Page 72 - 1-Entrepreneurship and Local Economic Development by Norman Walzer (z-lib.org)

Entrepreneurship and Small Business Growth 61

tucky, Missouri, and Wisconsin), 82 rural counties (17.8 percent) had 30
percent or more of their employment in these businesses, and 187 counties
(40.7 percent) had 25 percent (AEO 2006).
Microenterprises in these states grew during the early 2000s with 85.2
percent of the counties reporting increases in number of establishments
and 77.8 percent of the counties reporting increases in employment in
these businesses. Rural counties adjacent to urban areas differed very little
from remote counties in increases in numbers of businesses (86.3 percent
versus 84.2 percent), but fewer remote counties reported employment
growth in microenterprises (81.1 percent versus 75.0 percent).

CONCEPTUAL FRAMEWORK

Successful entrepreneurship strategies lead to small business growth and
determinants of small business employment patterns in the United States
and other countries have been studied many times (Bruce et al. 2007). An
extensive review of the literature on microenterprise business growth was
reported by Doub and Edgcomb (2005) with some studies examining busi-
ness start-ups and others focusing on established businesses. Three empiri-
cal studies summarized next provide a basis for formulating hypotheses
about business formation rates at the microlevel and employment changes
in a region.

Acs and Armington
In 2005, Acs and Armington provided an extensive examination of new
firm formation rates using Business Information Tracking Series (BITS) data
for 384 labor market areas from 1991 to 1998 (2006). Differences in firm
formation are associated with regional differences in human capital, growth
in local population and income, and industry specialization. The re-
searchers studied formation rates in six industry sectors, including business
services, distribution, extractive, local marketing, manufacturing, and retail
industries by year during the period of examination.
The findings differ by industry sector and year, but, in general, significant
relationships were reported between formation rates and human capital
measures such as proportion of college graduates and share of high school
dropouts compared with the noncollege adult population.
The researchers also report significant relationships between intensity of
service businesses and all establishments in the labor market area. Areas
strong in service businesses had higher formation rates, and average size of
establishment in the region was statistically related to formation rates. The
unemployment rate was statistically significant in specific years, but seems
to vary with the business cycle.