Page 85 - 1-Entrepreneurship and Local Economic Development by Norman Walzer (z-lib.org)

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

Potential Entrepreneurs to Entrepreneurship
How do start-ups arise? According to Schumpeter (Baldwin 1954; te Velde
2001), the economy starts at a stationary state as posited by neo-classical
theorists. Potentially profitable opportunities exist but these opportunities
are recognized by only a few individuals with foresight (entrepreneurs). The
entrepreneurs secure the necessary productive means through financial in-
stitutions and other sources. The entrepreneurs are soon followed by others
who want to take a share of the market and the ensuing profits. Soon, the
market becomes saturated with little or no room for potential new entrants.
The market then returns to equilibrium conditions.
This explanation supports the concepts of diversity and selection out-
lined previously but what makes it especially interesting is the implicit as-
sumption that a conducive business structure spawns entrepreneurs such as
when financial institutions support entrepreneurial ventures. Without this
support, the potential pool of entrepreneurs is only a weak predictor of new
firm starts (the path coefficient is .23). However, when combined with busi-
ness structure, the potential pool of entrepreneurs variable accounts for as
much as 80 percent of the variability in entrepreneurship.

SUMMARY AND CONCLUSION

Natural amenities are positively associated with potential entrepreneur-
ship indicating that more attractive living environments attract entrepre-
neurs as suggested by Florida (2004) and others. Wealthier counties, mea-
sured by median value of owner-occupied housing, had higher business
density and growth rates. Not surprisingly, counties with a positive busi-
ness climate, such as those with growth in establishments of 5 to 19 em-
ployees, reported higher growth in microenterprises. These findings add
validity to the claim that knowledge spillovers are a necessary condition
for entrepreneurship.
Rural midwestern counties vary widely in the relative importance of mi-
croenterprises, with some counties having as much as one-third of the em-
ployment in these businesses. The analyses in this chapter offer several find-
ings that can be useful in designing local development strategies involving
entrepreneurship.
Specifically, the number of microenterprises grew more rapidly in coun-
ties with higher median housing value, natural amenities, lower average
wages, and growth in enterprises with 5 to 19 employees.
To the extent that entrepreneurs start small with microenterprises,
practitioners might target certain groups for special training and techni-
cal assistance efforts. Even if not all such groups are true entrepreneurs