28 Introduction Oil drilling took hold in Alaska in the late 1950s, and the state’s economy thrived for decades. The oil industry growth, coupled with boom towns, supporting infrastructure, and pipeline construction, led to huge population gains: a net influx of over 30,000 by 1983 relative to a 1970 population of about 300,000 (Department of Labor and Workforce Development, 2021). Now, however, as the world looks to mitigate global warming, a shift is occurring away from oil, creating a problem for the oil-dependent economy. At its peak in 1985, the industry was responsible for more than 50% of the gross state product (GSP), at over $12.5B. As the oil industry waned, Alaska’s economy has struggled. Among all states, in 2021, Alaska ranked fiftieth in economic health based on a combination of growth, employment, and business environment (Economy Rankings, 2021). Alaska has found diversifying its economy difficult. Significant barriers inhibit development of small, high-growth businesses, including high shipping costs, high utility costs, lack of human capital, and a seasonally varying customer base. Even so, businesses that can leverage the uniqueness of Alaska have the capability to provide needed economic diversification. The oil industry thrived thanks to the natural resource abundance in the state. Similarly, other niches also offer Alaska-specific advantages that small businesses can leverage to grow and thrive. Current State of the Alaskan Economy Oil continues to play a major role in the Alaskan economy, but much reduced from its 1985 peak. By 1998, the industry had already shrunk to a third of its former size (Goldsmith, 1999). Today, oil, mining, and gas combined make up just 16% of the GSP, now second behind the government’s 20% share. Two other key sectors that stimulate many small businesses are seafood and tourism. The seafood HARNESSING UNIQUENESS: SMALL BUSINESS GROWTH IN ALASKA FOR ECONOMIC DIVERSIFICATION Michael G. Nardelli The decline of the oil industry in Alaska has caused a large deficit in the state economy. Small, high-growth businesses have the opportunity to diversify and contribute to a larger portion of the state economy. This article explores the unique circumstances in Alaska that cause barriers to growth of small business but also create niche sectors and opportunities that have potential for many of these entities to thrive. Perspectives on Business and Economics, Vol. 38, 2020
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