WHAT CAN THE PUBLIC SECTOR DO TO INCREASE NEW BUSINESS STARTS?
Sammis B. White
University of Wisconsin-Milwaukee
P.O. Box 413
Milwaukee, Wisconsin 53201-0413
414 229 3884
Paul D. Reynolds
Center for the Study of Entrepreneurship
Milwaukee, WI 53233
The generation of new businesses is a concern to virtually every community, but the process of generating these new businesses and jobs is not well understood. What can the public sector best do to increase the number of new business starts within its province? To further explore that question we have focused on the stages of the entrepreneurial process and the transitions between the stages.
As we have explored the participation of adults in entrepreneurial activity, we find that approximately 4% of all adults at a point in time are what we term 'nascent entrepreneurs", persons who are taking explicit steps to start a new business. Having determined this, the next critical question is what proportion of this 4% actually start new businesses. Is it 3%, 10%, 20% or even higher? We explore in this paper what the rate of transformation is, how long it takes to move from nascent entrepreneurship to new business owner, and why it is that as persons become increasingly involved in that move from no involvement to nascent entrepreneur to new business owner they have an increasingly negative view of the entrepreneurial climate, the general support they receive for their activities. The last question explored is what, if anything, the public sector might do to help increase the rate of transformation from nascent entrepreneur to new business owner.
Based on a survey of 543 new business owners, 93 persons who are attempting to start a new business ('nascent" entrepreneurs) or did attempt to start a new business (discouraged entrepreneurs), and 1278 typical adults randomly chosen from the state's population, we have assembled representative samples which allow us to make statements about the rates of participation of adults in various stages of entrepreneurial activity. These survey results have just been supplemented by interviews with approximately 60 of the persons interviewed as nascent entrepreneurs in our original survey 12-18 months ago. These follow-up interviews give us a much better measure of the transformation rate of nascent entrepreneurs into new business owners and the length of time it takes them to make that decision.
Since our data are so fresh, we do not yet have a definitive answer as to the transformation rate of nascent entrepreneurs. But a preliminary examination of those nascent entrepreneurs who have become new business owners since the time of our last interviews suggests that the rate may exceed 20%. Aiding that transformation rate seems to be knowledge of and use of the various business assistance programs. The factors which tend to make individuals more negative about the entrepreneurial climate the more they are involved in it appear to be numerous.
The higher rate of transformation from nascent entrepreneur to new firm owner, the greater the impact in terms of job creation. The high rate discovered is encouraging because less time, energy, and money are wasted attempting to start new businesses. This rate of transformation can apparently be influenced if more is done to promote the knowledge of and use of business assistance programs, since those who do use them appear to transform more often. Attempts to change the entrepreneurial climate may also have an effect on transformations.
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