Can Worcester power its startup magnet?

A quick look at Worcester's economic base reveals that many of its largest employers were at the forefront of the global economy about 100 years ago. Is there more that Worcester could be doing to get its economy more plugged into the 21st century's economic trends?

Before getting into this, I was struck by a comment that Worcester native and Harvard Business School professor David Yoffie made last month. As I wrote in my Oct. 2 column, “Can Worcester draw entrepreneurs?”, Yoffie mentioned that his great uncle founded Worcester Knitting Co., a maker of polo shirts. Yoffie's father took over the firm.

In the 1970s, the EPA required WKC to invest in equipment to cut its flow of pollution to the Blackstone River. Yoffie's father would invest only if one of his three sons would run WKC. Yoffie's oldest brother took the bait but in the 1990s, WKC's high labor costs drove it out of business. Meanwhile, David continued with his education, earned graduate degrees from Stanford and ended up as a professor while his middle brother became a nationally famous rabbi.

For David, Worcester could not overcome the pull of other places to work. And that got me thinking about the concept of a regional startup magnet — the combination of forces that draws entrepreneurs to come to an area and build a business there. As my co-author, Srini Rangan, and I pointed out in our 2010 book, “Capital Rising,” a region's startup magnet consists of four factors with the potential to draw in capital for entrepreneurial activity.

We dubbed these four factors — corporate governance, capital markets, human capital and intellectual property protection — the entrepreneurial ecosystem, or EE. To get a clue of why Worcester's EE could be stronger, let's look at its employers.

Many of its biggest employers appear to have been founded well before the dawn of high-tech venture capitalism. Unfortunately, I don't have the best possible information on which to draw conclusions. Unlike Boston, which publishes annual lists of top employers, the best I could find for Worcester was an imprecise state report from the Massachusetts Executive Office of Labor and Workforce Development titled “Largest 100 Employers in Worcester, MA-CT Metropolitan NECTA.” I would gladly report on more precise and up-to-date information for Worcester. In my analysis, below, I am excluding Westboro-based companies because, based on my interviews with entrepreneurs, most venture firms consider Westboro to be part of the Interstate 495 belt.

My conclusion is that Worcester's economy is dominated by insurance companies and the former Norton Co. For example, among the employers with between 1,000 and 4,999 employees are Commerce Insurance (founded in 1972), Hanover Insurance (founded 1852) and abrasives-maker Norton Co.

But not all of Worcester's biggest employers harken back to previous centuries. There are others that I had never heard of before — with the exception of Wachusett Mountain Ski Area, where I have enjoyed skiing many times since my childhood. For example, among the companies with 1,000 to 4,999 employees is Affiliated Podiatrists — it specializes in “Nail Fungus & Laser Toenail Treatment,” and although that number may represent its national “footprint” (pun intended), I sincerely doubt that it really employs that many people in Worcester. VNA Care Network, which offers “home health care, hospice, and wellness services,” I'd be more willing to believe is in the 1,000 to 4,999 employees.

Among the smaller organizations — employing between 250 and 1,000 people — is a smattering of state and city government entities, Wyman Gordon (founded 1883), Morgan Construction (founded in 1888 and now part of Siemens), and some health care providers. But there are also a few glimmers of high-tech hope — Abbott Bioresearch Center, which does immunology research, and Allegro Micro Systems, a semiconductor division now part of Japan's Sanken Electric Co., each employs between 500 and 999, according to that state report.

But what's striking about these examples is that most of these companies are owned by people outside Worcester. The city is not spurring enough startup growth to replace those companies that are run by people outside the area.

To spur entrepreneurship and attract capital, Worcester needs to boost weaknesses in its EE. While Worcester could “rent” America's strong corporate governance rules, intellectual property protection and its access to global financial markets, it needs to improve in the areas of building up its human capital — namely people who can start companies and help design and make the products. From that human capital, venture capital might flow to the region as well.