Determinants of Growth in Entrepreneurship Across U.S. Labor Market Areas, 1970-2006

Entrepreneurship often has important implications for regional development. This study examines trends, variation, and determinants of entrepreneurship and seeks to test three main research hypotheses: 1) that higher levels of human capital in local labor markets are likely to be associated with faster growth in entrepreneurship numbers and shares over time and in both metropolitan and nonmetropolitan regions; 2) that the impact of human capital on growth in entrepreneurship numbers and shares differs over time across metropolitan and nonmetropolitan regions; and 3) that higher levels of human capital in local LMAs are associated with higher growth in the proportion of entrepreneurs within specific gender, age, and high-technology industry subgroups in LMAs (2000–2006). An overview of methodological approaches is provided as well as analysis strategies. (p.3) (Abstractor: Author and Website Staff)

The study found persistent differences in the entrepreneurial shares of employment among U.S. regions. For example, there is evidence of substantial change (growth or decline) in entrepreneurship concentration in individual regions over time, but only limited evidence of convergence of shares among regions. These findings suggest that growth in entrepreneurship in regions is not determined by forces toward convergence, but instead is related, more directly, to the specific characteristics of regions. The study also found some evidence of convergence in the proprietorship share across metropolitan and nonmetropolitan regions, as strong metropolitan growth has caused the gap with nonmetropolitan regions to close during the period. In addition, findings indicated little evidence of within-distribution convergence for all regions, metropolitan regions, or nonmetropolitan regions, based on the standard deviation of the distribution. In other words, there is little reduction in the dispersion of proprietorship shares across regions during the period. However, it appears that regions that begin with relatively low proprietorship shares tend to have higher growth than regions that begin with larger shares. This suggests that regions tend to “catch up” and “fall back” depending on the initial level of their proprietorship share. Lastly, a positive correlation between human capital and the growth in the number and share of proprietorships in nearly every decade was indicated, depending on whether the particular regression focused on all LMAs, metropolitan LMAs, and nonmetropolitan LMAs. The study also found some evidence that human capital may have mattered more during the 1990s (particularly for nonmetropolitan regions). (p.57-58). (Abstractor: Author and Website Staff)

• Last Updated:
• Created:
• Resource Publication Date: 2010
• Author(s): Gurley-Calvez, Tami; Hammond, George W.; Thompson, Eric C.
• Organizational Author(s): Organizational author not identified
• Funding Source: U.S. Small Business Administration
• Resource Availability: Publicly available
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• Posted in: Workforce System Strategies