Page 70 - 1-Entrepreneurship and Local Economic Development by Norman Walzer (z-lib.org)

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Entrepreneurship and Small

Business Growth

Norman Walzer, Adee Athiyaman, and Gisele F. Hamm

The importance of small businesses in generating local employment, espe-
cially in rural areas has been recognized by policymakers and many pro-
grams are available to help start and promote these businesses. However the
specific roles of entrepreneurship in fostering business start-ups, and there-
fore expanding regional growth, have not always been recognized.
While new firms can be any size, business start-ups in rural areas often
are small with relatively few employees. Nevertheless, these businesses fre-
quently are the fastest growing and may account for much of the job cre-
ation in rural areas. This chapter examines the importance of small busi-
nesses in regional economic growth and presents a conceptual model to
understand factors affecting both the formation and growth in number of
microenterprises in midwestern counties. Specifically, the relevance of local
economic climate, business structure, natural amenities, and potential en-
trepreneurs in the region in explaining changes in the number of microen-
terprises in the county is examined.

BACKGROUND

Entrepreneurship was not a major factor in neo-classical economics (Baumol
1968; Kirzner 1997). While production functions enable managers to opti-
mize outputs given a set of inputs, the theory of the firm does not recognize
the gap-filling and input-completing functions of entrepreneurs that lead to or-
ganizational efficiency, and more importantly, new firm starts (Leibenstein
1968; Beugelsdijk and Noorderhaven 2004). In practice, an entrepreneur rec-
ognizes gaps for goods/services in the market place, assembles necessary

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