FEATURE
PAPER
Firm Births, Firm Deaths, and Institutions in a Dynamic
Model of the U.S. States
The
following paper was presented at the 2007 USASBE/SBI Conference.
It was written by Noel D. Campbell of the University of Central Arkansas, Kirk C. Heriot of Columbus State University and Tammy M. Rogers of North Georgia College & State University.
Abstract
This research investigates
the relationship between economic freedom and entrepreneurial
activity. We measure economic freedom as a combination of
favorable
legal institutions and tax and regulatory policies, and measure entrepreneurial
activity as the birth and death of micro-businesses as a
percentage of total businesses within a state.
Using Kreft and Sobel (2003) as a point of departure, we evaluate the relationship
between economic freedom and firm deaths and firm births for the U.S. states
for the
period 1990–2001. As expected, the freer a state is the more new small businesses
the
state’s entrepreneurs form. Furthermore, the freer a state is, the fewer small
businesses
die, ceteris paribus.
Executive Summary
DIn very simple terms this research takes the anecdotal evidence that exists about the
importance of economic freedom on entrepreneurial activity and empirically evaluates it.
The findings of this research strongly support the hypothesis that state governments erect
barriers that reduce economic freedoms which make starting a new venture very difficult.
In addition, the findings show that economic freedom is strongly related to the deaths of
business ventures in the 50 U.S. states over an eleven-year period (1990 – 2001). These
findings go a long way to support the argument that where you choose to start a new
business venture may have a profound impact on whether you are successful or not.
Entrepreneurs would be wise to carefully consider whether they are starting a new
business venture in a state that has the economic freedoms necessary to initiate and
sustain the business.
Read
the Entire Paper...
TIP
OF THE WEEK
Pitfalls in Selecting New Ventures
Lack of Objective Information
Many entrepreneurs lack objectivity. Engineers and technically trained people are particularly prone to falling in love with an idea for a product or service. They seem unaware of the need for scrutiny they would give to a design or project in the ordinary course of their professional work. The way to avoid this pitfall is to subject all ideas to rigorous study and investigation.
No Real Insight into the Market
Many entrepreneurs do not realize the importance of developing a marketing approach in laying the foundation for a new venture. They show a managerial shortsightedness. Also, they do not understand the life cycle that must be considered when introducing a new product or service.
No product is instantaneously profitable, nor does its success endure indefinitely. Entrepreneurs must not only project the life cycle of the new product, but also recognize that introducing the product at the right time is important to its success. Timing is critical. Action taken too soon or too late will often result in failure.
Inadequate Understanding of Technical Requirements
The development of a new product often involves new techniques. Failure to anticipate the technical difficulties with developing or producing a product can sink a new venture. Entrepreneurs cannot be too thorough when studying the project before initiating it. Encountering unexpected technical difficulties frequently poses time-consuming and costly problems.
Poor Financial Understanding
A common difficulty with the development of a new product is an over optimistic estimate of the funds required to carry the project to completion. Sometimes entrepreneurs are ignorant of costs or are victims of inadequate research and planning. Quite often they tend to underestimate development costs by wide margins. It is not unusual for estimates to be less than half of what is eventually required.
Lack of Venture Uniqueness
A new venture should be unique. Uniqueness is the special characteristics and design concepts that draw the customer to the venture, which should provide performance or service that is superior to competitive offerings. The best way to ensure customer awareness of differences between the company's product and competitors' products is through product differentiation. Pricing becomes less of a problem when the customer sees the product as superior to its competitors. A product that is unique in a significant way can gain the advantage of differentiation.
Ignorance of Legal Issues
Business is subject to many legal requirements. One is the need to make the workplace safe for employees. A second is to provide reliable and safe products and services. A third is the necessity for patents, trademarks, and copyrights to protect one's inventions and products. When these legal issues are overlooked, major problems can result.
| Donald
F. Kuratko & Richard M. Hodgetts. Entrepreneurship:
Theory, Process, Practice 7th Edition.
2007. Thomson South-Western. p211-213. |
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CONFERENCES
ASU
|
| Who: |
Arkansas
State University
|
| What: |
Identity
Solutions Symposium & Workshop
|
| Where: |
Jonesboro,
Arkansas, USA |
| When: |
February
21-22, 2007 |
|
|
|
IIEE
|
| Who: |
Illinois
Institute for Entrepreneurial Education
|
| What: |
2007
Youth Entrepreneurship Conference
|
| Where: |
Lincolnshire,
Illinois, USA |
| When: |
May
3-5, 2007 |
|
|
|
N/A
|
| Who: |
Alfred
University College of Business, Penn State University-Altoona
Department of Business and Engineering, & University
of Guam School of Business and Public Administration
|
| What: |
Doing
Business in the Global Economy
|
| Where: |
Marriott
Hotel Resort and Spa, Tumon, Guam |
| When: |
March
5-6, 2007 |
|
|
|
APBO
|
| Who: |
Asia/Pacific
Business Outlook
|
| What: |
Asia
Pacific Business Outlook 2007 Conference
|
| Where: |
University
of Southern California
Los Angeles, California, USA |
| When: |
March
26-27, 2007 |
|
|
|
ICSB
|
| Who: |
International
Council for Small Business (ICSB)
|
| What: |
World
Conference
|
| Where: |
Turku,
Finland |
| When: |
June
13-15, 2007 |
|
|
|
CALLS FOR PAPERS
ISOBD
|
| Who: |
International
Society of Business Disciplines |
| What: |
Semi-Annual
Professional Meeting
|
| Where: |
Las
Vegas, Nevada, USA |
| When: |
March
18-21, 2007 |
Submission
Deadline:
February 18, 2007
|
|
|
|
AA
|
| Who: |
Allied
Academies
|
| What: |
2007
International Conference
|
| Where: |
Jacksonville,
Florida, USA |
| When: |
April
11-14, 2007 |
Submission
Deadline:
March 1, 2007
|
|
|
|
CNU
|
| Who: |
Christopher
Newport University
|
| What: |
"Truth & Consequences" Exploring
Economic Development from Entrepreneurship to
Relationship
|
| Where: |
Newport
News, Virginia, USA |
| When: |
September
28-30, 2007 |
Submission
Deadline:
April 1, 2007
|
|
|
|
AMA
|
| Who: |
Atlantic
Marketing Association
|
| What: |
Atlantic
Marketing Association Annual Meeting
|
| Where: |
New
Orleans, Louisiana, USA |
| When: |
September
26-29, 2007 |
Submission
Deadline:
April 17, 2007
|
|
|
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