Page 99 - 1-Entrepreneurship and Local Economic Development by Norman Walzer (z-lib.org)

88 Jason Henderson, Sarah A. Low, and Stephan Weiler

can be estimated by the ratio of proprietor income to the total sales of
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their products and services. This indicator is a better measure of entre-
preneurial depth for two reasons. First, value-added is a direct measure
of the proprietor’s contribution to the product or service provided to the
market. The metric reflects the proportion of the overall value of the
good that is due directly to the entrepreneur’s ideas and skills. Second,
value-added is a better measure of depth than average income because
the ratio is not skewed by varying mixes of part-time versus full-time en-
trepreneurs.
The value-added measure indicates that the value entrepreneurs add to
their communities varies widely across the nation (figure 5.5). The value-
added measure provides a slightly different picture of entrepreneurial depth
than the income measure, although the two are still highly correlated
(0.81). Counties with a high value-added measure are less clustered than
counties with a high income measure, and they are also less concentrated
along the east and west coasts.
Analysis across metropolitan, micropolitan, and town counties reveals
that metropolitan proprietors contribute and capture more value from their
products and services than micropolitan and town county proprietors, thus
generating more income per sales dollar. Metropolitan counties had the
highest ratio of proprietor income to nonemployer receipts (0.703). Town
counties had the lowest income-to-receipts ratio (0.461), with the ratio for
micropolitan counties marginally higher at 0.483. As a result, the location

Figure 5.5. Entrepreneurial Depth: Value-Added