Summer is supposed to be a slower time, but it seems like the small business and entrepreneurship-focused policy wonks are still hard at work. Here’s an update on 3 recent studies that I found interesting and informative:
The European Union has recently set up a Knowledge Web on SMEs and Entrepreneurship and is beginning to post a host of interesting research findings. This article from Spanish and Dutch researchers takes a long-term look at an important question: do the self-employed contribute to better economic development outcomes in terms of jobs and prosperity? If they only provide jobs and income for themselves, that’s a good thing. But, it would be even more consequential if these firms had wider community and regional impacts. This study of US metropolitan areas finds that regions with high self-employment rates also had high rates of unemployment growth. This effect is significant, but has become less important over time. My unsurprising take-away?: encouraging self-employment is good thing!!
The same Spanish-Dutch research team have also produced another study that looks at the motivations of the self-employed and their subsequent impact on business growth. This study reports on Dutch self-employed individuals and assesses whether their business was driven by necessity (e.g., the absence of other job options) or opportunity (e.g. identify an untapped market). They find a strong relationship in that necessity entrepreneurs perform less well than opportunity-focused entrepreneurs. This result is unsurprising, but the researchers also note that the effect is so pronounced that it is unaffected by education levels, prior training, or experience. In other words, the founder’s motivations for a business matter a great deal. In practice, this suggests that small business coaches and support providers should focus particular attention on an aspiring business owner’s intentions and motivations and less on what appears on their resumes.
This Kauffman Foundation-sponsored study reports on interviews with high growth companies based in Kansas City. Their owners were asked to offer their views on the health of the region’s entrepreneurial ecosystem. The local entrepreneurs reported that they did not suffer from operating in a region that does a middling job in terms of attracting venture capital or in spawning new blockbuster companies. Instead, they reported that they enjoyed great benefits from local mentors, and from doing business with customers, vendors and collaborators based in Kansas City. They were also able to prosper and grow quickly by retaining a regional focus and, in many cases, did not feel a strong need to build extended global markets. My take-away?: You don’t need to be Silicon Valley to be successful!! Successful entrepreneurial ecosystems can exist anywhere and will always reflect local preferences, history, and unique competitive advantages and assets.