GOVERNMENT CONTRIBUTIONS TO GROWTH

One of the few ways in which government might be involved in the creation and support of new businesses is through the provision of a variety of business assistance programs. These programs may be operated by the public sector or just aided by government advertising or referrals. In any case such programs have proliferated and may be an important contributor to entrepreneurship.

We previously found that persons taking steps to found a new business were more likely to have followed through and started a business the greater the number of helpful contacts they had made with various business assistance programs (White and Reynolds, 1994). The same is true, we learned above, about survival: survivors had made 3.9 of these helpful contacts, on average, compared with 2.6 for decedents. Growth patterns do not appear to be as strongly influenced by contacts with business assistance programs. The highest-growth firms did make slightly greater contact (4.1) with assistance programs than the average for all new firms (3.9) The more inclusive definition of high-start firms, however, were not distinguishable from low growth firms on the basis of the number of contacts. Those firms which grew consistently and inconsistently also were virtually equal in their use of business assistance programs. But those firms which had high starts were somewhat more likely to have made use of the assistance programs (4.0) than the low-start firms (3.4). Unfortunately, in terms of a prescription for government aid, none of these differences in use of assistance programs is statistically significant.

The argument for greater support for business assistance programs must rest mostly, therefore, on the increased transformation of nascent entrepreneurs into fledgling firm owners and the increased transformation of fledgling new firms into established new firms. Once these transformation are made, the role of the business assistance programs is not as decipherable in terms of growth paths taken. But the strong link between the two higher rates of transformation and business assistance programs does suggest that these programs may play a role and that an investment of government resources might further market the availability of these programs and, where needed, further bolster the programs themselves.

CONCLUSION

What we must conclude from this exercise is that we are unable to offer a formula to entrepreneurs which will give them a high probability of starting a firm with high, rapidly, and consistently increasing sales. The necessary ingredients, if, indeed, any exist for reaching the three goals concurrently, are not factors on which we gathered information in our survey. Our results give some hints as to what may make a difference in relationship to survival (older heads with less experience starting other businesses), to higher levels of first-year sales (larger teams, greater use of corporation or Subchapter S legal status, greater first year assets, greater initial borrowing, higher initial employment, and more rapid employment growth), to faster rates of sales growth (heads with college degrees, choice of Manufacturing, FIRE or Business Services, have greater sales to out-of-state customers, and be considered to have a more high-tech emphasis), and to consistent increases in sales (higher percentage of team leaders with college degrees, lower first year sales, higher compound annual sales growth, and the identification of more, major start-up problems). But what may make the most difference in sales patterns are probably the characteristics of the persons involved, characteristics such as strength of motivation, perseverance, creativity, energy, and similar difficult-to-measure character traits, as others (such as Keeley and Knapp, 1994) suggest. Also important may be luck and timing. Our list of 36 factors does not seem to yield any convincing picture of what it is that entrepreneurs can do to achieve sales or employment goals which they may set.

The experience one group of entrepreneurs have had which are reflected in our data can be of use as benchmarks. Individuals can learn if they are growing faster or slower, encountering more or fewer problems, obtaining more or less financing, selling more or less to out-of-state customers, and the like. But unfortunately, much of this information cannot be turned into a fail-safe prescription for faster or more consistent growth or even survival. The nature of entrepreneurship seems too complex for the development of sure-fire formulas.

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Last Updated 4/1/97 by Cheryl Ann Lopez

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