A profile of small business owners in rural Pennsylvania and their awareness of publically funded business assistance programs.

Author:Osborne, Stephen W.
 
FREE EXCERPT

INTRODUCTION AND LITERATURE REVIEW

Small businesses represent 90% of all businesses and employ two-thirds of the population in rural communities of the United States (Velazquez, 2006). In Pennsylvania, small businesses play an even greater role, with 98% of all Pennsylvania businesses employing fewer than 100 workers, according to the Pennsylvania Department of Labor and Industry. These small businesses also represent the main source of entrepreneurial activity and employment growth in most rural communities. It is important to recognize that it is not the businesses themselves, but the entrepreneurs and small business owners who are the lifeblood of Pennsylvania's rural small businesses. An understanding of who rural Pennsylvania's typical small business owners are is an important step in assessing their needs and delivering business assistance services.

The research in this area is typically descriptive in nature and contains little more than basic statistical analysis. Moreover, the majority of the recent literature examines rural small businesses at the industry and business level but rarely at the owner level. Much of this research is narrow in scope, profiling only minority segments such as women or veteran owned business owners. A select few studies examine the broader group of all small business owners.

A 2004 study by the W. K. Kellogg Foundations looked at rural entrepreneurship and found that 10.5% of the U.S. adult population is engaged in some form of "entrepreneurial activity" (W. K. Kellogg & Corporation for Enterprise Development, 2004). Another study, the Kauffman Index of Entrepreneurial Activity (Fairlie, 2005), analyzed national data pertaining to small business owners and entrepreneurs, drawing conclusions about their typical age, gender, race, and regional location. While both of these reports reaffirm the importance of small businesses to rural regions, neither provides comprehensive profiles of the typical rural small business owners which is necessary to effectively create and target business assistance programs. This study presents a broad attempt at profiling Pennsylvania's small business owners.

A second topic of significant research pertains to the assessment of publicly funded financing and technical assistance programs (Goetz, Partridge, Deller & Fleming, 2010). A recent study by Forbes (2010) found that those organizations that take advantage of outside advice--whether professional or informal--have been more successful and experienced stronger turnover than their counterparts. The question of whether government has a role in stimulating entrepreneurship and, if so, how to evaluate whether policy makes a difference in rural small businesses is an important one (Atkinson, 2004; Forbes, 2010),

Most of the literature pertaining to rural small business owners, and the public policy that affects them, echoes Atkinson's position on the importance of rural policy to the nation's long term economic growth along with the fact that there are differences between policy as it relates to rural businesses (Dabson, 2011). Following the 2008/2009 recession, small businesses in their role as job generators are even more important along with choosing the right policies to put in place (Baily, M., Dynan, K., & Elliot, D., 2012). However, few studies delve deep enough to even begin to evaluate the public programs that are in place to assist rural small business owners. Although, some literature is available on federal, state, and local government policy in rural areas pertaining to economic development and business and entrepreneurial assistance, the majority of this literature is descriptive in nature and provides little in the way of in-depth statistical analysis on which to frame public policy.

Objectives

A team of Indiana University of Pennsylvania (IUP) faculty members were awarded a grant from the Center for Rural Pennsylvania to pursue five objectives:

* Create a profile of rural small business owners.

* Identify the federal, state, and local government providers of small business assistance services including university outreach programs.

* Determine small business owners' perception of access and availability of these services in rural areas.

* Assess which services provided by these publicly funded and some private small business assistance organizations were being used and if they were perceived as beneficial.

* Look at best practices and model programs currently in operation that are assisting rural small business owners with growth and expansion opportunities.

This paper presents the results of the first, second and part of the third objectives, developing a profile of rural Pennsylvania businesses and their owners and examining their awareness of publically funded assistance programs.

METHODOLOGY

A variety of pertinent methodologies were used to collect primary data. Two different surveys were developed and administered--one to small business owners and another survey was administered to service providers. Also, a focus group was held with a group of business people, policy makers, and service providers. This paper examines some of the results of the business owner survey.

The survey instrument was designed based on the objectives of the project. The researchers reviewed the literature pertaining to entrepreneurship and small business management, research methodology, survey development, and small business assistance programs to aid in drafting the survey. The survey was pilot-tested with 18 participants comprised of small business owners as well as professionals in small business management, economic development, survey design and analysis, graphic design, and market research. Fifteen participants returned the survey, most with just minor comments. These changes were and incorporated into the final survey.

Reference USA was used as the database to identify a stratified sample of 5,000 small businesses in rural Pennsylvania. The criteria used to create the stratified sample included the following:

The definition of a "small business" was based on a variety of guidelines, especially those of the U.S. Small Business Administration (SBA). These guidelines helped to determine the maximum revenues and/or workforce size for small businesses in each industry. In addition, the judgment of the project directors helped in determining a representative sample of the small businesses in rural Pennsylvania. For example, although manufacturing businesses with up to 500 employees are still considered to be small businesses by the U.S. SBA, the target sample in this survey did not include many such businesses. The sample based on the SBA and other criteria were manually scanned to minimize relatively large sized small businesses. The ten industry categories (listed below) ere used based on the Reference USA database software's industry categories. These categories are themselves based on SIC codes. The final industry categories were as follows along with their small business criteria shown parenthetically. * Agriculture/Forestry/Mining (max. $1 million in revenues)

* Construction (max. $10 million)

* Manufacturing (max. 250 employees)

* Legal Services (max. $5 million)

* Wholesale Trade (max. 100 employees)

* Retail Trade...

To continue reading

FREE SIGN UP