Page 34 - 1-Entrepreneurship and Local Economic Development by Norman Walzer (z-lib.org)

Entrepreneurship as Rural Economic Development Policy 23

of their large numbers, these firms accounted for only 4 percent of total
business revenues, however. Small businesses with annual revenues of less
than $90,000 represent 95 percent of nonemployer firms and just 38 per-
cent of business revenues; whereas, small businesses account for 25 percent
of employer firms but less than 5 percent of business revenues. Similarly,
young businesses (less than four years old) represent just over 40 percent of
nonemployer businesses with some 37 percent of business revenues, and
about 35 percent of employer businesses accounting for less than 20 per-
cent of revenues.
Although their economic impact is relatively small compared with
longer-established employer businesses, Davis et al. (2005) claim that these
small and young enterprises are important because they are a critical part of
U.S. business dynamics. They support the notion that small nonemployers
are a seedbed for future employment growth because over a three-year time
frame, about 5 percent of nonemployer businesses (accounting for 10 per-
cent of nonemployer business revenues) became employer businesses or
were acquired by, or absorbed into, employer businesses. This equates to
750,000 businesses. Moreover, these newer firms that are transitioning to
employer businesses are the fastest growing in the economy.
As part of the Global Entrepreneurship Monitor (GEM) program, Autio
and Hancock (2005) analyzed what they termed High Expectation Entre-
preneurial Activity or HEE. They defined HEE as all start-ups and newly
formed businesses which expect to have at least 20 employees within
5 years. Their findings showed that these businesses represent just 9.8 per-
cent of the total pool (and that only 4.9 percent expected to employ more
than 50 people in that timeframe). Even so, they estimate that HEE will
be responsible for 75 percent of the jobs created by all start-ups and
newly formed businesses.
These studies make clear that the return in terms of jobs and wealth from
entrepreneurship development will come only from between 1 in 10 to 1
in 20 ventures. Although there have been many attempts to isolate predic-
tors of these high-flying entrepreneurs, including suggestions by Autio and
Hancock (2005), picking winners is inherently risky and not a recommended
basis for public policy. One factor to consider is that people creating enter-
prises have different motivations, which might limit or shape their aspira-
tions, or which may evolve over time with experience.
A typology used in a recent Kellogg Foundation/CFED report (Dabson et
al. 2003) on rural entrepreneurship identifies five types of entrepreneurs.
Aspiring entrepreneurs are those who are attracted to the idea of creating an
enterprise but have yet to launch a venture. Of those already in business,
survival entrepreneurs have resorted to creating enterprises either to sup-
plement existing, inadequate incomes or are those with few other options
for obtaining employment; and lifestyle entrepreneurs are those who create