Page 83 - 1-Entrepreneurship and Local Economic Development by Norman Walzer (z-lib.org)

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

Climate, Business Structure, Natural Amenities, Potential for Entrepre-
neurs in a County, and Entrepreneurship—affect individual observed
variables such as Tax Effort, Housing Value, and other factors. The ob-
served variables cannot be measured precisely and therefore are also af-
fected by other factors not included in the estimated model. Choosing
the right number of measures for each theoretical variable is an art rather
than a precise process (Bentler 1993). While theory was used as a basis
for developing the model, we readily acknowledge that other indicators
might work as well.
Of main interest to the current discussions are the paths or linkages
among the theoretical constructs such as between Economic Climate and
Business Structure or between Natural Amenities and Potential for Entre-
preneurs in a County. Four of the five hypothesized relationships outlined
1
earlier in this chapter were verified in the causal analysis. The only in-
significant causal path was the Business Structure to Potential for Entrepre-
neurs in a County linkage.
Thus, simply stated, the empirical analysis shows that Economic Climate
is related to Business Structure in a county as shown by a path coefficient of
.229. Likewise, Natural Amenities affect the Potential for Entrepreneurs in a
County (.558). The Business Structure then influences the level of Entre-
preneurship (.478) as does the Potential for Entrepreneurs in a County
(.236). The outcome then is an increase in the number of Microenterprises
in a County.
An individual- or firm-level analysis would be required to fully assess the
selection concept discussed earlier. In other words, in light of the theory
that individual employees in large firms also engage in start-ups, the inten-
tion of those employees to start businesses would need to be assessed. Since
the current analysis was limited to aggregate data (for instance, Business
Density), a relatively weak relationship between the aggregate indicators of
Business Structure and potential Entrepreneurship can be expected.
Also important to note is that county Business Structure has approxi-
mately twice the impact on growth in Entrepreneurship (.478 versus .236)
as Potential for Entrepreneurs in a County. Each of the four significant
causal linkages is discussed next in terms of ways to promote local entre-
preneurship.

Economic Conditions to Business Structure
Economic base theory (Richardson 1969) categorizes business activities
in a region into basic or nonbasic. Conceptually, basic activities promote
growth and development in a region by generating income from outside the
region whereas nonbasic activities mainly serve the domestic population.
Since nonbasic activities reflect the level of income and demand in the re-