This article is based on Social Capital and Leadership: Keys to Successful Rural Economic and Community Development, a report that Stuart Rosenfeld wrote for the Federal Reserve Bank of Boston.

In Elbow Lake, Minnesota, a small group of independent metalworking firms, inspired by the success of networked manufacturers in northern Italy, decided to pool their skills and knowledge.

Led by the president of Cosmos Enterprises, Clint Grove, they obtained a modest grant from the West Central Initiative Fund to formally organize and collaborate. As word spread, the group attracted other nearby companies, which extended into North and South Dakota. Its initial joint projects cemented relationships and built trust. Today the mission of Tri-State Manufacturers Association includes programs that improve prospects not just for manufacturers but also their communities—both of which it has accomplished.

Where Elbow Lake grasped an opportunity, Millinocket, Maine, responded to a crisis. Following the closure in 2008 of a paper mill, the largest employer in Millinocket, Maine, unemployment gradually reached 20%. Civic leaders rose to the challenge and formed Our Katahdin, a volunteer-driven, leadership-building, economic development organization. It purchased the mill site for $1 to eventually house new businesses and acquired a large downtown space for co-retail and co-working. The latter was part of its effort to rebuild and upscale the downtown and attract recreational tourists from nearby Mt. Katahdin. To help make this strategy work, Coastal Enterprises, Inc. partnered with Our Katahdin to form Baxter Business Works, a cohort-based initiative involving peer learning, networking, and the nurturing and support of new and aspiring businesses.

Building Social Capital

Social capital (defined as networks of collaboration and cooperation based on norms of reciprocity and trust) is found to be essential to broad-based rural development. Relationships within a group or community characterized by high levels of similarity (i.e., bonding social capital) can enable rural development but are rarely the source. Connections that prove most effective for generating growth, (i.e., bridging social capital) emerge from new or peripheral relationships that are often established at national or international social, professional, or business events. Links to people from different backgrounds and/or places with similar challenges but dissimilar circumstances are what often spark innovation and produces new and more inclusive business opportunities.

The geography of rural development also matters. The vast majority of the examples of rural development examined had little to do with political boundaries. Both successful leadership and strength of social capital depended on regional cooperation, partnerships and labor markets to provide the necessary scale and diversity to succeed.

Visionary and Resourceful Leaders

The importance of leadership to rural economic and community development is widely accepted, despite the dearth of measurable evidence of impact. The Center for Rural Affairs has called leaders “the lifeblood of small towns and rural communities.”

Leadership most often emerges from those already in positions of authority. But it also may come from citizens who rise to the occasion, possibly in response to a plant closing or natural disaster, long-term decline, or an opportunity discovered. The most effective leaders are visionaries, offering new and innovative development strategies and with the ability to bring people together to accept and implement them. In the case studies, leadership often came from community-based organizations, local colleges, or cooperative extension.

Some Ideas that Work

There are enough success stories across rural America to suggest some common paths for identifying the leadership and building the social capital necessary to drive growth. A few of the strategies the research suggests are:

Involving educational institutions to produce the leadership, innovation, and connections that drive growth

Moving beyond the local community and even regional boundaries to generate new and innovative ideas, markets, and business relationships

Focusing on small-scale and entrepreneurial business development, especially in sectors popular among younger populations such as specialty food, creative, and recreation

Building an associational infrastructure that provides places, times, and reasons for people to meet and network with others who have complementary interests and/or are from different backgrounds

Working with or through non-profit intermediaries, which often have the independence, experiences, and connections to develop new approaches

Using cultural and creative capital to generate wealth, which also has the potential for attracting youth and building brands.

Stuart Rosenfeld is a consultant and founder of RTS, Inc. He wrote “Social Capital and Leadership: Keys to Successful Rural Economic and Community Development” (on which this article is based) for the Federal Reserve Bank of Boston.