Page 71 - 1-Entrepreneurship and Local Economic Development by Norman Walzer (z-lib.org)

60 Norman Walzer, Adee Athiyaman, and Gisele F. Hamm

resources to complete the inputs needed in the production process(s), and op-
timizes the production process(s).
Thus, an entrepreneur’s role includes more than managing an operation;
it also involves recognizing and taking advantage of business opportunities.
The new firm creation role of entrepreneurs has been studied from a vari-
ety of disciplines including social psychology and economics (Labriandis
2006) to identify common characteristics of entrepreneurs and to find ways
to promote entrepreneurial behavior.
An endogenous growth theory is often used to justify the inclusion of en-
trepreneurial concepts in regional development (Pack 1994; Audretsch and
Keilbach 2005). This theory uses two concepts to link entrepreneurship and
economic growth: diversity and selection. Diversity is defined as knowledge
created by firms’ investments in research and development (R&D). Selec-
tion refers to the entrepreneurial activity of creating economic value from
the knowledge created by R&D activities. According to Audretsch and Keil-
bach (2004a, 607):

(individuals) placing a high value on knowledge that is not valued as highly by
the hierarchical decision making organizations in incumbent firms will face an
incentive to become entrepreneurs and start a new firm in order to appropri-
ate the value of that knowledge.

Empirical tests show that statistically significant variations in economic
growth among nations can be attributed to these entrepreneurial concepts
(Beugelsdijk 2006).
At least two implications flow from discussions of the two entrepreneur-
ship concepts. First, new firm starts indicate entrepreneurship. Second, en-
vironmental factors such as the socioeconomic-spatial characteristics of a
community (e.g., population density, unemployment rate, distance from
major cities, etc.) can facilitate or hinder entrepreneurship (Labrianidis
2006).
Four categories of environmental factors are examined in this chapter: (1)
economic climate; (2) business structure; (3) natural amenities; and (4) po-
tential for entrepreneurship in the county. A structural equation that per-
mits the modeling of complex sequences of causal relationships, assess-
ment of errors in measurement, and the identification of both direct and
indirect effects within a system of equations is then applied to data on mi-
croenterprises in six midwestern states.
Microenterprises are important in the overall rural midwestern economy.
The Association for Enterprise Opportunity (AEO) provides county-level
data for two business groupings: (1) owner-operated businesses with no
employees and (2) those with one to four employees. These businesses are
a subset of rural businesses and include other enterprises besides start-ups
or entrepreneurs. In the six midwestern states (Illinois, Indiana, Iowa, Ken-