Entrepreneurship and Small Business Growth
Norman Walzer, Adee Athiyaman and Gisele F. Hamm
Synopsis:
This chapter illustrates a study of small business growth and entrepreneurship activities within the Midwest. Inspired by the endogenous growth theory, the authors analyzed Midwestern counties attempting to link entrepreneurial concepts with regional development. They specifically focused on the following criteria: local economic climate, business structure, natural amenities and potential entrepreneurs.
In order to review economic conditions, they used key indicators such as unemployment rate, poverty rate, population density, median housing values, tax effort and average wages. of these factors, they found that wealthier counties with higher median housing values and lower tax rates showed the most business activity. Percent unemployment showed value in estimating the economic climate but the population density proved little insight. Ultimately, the found that sound economies provide a strong basis for entrepreneurial growth. A strong climate is just the foundation. In order to have growth you need potential entrepreneurs.
The authors used their understanding of people’s tendency to gravitate toward areas of higher quality of living when they identified areas with potential for entrepreneurial activity. Using factors including winter sun, temperate summer, low summer humidity, topographical variation and water areas they attempted to determine the appeal of a location. They found a positive relationship between perception of amenities in an area and the potential for business owners. They also recognize communities have options to make themselves appear more desirable to future entrepreneurs.
Certain demographics represent a large majority of potential entrepreneurs. The authors looked for link in counties entrepreneurial activity with these certain characteristics. Three specific subgroups have been identified with rapid growth. These included agricultural workers, percent of Hispanic population and percentage of males ages 25-34 with bachelor’s degrees. Each provides diversity and unique resources or skill sets useful in a business venture.The Correlation of these types of potential entrants was found to be a “very weak predictor of new firm starts.” When combined with business structure however, the relationship greatly strengthens.
A strong, developed business structure allows the future business owners a chance to interact and share knowledge. the business density, Rural-Urban Continuum Codes and growth in larger businesses were examined in relationship to small business growth. The authors determined that the more an area showed successful business growth, and high density, the more opportunities arose for specialized firms. Of all the factors examined, business structure was most greatly related to new business ventures. Potential entrepreneurship factors and business structure provide the most insight into entrepreneurial activity and micro-enterprise success.
My thought:
We have spent a lot of time so far discussing economic development in regional terms. This study quantifies the statistical correlation between a number of factors and economic development in different regions across the Midwest. Based on the results, local areas are smart to support businesses with the potential for expansion. Expansion will help the area not only by the immediate employment and wealth building gains but also by increasing the potential for new businesses. Counties or regions should adapt an assets based mentality discussed in the previous reading to draw potential entrepreneurs.
Question:
Coming from a science background, I strongly value a scientific study. I also recognize the fallibility of drawing statistical analysis. What other factors not addressed in the study, might affect the outcome of the survey?
What sort of phenomenon could abruptly change the small business growth potential based on the conclusions of the study?
Work3 Please answers the follow two questions. Using New Time Roman 12, 10 lines for each answer. Give some example and opinions.
Entrepreneurship and small business growth
Norman Walzer, Adee Athiyaman and Gisele F Hamm
Synopsis
Entrepreneurs spot gaps or the need for goods or services in the market and they find the necessary resources to complete the production process for those needs. Entrepreneur’s roles involves recognizing, taking advantage of business opportunities and management of the business. Endogenous growth theory is used to justify the inclusion of entrepreneurial concepts in regional development theories that are linked to this concept which include diversity and selection.
Implications of entrepreneurship concepts include Creation of new firms. Environmental factors such as socioeconomic spatial characteristics of community such as population density, unemployment rate and distance from major cities can hinder enhancement of entrepreneurship.
In the United States successful entrepreneurship strategies have led to small business growth and determinants of small business employment patterns.
In a county there are six measures that are used to describe economic conditions
1. Unemployment rate – residents of counties with high unemployment are pressured to seek alternative employment opportunities which sometimes leads starting businesses.
2. Poverty rate- it’s very unlikely for residents in high percentage of poverty to get access to wealth and convectional loans.
3. Average wages in a county are captured to include the difference in personal costs which are more important in larger businesses but can still be significant for microenterprises employees.
4. Tax effort- if taxes are not passed on to consumers they can reduce the overall profit for the business. Which is defined as per capita taxes paid relative to income per capita. Tax effort measures prosperity and local economic climate for business development.
5. Population density- small business are more likely to flourish in a highly populated regions especially with limited marketing resources since they have greater interactions among business owners and operators.
6. Median housing values- used for access of capital or wealth as housing may be protected in bankruptcy processing since when starting or expanding a business one requires access of capital.
Business structure
Prosperity of a county can be determined by business structure of which most microbusinesses are often linked to larger businesses. Business density helps to account for and reflect business structure in a county, it also indicates opportunities for microbusinesses to interact and share knowledge.
Entrepreneurship is a dynamic concept that involves innovation in new markets and managing the production process. In this context the Midwest was used in the study in the relationship of entrepreneurship, small business development and employment growth as it offers a variety of urban, rural setting with diversified economy.
Four significant linkages that promote local entrepreneurship include
1. Economic conditions to business structure- economic conditions in county positively influence the business structure of that region.
2. Natural amenities to potential entrepreneurship- changes in natural amenities are positively related to changes in the potential pool of entrepreneurs as rural areas.
3. Business structure to entrepreneurship – higher density lead to specialization and physical capital could bring knowledge
4. Potential entrepreneurs to entrepreneurship- entrepreneurs will recognize a need or opportunity and secure necessary financial means and other resources to fill those needs.
Critique
Overall the author explained the importance of small businesses in regional economic growth and the factors that affecting both the formation and growth of those microenterprises. Small business are the fastest growing and account for more job creation especially in the rural areas. In the context the Midwest was used for data collection as it offers a variety of urban and rural setting with diversified. I feel that the data presented in this context is more biased as each region is unique but the finding can still be useful in designing local development strategies that involve entrepreneurship.
Discussion question
1. What factors provide a suitable climate for small business to prosper?
2. In what way can entrepreneurship be encouraged in the rural/remote areas?
