Page 73 - 1-Entrepreneurship and Local Economic Development by Norman Walzer (z-lib.org)

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

The analyses by Acs and Armington (2005) further demonstrated that
firm birth rate is important in five industry sectors but not in manufactur-
ing. The share of proprietors’ income in a Labor Market Area (LMA) is pos-
itively related to overall firm formation rates showing that those areas with
a strong presence of proprietors usually have a more favorable climate for
entrepreneurs. This relationship, however, does not hold for all industry
sectors.
The authors also report a positive relationship between percent of adults
with a secondary school degree and firm formation rates; however, the pro-
portion of adults with college degrees is not significantly related to forma-
tion rates. These results suggest that broad-based educational levels in the
region may lead to more entrepreneurship than a high percentage of resi-
dents with higher education degrees.
Finally, Acs and Armington report a strong positive relationship between
entrepreneurship and overall economic development. This finding is not
unexpected and may be even more important in rural areas that lost large
manufacturing industries and, thus, now rely more heavily on small busi-
nesses serving local as well as regional markets.

Innovation and Information Consultants, Inc. (IIC, Inc.) Study
The Small Business Administration (SBA), Office of Advocacy, commis-
sioned the Innovation and Information Consultants (2006) to examine factors
affecting the growth and profitability of small businesses. This project studied
changes in business employment at the national level using pooled data for
1997–1999 and 2000–2002, followed by verification with case studies in Ken-
tucky, Maine, Nebraska, Nevada, North Carolina, and Utah, to identify im-
portant characteristics and policies leading to small business growth and prof-
itability. Explanatory variables vary in their relationship to births compared
with deaths and between periods of expansion and recession.
Results from an analysis of rural establishment growth show that rural
population growth and urban-rural wage gap are positively related. The
rural amenity index, urban small business growth, and a Rocky Moun-
tain regional variable were also positively related but only during the re-
cessionary period, while the urban amenity index, urban population, ur-
ban jobs, and Southeast regional variable were negatively related. During
a period of economic expansion (1997–1999), rural small business prof-
itability (measured by average nonfarm proprietors’ income) and urban
small business growth were negatively correlated with rural establish-
ment growth.
Since one aim of the IIC, Inc. project was to determine the importance of
local economic development for rural business prosperity, the authors ex-
amined small business performance from several angles. Changes in num-
ber of rural small businesses were related to population, per capita income,