Page 78 - 1-Entrepreneurship and Local Economic Development by Norman Walzer (z-lib.org)

Entrepreneurship and Small Business Growth 67

Population Density
With limited resources for marketing, small businesses often serve
mainly local areas and may be more successful in areas with higher popu-
lation density as noted by Audretsch and Keilbach (2004b). More densely
populated areas may also involve greater interactions among small business
owners and operators. Business density is included separate from popula-
tion density to distinguish these effects (see the discussions pertaining to
the business structure factor).

Median Housing Values
Persons interested in starting businesses or in expanding existing ventures
require access to capital. By definition, microenterprises in this study did
not have access to traditional lending sources, a common phenomenon in
rural areas with a limited number of banks or financial institutions. Previ-
ous research has documented that personal savings and family resources of-
ten provide much of the start-up capital for small businesses (Blade Con-
sulting Corporation 2003). Median housing value is included as a proxy for
wealth or access to capital recognizing that housing may be protected in
bankruptcy proceedings.

Tax Effort

The local economic climate for business development and prosperity is also
measured by tax effort defined as per capita taxes paid relative to income per
capita. While taxes are usually not a deciding factor in selecting a business lo-
cation for a small business (Area Development Online 2005), when not
passed on to consumers, they can reduce the overall profitability of a business.

Average Wages
Personnel costs are likely to be a more serious cost consideration in larger
businesses, but these costs may still be important in microenterprises with
employees. Thus, the average wage in a county was included to capture dif-
ferences in personnel costs.

NATURAL AMENITIES

Since the work of Johnson and Beale (2002) showing that retirement and
tourism opportunities differentiated counties with respect to growth during
the 1990s, there has been increased interest in amenities and quality of life
considerations in potential economic development (Johnson and Beale