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ENTREPRENEURSHIP IN INDIAN COUNTRY
June 03, 2002
Throughout America’s history, Native Americans have suffered from a variety of stereotypes. The newest version says that Indian tribes are rich on gambling proceeds. As in the past, this myth is just that — more myth than reality. But, persistent myths notwithstanding, there are many current promising signs of entrepreneurship and economic development in Indian country. Perhaps a new, more positive stereotype is in the offing: the Native American entrepreneur.
Native Americans, both on and off the reservation, have seen major changes in their economic circumstances over the past few decades. The arrival of gaming has received the most public attention, largely driven by the spectacular success of a few major casinos like Connecticut’s Foxwoods Resort. These huge successes have generated lots of jobs and economic activity. Indian gaming is now roughly a $10 billion business annually, according to the National Indian Gaming Commission. Yet the gains from Indian gaming are not shared throughout all Native American communities. Approximately one-third of all tribes are involved in gaming, and most of these operations are small enterprises with tight restrictions on the types of gaming permitted by state and local governments.
The remaining tribes that do not operate profitable gaming facilities (if any at all) face many profound social and economic challenges. Unemployment remains high — the average Indian jobless rate dropped over the 1990s but still remains at 46 percent. Poverty rates also are high, exceeding 50 percent on many reservations. Finally, while educational attainment is improving, Native Americans still lag behind other ethnic groups in measures of college attendance and completion of high school.
Not all of the news is negative. In fact, a boomlet in Native American entrepreneurship is emerging. And many tribes now are viewing new business development as a key economic development strategy. Recent U.S. Census data indicate that Native American/Alaskan Native-owned businesses have grown at a tremendous rate — doubling in number between 1992 and 1997. Although the National Center for American Indian Enterprise Development (NCAIED; www.ncaied.org) and other Native American support groups contend these figures greatly overstate the number of Indian-owned businesses, even recalculated numbers highlight a strong interest in entrepreneurship among Native Americans.
While interest in starting businesses is growing among Indian entrepreneurs, they still face significant challenges (especially those living on reservations). These include:
Limited infrastructure: Many reservations lack basic infrastructure — water, road, and sewer services — of sufficient quality to support new businesses. Similarly, the “digital divide” on some reservations is profound. By way of example, a 1999 study found that 39 percent of rural Native American households have telephone service compared with 94 percent for non-Native American rural households.
Tribal Governments: Many tribal government leaders encourage entrepreneurs to launch businesses, but some tribal council regulations can tend to create complications for new firms. In addition, many tribal governments run their own businesses that can compete with those run by individual entrepreneurs. Studies of tribally owned businesses have found that the most successful enterprises maintain a strong independence (via a separate board of directors) from the tribal government. A company’s focus, for example, must remain on the success of the business, not on other (often laudable) goals of job creation or workforce training. Moreover, many Native American entrepreneurs contend that a strong “buy Indian” ethic has yet to emerge among tribal governments and consumers. As a result, a solid home market does not really exist, and marketing to new customers becomes ever more important for these businesses.
Technical Assistance: New business owners often seek support to improve their marketing and strategic planning skills, or to learn how to better access outside capital sources. Yet these technical assistance resources — widely available in the nation’s urban and rural regions — often are not available to Indian entrepreneurs. A recent survey of tribes by the National Congress of American Indians (www.ncai.org) found that while two-thirds of surveyed tribes operated job training programs, less than one-third of tribes operated revolving loan funds or provided advisory services for start-ups. As a result, many Native American entrepreneurs may start businesses lacking the requisite knowledge and skills to do so.
While these challenges are serious, a number of promising steps are now underway to address many of them. In particular, a number of new groups are emerging to offer technical support to Native American entrepreneurs. In addition to existing groups like NCAIED and the National Indian Business Association (www.nibanetwork.org), a new National American Indian Chamber of Commerce was chartered just last month.
In addition, there is a new focus on educating Native American youth about entrepreneurship as a career option. A joint project between the Kauffman Center for Entrepreneurial Leadership (which funds the NCOE) and Montana’s Salish Kootenai College (one of North America’s 33 Tribal Colleges) has produced a new entrepreneurship curriculum that will be used by tribal colleges and universities across the United States.
Last but not least, federal agencies are beginning to recognize that they must change the relationship between tribal governments and Washington. A number of interesting proposals are now pending in Congress. These include a measure to consolidate federal funding to tribes so that local governments have more discretion on the use of funds. The U.S. Bureau of Indian Affairs also is considering a proposal to securitize its loan portfolios so that more capital can flow to Indian-owned businesses. This proposal is a rare exception. Most federal programs continue to focus on direct assistance, not on economic development.
Behind the news headlines that are almost exclusively focused on Indian gaming, a major economic transformation is occurring in Indian Country. Native American entrepreneurship is an emerging movement that will hopefully continue to grow and prosper.