Page 84 - 1-Entrepreneurship and Local Economic Development by Norman Walzer (z-lib.org)

Entrepreneurship and Small Business Growth 73

gion (economic conditions), it is logical to expect economic conditions to
influence business structure.
The statistical analysis in this chapter supports the economic base theory
in that the economic conditions in a county positively influence a region’s
business structure. Wealthier counties, measured by median value of owner-
occupied housing, had higher business density. In addition, a significant in-
crease in business activity occurred in counties with lower tax rates. In all,
approximately 60 percent of the variability in county business structure is
attributed to sound economic conditions.
Of the six variables used to measure economic climate, percentage un-
employed in the county is the most accurate indicator according to the sta-
tistical analysis. Population density had the worst performance. Similarly,
business density is the least error-prone indicator of business structure in
the county.

Natural Amenities to Potential Entrepreneurship
Rural lifestyles are perceived as offering beneficial aspects of well-being
such as clean air, open spaces, gardens, and nature-based recreational op-
portunities (Cloke 1995). The causal model in this chapter shows that
changes in natural amenities are positively related to changes in the poten-
tial pool of entrepreneurs. Put another way, one unit increase in quality of
life perceptions about a county results in a .56 standard deviation increase
in the potential pool of entrepreneurs. This relationship is significant in the
sense that perceptions about quality of life predict the potential pool of en-
2
trepreneurship in a majority of instances (R 70 percent). Specific strate-
gies to enhance quality of life perceptions at the county level are available
in Athiyaman (2007).

Business Structure to Entrepreneurship
Business structure in a county affects local entrepreneurship in several
ways. For instance, denser economic activity leads to specialization (ag-
glomeration effect) and thus firm starts. In addition, when for technologies
with constant returns, proximity to markets often brings higher returns be-
cause of lower transportation costs. This situation, in turn, can attract en-
trepreneurial ventures. Finally, the higher density of human and physical
capital could bring knowledge spillovers and hence entrepreneurship.
Business structure has a positive influence on local entrepreneurship with
a standardized path coefficient of .478 indicating that business structure en-
hancements increase entrepreneurship. In fact, of all the variables used to
analyze the causes of entrepreneurship, business structure has the most pos-
itive influence on new firm starts.