Business Survival and Success of Young Small Business Owners

Little empirical evidence provides insight in person-oriented drivers of business survival and success of small business owners. In this paper I perform a duration analysis of business survival amongst young white (self-employed) small business owners in the U.S. Compulsory exits are distinguished from voluntary exits. This enables an alternative definition of business success: the longer one can survive and prevent inLvoluntary exit, the more successful one is. Potential drivers of survival are derived from recent empirical evidence in related studies. The potential drivers of success are also derived from historical economic thinkers such as Marshall and Schumpeter. The estimated hazard rates are affected by characteristics of the small business owner and business conditions.     

Sampling Minority Business Owners and Their Families: The Understudied Entrepreneurial Experience*

We here review and critique prior research on minority entrepreneurship, paying particular attention to the contributions and limitations of deployed sampling techniques and research methodologies. As based on this review, we then introduce the 2003 and 2005 National Minority Business Owner Surveys—a comprehensive and primary data collection effort that used varied methodologies to secure in‐depth information about random national samples of African American, Korean American, and Mexican American populations as well as a comparison sample of nonminority business owners. We present the initial business ownership profiles developed with these recent data, in part, as a benchmark of the U.S. entrepreneurial experience, and compare the profiles with those presented in prior research. These profiles document similarities and differences across the four groups and provide an empirical foundation for understanding the origin of those similarities and differences. No longer can we ignore the in‐depth study of minority businesses and their owning families nor can we simply assume that all businesses are the same, regardless of minority status or ethnicity.     

Antitrust,Innovation, Entrepreneurship and Small Business

The purpose of this article is to discuss a few aspects of antitrust enforcement that are directly related to small businesses. The first point concerns how the antitrust laws work as an economic "charter of freedom" by protecting our economy from the misuse of market power by dominant firms, or from anticompetitive collusion by groups of firms, or from anticompetitive mergers, all of which can blunt the mainspring of our economic success – competitive markets. Second is an expansion on the first theme which focuses on how antitrust enforcement helps preserve two freedoms that I think small businesses care about very much: the freedom to engage in entrepreneurship, and the freedom to innovate. A final discussion involves a few recent cases recently seen at the Antitrust Division that illustrate the many ways in which antitrust enforcement has helped the small business marketplace.     

Entrepreneurship,Small Business and Public Policy Levers

The author develops a progressively refined framework consisting of four typologies to help understand, explain, and analyze how various public policy levers impact new, small, and entrepreneurial businesses. Dimensions for the typologies include institutions and culture, competition and intended immediate beneficiaries of competition, impediments and supports, and policy objectives and direct/indirect action. Implications emerging from the typologies lead to potential hypotheses that can be subject to further investigation and empirical testing.     

The Response of Small Business Owners to Changes in Monetary Policy

The small business sector of the economy accounts for half of private gross domestic product and well over half of private sector employment. Little is known about how these firms and the banks that serve them are affected by changes in monetary policy. Using data from the monthly surveys of the members of the National Federation of Independent Business, the impact of unexpected (between meeting) Federal Reserve announcements on owner expectations and hiring and spending plans are examined. Using interviews filled out during the month, “before” and “after” groups are analyzed to assess the impact of Federal Reserve announcements on firm behavior. Narrowing the analysis period to just days before and after Federal Reserve announcements permits the assessment of owner responses uncontaminated by other events. Changes in owner expectations and spending and hiring plans are shown to be translated into subsequent changes in actual spending and hiring that are often the opposite of what is suggested by conventional economic theory. Firms that do not use debt respond in the same way as those regularly active in credit markets. The results provide additional insight and richness to our understanding of the transmission channels through which monetary policy impacts the real economy.     

Socially Responsible Processes of Small Family Business Owners: Exploratory Evidence from the National Family Business Survey

The purpose of this exploratory study is to ascertain the impact of family, business, and community factors on the socially responsible processes of small family businesses, and investigate the influence of financial success and attitudes toward community on these processes. The research is grounded in the Sustainable Family Business Theory, which has been enhanced to include the interactive and collaborative action, both economically and socially, of family businesses and their communities. Data are from the National Family Business Survey, 2000 panel. The processes studied include interpersonal transactions in the form of community leadership and holding an elected or appointed office, and resource transactions in the form of providing financial or technical assistance in community development, and providing donations to local programs. Models assessed the probability and intensity of assistance provided by family businesses. The findings indicate that the social and economic climate of the community may contribute to the performance of responsible actions by businesses because human, social and financial capital resources from both the family and the business can be used to solve problems in the community. The most robust result was that individuals with very positive attitudes about their local communities were more likely to serve in leadership positions and make financial and technical contributions to the community. Business owners in economically vulnerable communities were willing to assume more responsibility to fill leadership positions in the community and make substantial contributions of financial and technical assistance than those in less vulnerable communities. Policymakers must recognize the many contributions of family businesses and forge rural developmentpolicies that not only help sustain existing businesses and fuel the engine of economic growth, but encourage human capital development, and, in turn, enhance the contributions of the family and the business to their community.     

External Relationships and the Small Business: A Review of Small Business Alliance and Network Research*

In order to thrive, small businesses are often advised to develop relationships with external organizations that have the potential to assist business development, survival, and growth. A focus on the external relationships of the small business underlines the vital importance of external resources in moving a small business toward increased success and profitability. Covering the period from 1990 to 2002, this paper reviews the small business literature as it relates to the use of these external relationships (such as organizational partnerships, networks, and alliances). In response to both academic and practitioner demand for further research in this area, an exhaustive analysis of the relevant literature was conducted and three “meta” research questions representing the connections within this literature were formed. The resource‐based view of the firm, resource dependency theory, and punctuated equilibrium theory are proposed as useful starting points for exploring these research questions and can give direction for moving forward in this research area.     

Women Entrepreneurs: A Comparison of International Small Business Owners in Poland and the Czech Republic

Women entrepreneurs from two Central European countries with relatively new market economies were interviewed for this research. The authors describe the experiences and motivation of these women international business owners and compare them to the literature on women entrepreneurs in North America. Cross-culturally, women entrepreneurs share many of the same motivations for starting a business, and experience similar challenges to making their enterprises successful. North American models of entrepreneurship are also examined. The findings suggest a universal model for entrepreneurship. Suggestions for government policies are put forward. Managerial and theoretical implications are also presented and new directions for research on women entrepreneurs are suggested.     

Raising Response Rates in Mail Surveys of Small Business Owners: Results of an Experiment

Mail surveys of small business owners have notoriously low response rates, creating the potential for substantial error in surveys of this population and diminishing the credibility of research conducted on small firms. The author recently carried out an experiment as part of a larger project involving 16,000 small business owner/members of the National Federation of Independent Business (NFIB). The experiment's purpose was to ascertain survey treatments that might enhance mail survey response among small business owners. Results showed that none of the six treatments examined improved response rates enough to warrant its routine use over the alternative, nor did any combinations of treatments help. The implication is that commonly used treatments, for example prenotification, often are unproductive.     

Small Business Credit Scoring and Credit Availability*

U.S. commercial banks are increasingly using small business credit‐scoring models to underwrite small business credits. The paper discusses this lending technology, evaluates the research findings on the effects of this technology on small business credit availability, and links these findings to a number of research and policy issues.     

Regulatory Modes and Entrepreneurship: The Mediational Role of Alertness in Small Business Success

Previous studies suggest that entrepreneurs play a key role in the success of their ventures. But relatively little is currently known about how they produce such effects. The present research provides data suggesting that two modes of entrepeneurs’ self‐regulation—locomotion and assessment—enhance a firm's success through their effects on the components of alertness. This mediational model was tested and supported with data from 120 entrepreneurs. Locomotion was positively related to the scanning and search component, while assessment was positively related to the association and evaluation components. These findings are discussed in terms of the role of founders’ self‐regulation in the performance of their companies.     

The Golden Rule and Business Ethics: An Examination

The phenomenon of globalization of markets has been accompanied by calls for a globalization of ethical norms. One principle often referred to in such calls is the so-called Golden Rule. The rule, often stated as Do unto others as you would have others do unto you, has long been used and referenced in the business literature. But those who use it often do so without full realization of the rule itself and what it stands for. This paper examines the history, meaning, and problems of the rule and attempts to show, through a case analysis, how these problems surface when using the rule in a business context. In so doing it attempts to clarify exactly what the rule means and how it can fit into a universal code of morality.     

Differences in Psychological Strategies of Failed and Operational Business Owners in the Fiji Islands*

This study investigates the differences between failed and operational businesses from a psychological perspective. The sample included 71 operational and 20 failed business owners from Suva, the capital of Fiji. It was hypothesized that operational business owners more often employ a detailed and long‐term planning strategy, whereas failed business owners more often pursue a reactive strategy, that operational business owners set more specific and more difficult goals, and that they have a higher degree of human capital than failed entrepreneurs. The data were analyzed using discriminant analysis. Results confirmed the hypotheses regarding planning and goal specificity.     

Motivations and Obstacles for Small Business Entrepreneurship in Russia: Fifteen Years in Transition

A longitudinal survey of small business entrepreneurs was conducted in Russia in two stages: in 1994 and in 2008. This study examined entrepreneurial climate and developments in Russia's small businesses with a focus on motivations and obstacles in starting up and operating businesses. It also aimed at analyzing entrepreneurs’ needs for training, consulting, and other types of assistance in a comparative context. Russia's climate for small and medium enterprises (SME) and entrepreneurship has improved, although it is still a work in progress. The 2008 survey indicated younger age, greater share of female entrepreneurs, and remaining small size of the firms. Though the level of SME entrepreneurial activities in Russia is still lower than in major developed economies, the gap is diminishing. Thise study found no significant differences between 1994 and 2008 in terms of entrepreneurial motivations and obstacles; several shifts and trends in motivations and obstacles were identified in their relative importance in SME dynamics.     

Linking HRM and Small Business Performance: An Examination of the Impact of HRM Intensity on the Productivity and Financial Performance of Small Businesses

Attempts to explore empirically the link between HRM and firm performance are numerous. Yet, research on this link remains restricted to large companies. Little is known about the extent to which the existing results extend to small businesses. The purpose of the present study is to develop and test a conceptual framework linking HRM to financial performance that fits small businesses. The central question is whether the development of an intensive HRM is profitable for smaller organizations. For the development and optimization of the conceptual framework, we rely on human capital theory and bankruptcy prediction models. Using structural equation modeling, we study the mediating effect of voluntary turnover and productivity on the relationship between HRM intensity and one year lagged financial performance. The results show both productivity and profitability enhancing effects as well as a cost increasing impact of HRM intensity.     

Moral Development in Business Ethics: An Examination and Critique

The field of behavioral ethics has seen considerable growth over the last few decades. One of the most significant concerns facing this interdisciplinary field of research is the moral judgment-action gap. The moral judgment-action gap is the inconsistency people display when they know what is right but do what they know is wrong. Much of the research in the field of behavioral ethics is based on (or in response to) early work in moral psychology and American psychologist Lawrence Kohlberg’s foundational cognitive model of moral development. However, Kohlberg’s model of moral development lacks a compelling explanation for the judgment-action gap. Yet, it continues to influence theory, research, teaching, and practice in business ethics today. As such, this paper presents a critical review and analysis of the pertinent literature. This paper also reviews modern theories of ethical decision making in business ethics. Gaps in our current understanding and directions for future research in behavioral business ethics are presented. By providing this important theoretical background information, targeted critical analysis, and directions for future research, this paper assists management scholars as they begin to seek a more unified approach, develop newer models of ethical decision making, and conduct business ethics research that examines the moral judgment-action gap.

     

Financial Reporting of Small Business Entities in Canada*

Financial reporting for small business entities (SBEs) has been the subject of much debate and concern by the accounting bodies (institutes) in Canada, the United States, the United Kingdom, Ireland, Australia, New Zealand, and other countries. The main issue for the standard setters is whether they should have one set of standards for all companies or two sets of standards (one for big companies and one for SBEs). The main objective of our study is to examine whether SBEs in Canada should have their own new set of Generally Accepted Accounting Principles (GAAP) or should they continue to use big GAAP used by public companies. To address this issue in the Canadian environment, we sent out a questionnaire to a sample of managers and owners of small businesses, preparers, auditors, and users of small business accounts. These stakeholders were asked to identify the purposes of SBE financial statements, their levels of satisfaction or dissatisfaction with the present accounting standards for SBEs, the burdens imposed on the preparers of the financial statements, and the weaknesses of the present standards. Furthermore, they were asked to give the expected advantages of adopting new standards, after having ranked four models of financial reporting of SBEs. The results are quite interesting. Stakeholders indicated that financial statements of SBEs are prepared mainly for taxation purposes and borrowing. They are not satisfied with the present standards because they are costly to comply with and very complex. The burden of producing SBE financial statements can be reduced by simplifying the present standards. The new standards would mean a shorter and simpler form of financial statements. It is hoped that the results of this study will provide the standard setters in Canada and other countries with an indication of the future direction for SBE reporting and accounting.