Innovation, another economic tool

Alivia Metts

Without a problem to be solved, a solution would never emerge. When people need something, they invariably come up with a way of getting it.
During this recession, many people have found themselves in need and looked for creative ways to generate new sources of income by satisfying other people’s needs. This entrepreneurial spirit led to a surge in nonemployer businesses, spurred by dislocated workers and recent university graduates as wage and salary employment declined.
Nonemployer businesses have no paid employees, generate annual receipts of $1,000 or more and are subject to federal income taxes. Most nonemployers are self-employed individuals operating very small unincorporated businesses. In some cases they are the owner’s principal source of income.
Idaho was recently ranked in the top 15 states on the Kauffman Index of Entrepreneurial Activity. The index calculated that about 390 of every 100,000 adults 20 to 64 who did not have a business before, started businesses each month in 2010 and spent at least 15 hours a month working at it.
Several North Idaho companies started out much that way such as Coldwater Creek, Litehouse and Namaste — to name only a few.
According to the index, entrepreneurial activity is highest in Western and Southern states, and lowest in the Midwestern and Northeastern states. And from 2009 to 2010, entrepreneurial activity rates increased in the West, further widening the gap between the West and other regions.
There were more than 21 million nonemployer businesses in the United States in 2009. The state of Idaho had 107,030. That was nearly seven percent of the population. Nearly half of Idaho’s 44 counties are at or above the national and state average of 6.9 percent of the population involved in a nonemployer business. Blaine County contains the highest percentage of nonemployers at 13.8 percent, just over 3,000 firms. Teton and Valley counties followed closely behind at 13.3 percent.
Three of the five counties in North Idaho have averages higher than the state. Bonner County leads the region in the percentage of nonemployer businesses at 8.8 percent and is in the top 10 counties in the state. Boundary at 7.5 and Kootenai at 7.3 percent follow.
The industry with the most entrepreneurial activity was construction, accounting for 16 percent of the nonemployer firms in North Idaho with $160 million in receipts in 2009. Benewah and Shoshone counties differ slightly from the other three northern counties. Other services were the focus of the largest number of nonemployer businesses in both counties — specifically personal and laundry services.
Bonner County, which had the largest percentage of nonemployer businesses, not only had many one-man construction companies but also real estate and professional service companies among its 4,000 nonemployer firms.
Although construction contains the most entrepreneurial activity, the aerospace industry has trickled into Idaho. As many engineers are problem solving, many have come up with new products and spun off into new companies. Several aerospace companies within North Idaho have started just like that. Aerocet Inc., located in Priest River, and Tamarack Aerospace Group in Sandpoint are prime examples of innovative leaders in the aerospace industry in North Idaho.
Aerocet was founded upon a visionary. Tom Hamilton’s aviation design expertise and innovativeness led to the success of the 25-year-old composite aircraft float manufacturer. Aerocet has successfully launched the first female molded composite kit aircraft in the world, with more than 3,700 kits produced and is still in production today under the Glasair and Glastar brand. In addition, key personnel designed and launched the Quest Aircraft Kodiak STOL aircraft project which resulted in the spinoff company, Quest Aircraft, the manufacturer of the Kodiak. Quest now has more than 120 employees with more than 160 orders of the 10-seat Kodiak STOL aircraft.
Tamarack Aerospace specializes in researching, developing and producing efficiency modifications and product upgrades for the aerospace industry. The business received its first Supplemental Type Certificate (STC) — required by the FAA to make any changes to a production aircraft — in May and expects to receive its Parts Manufacturing Authority — required by the FAA to manufacture parts for production aircraft — this month. The STC represents technological advancements in the industry and has two other STCs in the works for the same airframe.
As the aerospace industry and its supply chain continues to expand in Idaho, the need for collaboration and partnerships also grow. The Idaho Aerospace Alliance is filling that need as many manufacturers located within the state, that support both commercial and defense aerospace industries, have come together to build the aerospace industry within the state of Idaho.
Most businesses that have weathered this recession diversified their market base. The aerospace industry is yet another tool in Idaho’s toolkit in diversifying its economic base while generating good paying jobs for Idaho residents. It has been the foresight of entrepreneurs that has diversified our economy.

Alivia Metts is Regional Economist with the Idaho Department of Labor.