land and low-cost labor. While the South was successful in establishing a branch plant economy in the past half century, an over-reliance on external recruitment left the region vulnerable to rapid changes in international competition and technology.

Today, the region is experiencing a significant economic transition largely fueled by global outsourcing. Just as firms were initially attracted to the South by relatively low production costs, firms are increasingly re-locating plants and jobs to Asia and Latin America where production is even cheaper. In addition, productivity gains have also contributed to worker displacement in the region. Firms have leveraged new technologies to maintain or increase output without adding new workers by developing a more specialized and productive labor force.

As plants close and old-economy jobs disappear, development and political leaders are experimenting with new strategies to enhance regional competitiveness. While external recruitment strategies continue, and efforts are underway to transition into a more knowledge-based economy, many leaders are increasingly focusing on demand-side initiatives. They are promoting local entrepreneurship, building new markets for products and services, expanding markets for local products that already exist, transforming the local skills base, increasing access of local businesses to new capital and focusing on new business formation.

One such initiative is “Handmade in America (HIA),” a successful business initiative that has deftly linked the rich local arts heritage of western North Carolina with its already burgeoning tourism industry to endow a cluster of 23 counties in western North Carolina with a new “brand” image that is transforming their economic base and quality of life.

By organizing western North Carolina’s fragmented arts and crafts industry into an integral part of the region’s economic and creative base, and by using the tourism industry’s existing strengths to link it to the national market, HIA has succeeded in converting the region’s dispersed and often hidden cultural assets into a new economic resource and an engine of growth. The HIA initiative is one example of how local leaders can employ relatively simple regionally based strategies that identify and exploit existing local assets.

This is not to suggest that every region can or should emulate HIA’s specific development strategy based on its arts and crafts; rather, the HIA story offers broad organizational lessons about how regions can inductively cultivate local assets through simple “homegrown” strategies instead of relying primarily on external recruitment approaches. By organizing a relatively small community initiative starting with a few modest initial goals, regions can incrementally initiate a series of innovative local entrepreneurial activities that can spur collective action within communities and generate regional economic growth.

The Handmade in America Approach
The HIA initiative was born out of a need to overcome a constraint. In the early 1990s, business, government and non-profit leaders in western North Carolina confronted the limits of their existing reliance on the recruitment mechanism to create jobs. As noted by Rebecca Anderson, HIA’s Executive Director and former Director of Economic Development for the Asheville Chamber of Commerce, it was clear by the early 1990s that “the dominant economic policy of recruiting external industry into the region was not going to be the region’s future.”

When local development leaders were successful in recruiting external firms or plants, new plants usually did not create enough local jobs to meet the needs of the region. Firms or plants that did enter the region, according to Anderson, increasingly adopted new labor saving technologies that reduced the numbers of workers needed: “The machine had taken over and replaced workers.”

In response to this realization, a small group of Asheville leaders in business, government and non-profits began to discuss innovative alternatives to external recruitment. In looking for local strengths, they recognized that the region had two key advantages – tourism in the mountains of western North Carolina and a broad-based, if informal and uncoordinated, arts and crafts base across the region.

Existing Assets
Preliminary research on the arts community showed that more than 3,500 local craftspeople, a significant percentage of the region’s workforce, earned their living solely from making craft objects. Based on this existing but previously under-exploited economic strength, the group’s initial idea involved building up and marketing the region’s arts and crafts presence more widely by linking it to the region’s existing success with tourism.

A critical advantage in building a development strategy around the arts was provided by the prior presence of a strong and formal arts and crafts educational base in western North Carolina. For example, the Penland School of Craft in Mitchell County, the John C. Campbell Folk School in Cherokee County and several local community colleges and universities have long provided formal arts and crafts training to area residents.

These institutions became the centerpiece in the upgrading and restructuring of the arts as a new source of growth in the region. According to Anderson, their presence was crucial to building a new regional development strategy around arts and crafts, “I don’t think we could have claimed to be a craft center unless that educational base was there.”

Arts, Crafts and Tourists
The chamber of commerce under Anderson and her colleagues set about reversing the old recruitment-based model of development. Instead of recruiting outside firms and retraining local workers to meet their needs, the consortium envisioned the region’s existing arts and crafts heritage serving as a magnet to attract outside tourists to the region. New tourism activity would enhance the economic growth of the crafts community and produce multiplier effects that could spillover into the region’s economy, including other existing tourism assets such as skiing and other outdoor sports.

The funding for the new initiative came from a national non-profit, the Pew Partnership for Civic Change. With an initial startup grant from the Pew Partnership, Anderson and her colleagues formally constituted HIA in 1993 with a mission “to celebrate the hand and the handmade, to nurture the creation of traditional and contemporary craft, to revere and protect our resources, and to preserve and enrich the spiritual, cultural, and community life of our region” (Handmade in America Mission Statement, 1993). With this grant, HIA organized strategic partnerships with multiple stakeholder groups in the region to develop a strategic plan to organize and enhance the existing arts and crafts industry.

The partnership explored strategies to link arts and crafts to the larger tourism industry. Tourism would be “the thread that connects everything together to bring the flow of external dollars into the region, especially the rural areas” said Anderson. HIA’s first core project involved organizing a system of local self-guided trails for tourists to tour individual craftspeople and their small galleries throughout the region. Once the trail system was established, HIA leaders sought to organize and sell a guidebook that would lead tourists across the region to explore arts and crafts galleries and shops.

Inspired by the success of a successful trail guide system in Wisconsin, HIA published The Craft Heritage Trails of Western North Carolina, a guidebook that directs readers along the craft trail system throughout western North Carolina. The guidebook, produced by local writers, artists, and photographers, highlights area craft studios, galleries, restaurants, and inns, and brings tourists directly to the region’s rural areas to purchase crafts. According to HIA, more than 75,000 copies of the guidebook have been sold in bookstores and over the telephone in the past ten years.

The HIA guidebook was the first effort of its kind to link the region’s cultural assets together and tap into and expand the existing tourism base. The trail system and guidebook involved coordinating linkages between craftspeople, galleries, shops, and tourists. Before the trail system and guidebook idea came to fruition, the region’s arts and crafts presence was fragmented and uncoordinated. Linking craftspeople with gallery and shop owners expanded local markets allowing the more efficient production of local and crafts. HIA’s trail system and guidebook also deepened the capacities of local craftspeople and gallery owners.

An important additional component of HIA’s core idea involved training individual local craftspeople about how to effectively host tourists in their homes and personal studios. The training offered by HIA included recommendations about regular gallery or studio hours and the appropriate display of signs and other advertisements. HIA also provided customized consulting services for individual craftspeople. Thus, HIA programs assisted individual craftspeople to improve their products and services while connecting suppliers with local customers and galleries.

Small Town Success
The success of the trail system and guidebook concept led to additional spin-off strategies. For example, the guidebook led tourists to arts and crafts studios and galleries from one small town to another throughout the region. HIA reports that small towns included in the guidebook experienced additional economic growth due to increased tourism activity: small inns, bed & breakfasts, restaurants and other local businesses benefited from tourists visiting their towns to enjoy arts and crafts studios and galleries.

Soon, representatives from small western North Carolina towns, including Bakersville (population 320), approached HIA to learn how their towns could be included in HIA’s guidebook and experience the spillover effects of arts-oriented tourist activity. Small towns recognizing the multiplier effects associated with being included in HIA’s guidebooks were now eager to adapt in multiple ways to be featured by HIA.

As a result, HIA entered the consulting business. HIA launched its Small-Town Revitalization Project to help towns like Bakersville identify community assets and build on them to encourage local tourism. In conjunction with the University of North Carolina-Chapel Hill’s School of Government, HIA now provides small towns with training about project management, grant writing, accounting, and liability issues. The project focuses on what Anderson describes as “attractiveness issues: landscaping, parks, greenways, walkways.” HIA encourages construction of attractive town gateways and community gazebos as well as courthouse restoration and library construction to add value to local communities’ property base and quality of life.

In addition, HIA provides small grants to local towns as they carry out capital improvements, but importantly requires towns to match funds from individual giving or grants. HIA’s consulting services and its small town programs have thus encouraged local ownership and accountability. As a result, HIA does not serve as a distant third party controlling the development of small towns, but rather acts as a catalyst for enhancing collective action and deepening local capacity from within.

The Small-Town Revitalization Project has also stimulated additional entrepreneurial activity in small towns. For example, HIA and staff members from UNC Chapel Hill’s School of Government interviewed individuals in small towns to better understand their needs, assets, and opportunities to help design a customized approach for each town. For example, HIA’s informal survey found that many young people in Bakersville expressed a desire for a local pizzeria that they could visit after school; other towns identified other needs.

The results of this community survey by HIA have thus ended up serving local communities in unexpected ways. In Bakersville, for example, the survey led a local entrepreneur to open a small pizza restaurant to respond to the previously unidentified community demand. Bakersville also did not have any overnight lodging facilities. After becoming part of the Small-Town Revitalization Project, Bakersville now has seven bed-and-breakfast overnight lodging facilities that cater to tourists.

Farms, Gardens and Incubators
The “Agri-Tourism Trail System” represents the second generation of work that emanated from the success of the initial trail system and guidebook. This new trail system originated from the response to surveys that HIA conducted to identify additional expansion and development opportunities. These surveys, which were administered to trail guide system users, revealed that a number of tourists using the trail guide system indicated an interest in the many natural gardens they found sprinkled throughout western North Carolina. HIA realized that the national popularity of gardening could attract tourists to this distinctive aspect of western North Carolina.

According to Anderson, the French Broad River Basin in western North Carolina has the largest number of alternative crop growers in North Carolina, including gardens growing organic produce, mushrooms, herbs, day lilies, water lilies, and other items. In response to this new demand, HIA organized the “Agri-Trail System” to allow garden enthusiasts to access and tour the distinctive, but previously underutilized garden and farming assets of the region. HIA’s expansion therefore came from its ability to flexibly build upon the findings of its ongoing evaluations.

In the course of identifying these new needs and new assets, HIA also reached out to new partners and allies. For example, HIA organized several small craft business incubator studios throughout western North Carolina to help new artists make and market their products. Community development lender Self HELP and HIA collaborated to extend small loans to craftspeople for equipment, studio construction, materials and inventory, as well as for the purchase of land for shops and galleries.

One example of a successful HIA incubator is the Energy Exchange in Yancey County. The Energy Exchange utilizes methane gas from an abandoned landfill to power local potters' kilns and glassblowers' furnaces. The methane also runs the boilers that heat greenhouses where small farmers grow native ornamental plants. The incubator provides an environmentally clean source of energy for craftspeople, generates local savings by cutting energy costs, and attracts hundreds of tourists each year.

Business Services
Beyond craft business incubators, HIA has continued to provide consulting services for individual craftspeople and gallery and shop owners. These efforts have yielded significant benefits for many local entrepreneurs. For example, eight years ago, Edie Davis left her corporate job with American Express to open a local craft store in Chimney Rock, selling handmade pottery, glassware, wood and crafts by artists and craftspeople in western North Carolina. Her store, Edie's Good Things, was nominated by Niche Magazine as one of the top 100 retail crafts shops in the country.

Davis attributes much of her early success to HIA: “I could not have opened this business, which was my dream, without Handmade.” HIA helped Davis develop relationships with a network of local craftspeople and provided her with guidance, specialized suggestions, and encouragement. According to Davis, “Handmade made a roadmap for me to begin with, and when I asked them questions, they could always come up with an answer for me.” HIA’s responsiveness to the needs of its local constituency has been critical in making its interventions effective.

Today Davis’ business continues its involvement with HIA. Local suppliers deliver their crafts to HIA’s office in Asheville, where Davis picks them up and drives them thirty miles to her gallery in Chimney Rock. According to Davis, “Chimney Rock is too far away from Asheville for craftspeople just to drop by and deliver their products.” HIA’s offices serve as one component of Davis’ supply chain by temporarily storing products for Edie’s Good Things.

In addition to helping local entrepreneurs establish new craft stores and galleries, HIA’s consulting services have made existing businesses more profitable while reinforcing the community’s arts and crafts “brand.” For example, Sheree Sorrells, who owns and operates Whitewoven Handweaving Studio in Waynesville, said HIA has “made a real difference in the area” by promoting the fact that “crafts are not only something people do for enjoyment or hobbies, but also to create viable incomes for themselves.”

HIA is involved in many other projects and services, many of which emerged from the original concept of leveraging the region’s arts and crafts assets by linking them to the existing tourism base. The many projects and services that were spun-off from the original craft trail system and guidebook project illustrate well the central idea of endogenous development, prospering from within by building on existing strengths.

Increased local sales from new tourists entering the region allowed local craftspeople to focus on local production and sales rather than having to travel extensively to reach distant markets at craft shows and festivals. Instead of going to the customer, more customers began to come to the region where crafts were produced. By organizing a relatively small community initiative starting with a basic set of initial projects – the craft trail system and guidebook – HIA has successfully developed a series of new innovative entrepreneurial activities, engendered community collective action, and spurred regional economic growth.

Lessons Learned
The HIA partnership successfully identifies, coordinates, and markets local assets based on arts and crafts activity in western North Carolina. The HIA “model” is an important and successful economic development strategy for several reasons:

1. Enhanced social capital: The initiative builds upon and deepens social capital and boosts community and individual morale, which in turn facilitates efforts for future collective action and community and regional progress. These important consequences of the HIA initiative are usually absent from the large-scale supply side development initiatives that emphasize external recruitment.
2. Public-private partnership: The model suggests the important role of public and private institutions in the promotion of even relatively small development initiatives. The HIA initiative emerged from a local chamber of commerce. But with significant and sustained collaboration from multiple regional and national partners, including government agencies, regional universities and community colleges and non-profits such as the Pew Partnership for Civic Change, it grew into a major movement and driver of regional change.
3. Broad distribution of benefits: This locally rooted approach to regional development has distributed economic benefits across socioeconomic classes. While many new high-tech, high-wage, and high-skill industries promise to provide jobs for future generations of North Carolinians, most such initiatives do not offer immediate benefits for displaced workers from the "old" economy that have few traditional skills and little education beyond high school. By contrast, the HIA model benefits a relatively wide cross-section of individuals immediately, and well into the future. According to a survey commissioned by HIA in 1995, 64 percent of the region’s craftspeople are female, 41 percent are between the ages of 46 and 55, and the median age of craftspeople is 49 years old. These figures suggest that those who stand to lose the most from the crumbling of the region’s traditional industries may benefit directly and immediately from initiatives such as HIA.
4. Cultivation of local assets (not necessary based only on arts and crafts). In addition to traditional development strategies, state and local leaders should encourage the deployment of relatively small regionally-based strategies that identify and exploit existing local assets. HIA’s organizational role in this regard was to provide regional entrepreneurship, a meta-layer of coordination to an extensive, but dispersed arts community and to link it to a national market by harnessing another existing asset, tourism. By envisioning their role as active participants in a strategic local alliance, HIA was able to build multiple partnerships that helped elicit local and extra-local resources to transform the region’s collective capabilities into a growing and productive economic asset.

Aaron N. McKethan is a Ph.D. student in public policy at UNC Chapel Hill and Meenu Tewari is an Assistant Professor at UNC Chapel Hill.