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Business Starts and Microenterprises Characteristics and Trends in the U.S. Midwest

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Information about Business Starts and Microenterprises Characteristics and Trends in the...
Education

Published on March 4, 2014

Author: BrianHarger

Source: slideshare.net

Description

A presentation made by Dr. Norman Walzer and Andy Blanke to the Community Development Society meeting in Cincinnati, Ohio on August 21, 2012.
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Business Starts and Microenterprises Characteristics and Trends in the U.S. Midwest  Norman Walzer and Andy Blanke Presented to Community Development Society Meetings Cincinnati, OH August 21‐25, 2012

Presentation Overview • Entrepreneurship as a Development Strategy • Types of Entrepreneurs • Identifying and Supporting Them • Business Starts in the Midwest • Importance of Small Businesses in Local Economies • Who is Involved and Why • Hypotheses • Empirical Results • Implications for Development Strategies • Who to Target for Services? • Promising Practices 2

Why Entrepreneurship Matters • Microenterprises Major Employment in Rural Counties • Employment Growth  • Armington & Acs, 2004 • Henderson & Weiler, 2010 • Neumark, Wall & Zhang, 2008     • US Department of Labor, 2012 • Economic Diversification (Woods & Muske, 2007) • Development Strategy for Rural Areas • Difficulty Competing with Financial Incentives • Limited Number of 2nd Stage Companies to Expand • Need to Retain Population and Youth 3

Microenterprises in the Midwest • Microenterprises (AEO) • 5 or Fewer Employees, Including Owner   • Started with $35,000 or Less in Capital • Not Access to Traditional Capital Markets • Nine Midwestern States* • • • • Average 25.1% of Total County Employment Range of 10.1% to 69.4% Effect of Proximity to Metro Areas Tourism and Recreational Areas *Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Missouri, Ohio, and Wisconsin. 4

Microenterprise Employment (2008)* As Percentage of Private Non‐Farm Employment Legend 10.12% - 18.73% (193) 18.74 – 23.83 (250) 23.84 – 29.51 (191) 29.52 – 38.21 (160) 38.22 – 69.38 (64) *Microenterprises have five or fewer employees . Data Source: Association for Enterprise Opportunity. 5

Types of Entrepreneurs • Necessity   • Survival ‐ Supplement Incomes or Have Few Other Alternatives • Opportunistic • • • • Aspiring ‐Interested But Have Not Tried Yet Lifestyle ‐ Pursue Lifestyle or Stay in Community Growth ‐Grasp Opportunities to Build Wealth Serial ‐ Create Wealth from Starting‐Selling Businesses • Common Elements • • • • Motivation—Dissatisfaction with Job or Boss Basic Resources Flexible Schedule Willingness to Take Risks 6

Entrepreneurial Populations • Unemployed   • • Necessity Fairlie, 2010; Ramirez, 1991; Walzer et al., 2007.   • Pre‐Retirees • • Necessity Goetz & Rupashinga, 2009; Walzer et al., 2007. • Farmers with Small Acreages • • Lifestyle or Opportunistic Walzer et al., 2007; Deller, 2011.  • Hispanics • • Necessity or opportunity Lofstrom & Wang, 2006; Lofstrom, 2011; Sanders & Nee, 1996 • Females 25‐34 Years of Age • • Lifestyle or Necessity Mayer, 2008; Walzer et al, 2007; Reynolds et al, 2003.   7

Economic Environment (Control Factors) • Housing‐ proxy for wealth (Goetz & Rupashinga, 2009) • Metro Status (2=Metro; 0=Remote) • Market for Retail and Services (Armijos et al, 2012; Henderson et al, 2007). • Spread Technology, Opportunities (Audretsch, 1998; Feldman, 2000).  • Natural Amenities Scale (USDA) • Attract Creative Class (Johnson & Beale, 2002; Florida, 2002; IIC, inc., 2006;  Reese and Ye, 2011). • Innovation (Hendersion et al, 2007; Henderson & Weiler, 2010).  • Commuters‐ Have Alternatives to Starting a Business • Innovation Index (Purdue Center for Regional Development)‐ Proxy for Entrepreneurial Environment 8

Summary of Variables 9 Midwestern States  Variable Business Start Rate (2004‐2007) Entrepreneurship Potential Percent Female 25‐34, 2000 Percent Change Hispanic, 2004‐2007 Percent Change 55‐64, 2004‐2007 Percentage of Farms  < 260 Acres Unemployment Rate 2004 Economic Scenario Metro Status (2=Metro; 0=Rural) Natural Amenity Scale Innovation Index Median Value of Owner‐Occupied Housing ($10K) Population Commuting to Work in Nearby Counties, 2003 Mean Standard  Deviation 5.86% 2.31 5.91% 27.98% 10.02% 75.80% 5.93% 0.87 20.22 4.71 11.53 1.49 1.78 ‐1.66 86.31 $8.06 5.74% 0.50 1.46 4.38 2.66 9.67 (N=850 Counties) 9

OLS Regression Results (Dependent variable is Business Startup Rate 2004‐2007) Independent Variables   Constant Coefficient B ‐0.04 t‐value ‐6.58* Entrepreneurship Potential Unemployment  2.48E‐5 0.16 5.37* Pre‐retirees 0.04 0.09 2.59* Farmers with small acreages 0.03 0.14 3.95* Growth in Hispanic population 0.01 0.06 2.21* Females Age 25‐34 0.40 0.15 4.62* Housing 2.89E‐5 0.33 8.11* Metro Status (2=Metro; 0=Rural) 2,12E‐5 0.13 4.65* Natural Amenity Scale 1.94E‐5 0.07 2.15* Commuters Innovation Index ‐1.65E‐4 1.48E‐6 ‐0.07 0.13 ‐2.74* 3.89* Economic Setting * = significant at 5% R2 adj=.486  N =850 SEE = .016   F = 81.4 VIF = 1.97 10

Examples of Targeted Programs • Entrepreneurial Training for the Unemployed‐ New Jersey • http://lwd.dol.state.nj.us/labor/wnjpin/findjob/onestop/ETPU.html • Boomer Entrepreneur Initiative‐ Broward County, FL • http://www.flwbc.org/content/view/140/141/ • Rural Enterprise Center‐ Northfield, MN  • http://www.ruralec.com/agripreneur‐training‐approach http://www.energizingentrepreneurs.org/site/images/research/cp/cs/cs10.pdf • Latino Economic Development Center‐ Minnesota   • http://ledc‐mn.org/services‐projects.php • Activate‐ Baltimore County, MD • http://www.umbc.edu/activate/SageACTiVATE_UMBCImpactStudy2010.pdf http://www.pathforwardcenter.org/ht/d/sp/i/3374/pid/3374/cat_id/4197 11

Implications for Development • Groups to Target  With Entrepreneurial Programs • • • • • • • • • Females 25‐34 years Small Farm Groups and Families Hispanic Populations Pre‐Retirees Currently Unemployed Market Amenities in a Region Promote Entrepreneurship Regionally Wealth of Area Matters Foster Creative Environment 12

Future Research • Use More Sophisticated Technique • Refine the Business Start Model • More on Entrepreneurship Development Characteristics • Examine Starts by Business Sector • Introduce Incentives • Estimate Variables Associated with Closures • Explore Determinants of Survival Rates • Local Economic Conditions • Socioeconomic and Business Factors • Examine Successful Outreach Programs 13

For Further Information Norman Walzer Andy  Blanke Senior Research Scholar Research Assistant Center for Governmental Studies Northern Illinois University DeKalb, IL 60115 815‐753‐0933 Center for Governmental Studies Northern Illinois University DeKalb, IL 60115 815‐753‐1569 Nwalzer@niu.edu Ablanke@niu.edu 14

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