ED 311 297 CE 053 399 AUTHOR Ashmore, M. Catherine, Ed ...DOCUMENT RESUME. ED 311 297 CE 053 399....

DOCUMENT RESUME

ED 311 297 CE 053 399

AUTHOR Ashmore, M. Catherine, Ed.; And OthersTITLE New Strategies for a New Decade. Proceedings of the

United States Association for Small Business andEntrepreneurship Annual National Conference (4th,Cleveland, Chio, Cctober 8-11, 1989).

PUB DATE Oct 89NOTE 148p.

PUB TYPE Collected Works - Conference Proceedings (021) --Reports - Research/Technical (143) -- Reports -Descriptive (141)

EDRS PRICE MF01/PC06 Plus Postage.DESCRIPTORS Blacks; *Business Administration; Consultants;

*Demonstration Programs; Elementary SecondaryEducation; Employment Practices; *Entrepreneurship;*Females; *Futures (of Society); PostsecondaryEducation; Rural Areas; *Small Businesses

ABSTRACT

This document includes the following papers:"Challenge to the Small Business Workplace" (Quinn); "EndowedPositions in Entrepreneurship and Related Fields" (Katz);"Entrepreneurial Loan Request Image Variables as Perceived by Bankersand Entrepreneurs" (Klassen, Davis); "Entrepreneurship Education andMicrobusiness Development as Part of a Immunity RevitalizationProgram" (Turnbull et al.); "Environmental Contact Selection as aFunction of the Small Business Owner's Decision Style" (Brodzinski etal.); "Management and Small Business Success" (Fernald, Solomon);"Personnel Practices in the Small Business Manufacturing Sector"(Carr, Hunsicker, Padgett); "Rural Entrepreneurship Research" and"Unified Approach for Deve]oping Rural Entrepreneurship in the U.S."(Wortman); "Use of Business Plans by Rapidly Growing Firms" (Olson);"Women Entrepreneurs: An Examination of Different Age Groups"(Kuratko, Seeborg); and abstracts of the following--"EntrepreneurshipEducation Research" (Borycki); "Examination of Corporate

Entrepreneurship" (Kuratko); "How Consultants Contribgte to NewVenture and Small Business Development" (Chrisman, Carsrud);"Opportunity: The Neglected Concept in Entrepreneurial Management"(Neil); "Patterns of Organizational Stress in the GrowingEntrepreneurial Firm" (Merz, Watkins); "Perceptions of BoardInfluence in Inc. 500 Firms" (Ford, Priesmeyer); "Be All that You CanDream" (Pfrogner); "Black Entrepreneurship" (Bewayo, Pritchett,O'Daniel); "Consultants to Small Business" (McMillin); "ConsultingIssues" (Farber et al.); "Creation of a Business Image" (Passewitz,Heimlich); "Curriculum Development in Entrepreneurship" (Davis etal.); "Eastern Caribbean Investment Promotion Service Workshop"(Spain et al.); "Entrepreneurship Education Winners from Kindergartento College" (Schwammbeter); "Entrepreneurship Ethics" (Ulrich etal.); "Entrepreneurship Western Style" (Connelly, Hamilton); "TheIndividual Entrepreneur" (Chrisman, Naumes); "Keys to Profitability"(Fiorito et al.); "Michigan Business Counselor Certification TrainingIrogram" (Grose); "Model Adult and Community College EntrepreneurlipPrograms" (Hague.; "Model College and University EntrepreneurshipPrograms" (Devlil); "Model Elementary and Secondary EntrepreneurshipEducation Programs" (Mahr); "New Strategies for a New Decade"(Harris); "Nurturing the Female Entrepreneur" (Sharpe); "OVET Programin Ohio" (Albert); "Partners in Policy" (Adams); "Influence andStatus of Female entrepreneurs in the 1990s" (Moore, Buttner, Adams);"Structuring for Corporate Venturing" (Hofer Day); "Valuation ofClosely Held Corporations" (O'Brien, Nichols); "Ohio Ventures inBusiness Ownership Project" (Price); and "Women in Business: Meetingthe Challenge" (Gillman). (SK)

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Theme: NEW STRATEGIES FOR A NEW DECADE

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Si COPY AVAILABLE

New Strategiesfor a

New Decade

Conference Proceedings

Fourth Annual National ConferenceUNITED STATES ASSOCIATION FOR SMALL

BUSINESS AND ENTREPRENEURSHIP

Edited byM. Catherine Ashmore

George SolomonAndy Bangs

Cleveland, OhioOctober 8-11, 1989

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TABLE OF CONTENTS

USASBE OFFICERS

MISSIONS OF USASBE DIVISIONS

COMPETITIVE PAPER REVIEWERS

COMPETITIVE PAPERS '.

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A CHALLENGE TO THE SMALL BUSINESS WORKPLACE: 9FAIR COMPENSATION FOR ILLEGAL ALIENS

John F. Quinn, University of Dayton

ENDOWED POSITIONS IN ENTREPRENEURSHIP 15

AND RELATED FIELDSJerome A. Katz, St. Louis University

ENTREPRENEURIAL LOAN REQUEST IMAGE VARIABLES 23AS PERCEIVED BY BANKERS AND ENTREPRENEURS

Michael L Klassen, University of Northern IowaCharles H. Davis, University of Northern Iowa

ENTREPRENEURSHIP EDUCATION AND MICROBUSINESS 31DEVELOPMENT AS PART OF A COMMUNITYREVITALIZATION PROGRAM EXEMPLIFIED BY"THE NEW BUSINESS FOR CHESTER PROJECT'

Larry K. Turnbull, RDC Institute, Inc.A. Douglas Bender, Widener UniversityWilliam C. Payne, RDC Institute, Inc.John T. Meli, Widener UniversityCarl E. Russell, RDC Institute, Inc.

ENVIRONMENTAL CONTACT SELEC HON ASA FUNCTION OF THE SMALL BUSINESS OWNER'SDECISION STYLE

James D. Brodzinski, Kennesaw State CollegeRobert F. Scherer, Kennesaw State ColleLleFrank A. Wiebe, University of MississippiDean Kruger (Student), University of Mississippi

MANAGEMENT AND SMALL BUSINESS SUCCESS:A PRELIMINARY INVESTIGATION

Lloyd W. Fernald, Jr., University of Central FloridaGeorge T. Solomon, The George Washington University

PERSONNEL PRACTICES IN THE SMALL BUSINESSMANUFACTURING SECTOR

James W. Carr, West Georgia CollegeFrank R. Hunsicker, West Georgia CollegeThomas C. Padgett, West Georgia College

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RURAL ENTREPRENEURSHIP RESEARCH : ANINTEGRATION INTO THE ENTREPRENEURSHIP FIELD

Max S. Wortman, Jr., Iowa State University

A UNIFIED APPROACH FOR DEVELOPING RURALENTREPRENEURSHIP IN THE U.S.

Max S. Wortnian, Jr., Iowa State University

THE USE OF BUSINESS PLANS BY RAPIDLYGROWING FIRMS

Philip D. Olson, University of Idaho

WOMEN ENTREPRENEURS: AN EXAMINATION OFDIFFERENT AGE GROUPS

Donald F. Kuratko, Ball State UniversityIrmtraud Streker Seeborg, Ball State University

COMPETITIVE PAPER ABSTRACTS

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75

87

93

ENTREPRENEURSHIP EDUCATION RESEARCH: CURRENT 103TRENDS AND METHODSChristine Borycki, University of North Texas

AN EXAMINATION OF CORPORATE ENTREPRENEURSHIP: 104NEEDS AND STRATEGIES

Donald F. Kuratko, Ball State University

HOW CONSULTANTS CONTRIBUTE TO NEW VENTURE 105AND SMALL BUSINESS DEVELOPMENT

James J. Chrisman, University of South CarolinaAlan L. Carsrud, Universities of Durham & Southern California

OP?ORTUNITY: THE NEGLECTED CONCEPT INENTREPRENEURIAL MANAGEMENT

Thomas C. Neil, Ph.D., Clark Atlanta University

PA1 1ERNS OF ORGANIZATIONAL STRESS IN THEGROWING ENTREPRENEURIAL FIRM: A TEST

OF THE ORGANIZATIONAL LIFE-CYCLE HYPO THESISG. Russell Merz, Eastern Michigan UniversityVivian Watkins, Eastern Michigan University

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107

PERCEPTIONS OF BOARD INFLUENCE IN INC. 500 FIRMS 138A FACTOR ANALYSIS

Roger H. Fo.d, James Madison UniversityH. Richard Priesmeyer, James Madison University

WORKSHOP PRESENTATION ABSTRACTS

"BE ALL THAT YOU CAN DREAMLawrence Pfrogner, Lorain County Joint Vocational School

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111

BLACK ENTREPRENEURSHIP: UNEXPLOITED ETHNIC 112AND INSTITUTIONAL RESOURCES

Edward D. Bewayo, Montclair State CollegeForest M. Pritchett, Seton Hall UniversityRichard M. O'Daniel, Norfolk State University

CONSULTANTS TO SMALL BUSINESS: OPPORTUNITIES 113AND CHALLENGES

Dale B. McMillin, Ohio Psych Consultants, Inc.

CONSULTING ISSUES: PITFALLS AND REWARDSBarry Farber, University of Maine-AugustaAnita White, David M. Griffith & Associates, Ltd.Carol Matteson, Bloomsburg UniversityJoan Gillman, University of Wisconsin-MadisonAlan C. Filley, University of Wisconsin-Madison

114

CREATION OF A BUSINESS IMAGE: A STRATEGY 115FOR ENTREPRENEURS

Gregory R. Passewitz, The Ohio State UniversityJoe E. Heimlich, The Ohio State University

CURRICULUM DEVELOPMENT IN ENTREPRENEURSHIP 116Charles H. Davis, University of Northern IowaGerald E. Hills, University of Illinois-ChicagoD. Ray Bagby, Baylor UniversityCathy Ashmore, The Ohio State UniversityWayne Long, University of Calgary

EASTERN CARIBBEAN INVESTMENT PROMOTIONSERVICE WORKSHOP

Michelle Spain, MCAPKathleen Tuitt, ECIPSGeorge Kimble, Caribbean ElectronicsJeff Jackson, DAC International

ENTREPRENEURSHIP EDUCATION WINNERS FROMKINDERGARTEN TO COLLEGE

Betsy Schwammberger, NFIB

ENTREPRENEURSHIP ETHICS-A PANEL DISCUSSIONThomas A. Ulrich, Loyola CollegeW. F. (Fred) Kiesner, Loyola Marymount UniversityPeter Arlow, Youngstown State UniversityThomas J. Stuhldreher, Clarion University of PennsylvaniaGeorge S. Cole, Shippenburg University

ENTREPRENEURSHIP WESTERN STYLEDonald F. Connelly, Western High SchoolWilliam H. Hamilton, Purdue University

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THE INDIVIDUAL ENTREPRENEUR: A CASEWRITING WORKSHOP

James T. Chrisman, University of South CarolinaWilliam Naumes, Skidmore College

KEYS TO PROFITABILITY: CURRENT RESEARCHPROGRAMS HELPING SMALL BUSINESSES STAYVIABLE

Susan S. Fiorito, The University of IowaAnn E. Fairhurst, Indiana UniversityAntigone Kotsiopulos, Colorado State UniversityLinda K. Good, Michigan State University

MICHIGAN BUSINESS COUNSELOR CERTIFICATIONTRAINING PROGRAM

Nancy J. Grose, Michigan Small Business Development Center

MODEL ADULT AND COMMUNITY COLLEGEENTREPRENEURSHIP PROGRAMS

David Hague, Wisconsin Department of Voc/Tech Education

MODEL COLLEGE AND UNIVERSITYENTREPRENEURSHIP PROGRAMS

Stuart Devlin, New Mexico State University

MODEL ELEMENTARY AND SECONDARYENTREPRENEURSHIP EDUCATION PROGRAMS

Doug Mahr, California Department of Education

NEW STRATEGIES FOR A NEW DECADE INENTREPRENEURSHIP EDUCATION

E. Edward Harris, Illinois Institute for EntrepreneurshipEducation

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NURTURING THE FEMALE ENTREPRENEUR 129Margaret H. Sharpe, University of Mississippi

THE OVET PROGRAM IN OHIO 130Leon Albert, State Director

PARTNERS IN POLICY: A FIRST STEP 131Dr. R. Jerry Adams, National Business Association,

Dallas, Texas

A RESEARCH PERSPECTIVE-THE INFLUENCE & STATUS 132OF FEMALE ENTREPRENEURS IN THE 1990'S

Dorothy P. Moore, The CitadelE. Holly Buttner, University of North Carolina-GreensboroJanet S. Adams, Kennesaw State College

STRUCTURING FOR CORPORATE VENTURINGCharles W. Hofer, University of GeorgiaDiana L. Day, Wharton School

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VALUATION OF CLOSELY HELD CORPORATIONSJames P. O'Brien, Valumetrics, Inc.Robert Nichols, Valumetetrics, Inc.

THE OHIO VENTURES IN BUSINESS OWNERSHI'PROJECT

Sonia Price, Ohio Department of Education

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WOMEN IN BUSINESS: MEETING THE CHALLENGE 136Joan Gillman, University of Wisconsin-Madison

USASBE CONSTITUTION

USASBE BYLAWS

CONFERENCE PLANNING COMMITTEE

CONFERENCE CHAIRM. Catherine AshmoreThe Ohio State University

COMPETITIVE PAPERS CHAIRGeorge T. SolomonGeorge Washington University

WORKSHOP CHAIRAndy BangsUpstart Publishing

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141

LOCAL ARRANGEMENTS CO-CHAIRMichelle SpainMCAP

LOCAL ARRANGEMENTS CO-CHAIROliver "Bo" HaganBaldwin Wallace College

EXHIBITS CHAIRMargaret BedingfieldThe Equitable-Cleveland

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USASBE OFFICERS

President Alan C FilleyUniv. ty of Wisconsin-Madison

President-Elect Eugene G. GomolkaThe University of Dayton

Past President Joseph C. LatonaUniversity of Akron

Vice President Programs M. Catherine AshmoreThe Ohio State University

Vice President Finance Eugene FregettoDe Paul University

Vice President Membership Timothy MesconSalisbury State University

Vice President Development John F. BrennanSkidmore College

Vice President Publications Donald F. KuratkoBall State University

Vice President Individual Entrepreneurship Fred KiesnerLoyola Marymount

Vice President Research Max S. Wortman, Jr.Iowa State University

Vice President Corporate Entrepreneurship James J. ChrismanUniversity of South Carolina

Vice President Entrepreneurship Education E. Edward HarrisNorthern Illinois University

Vice Presiaent Small Business D. Ray BagbyBaylor University

Vice President Minority Small Business Michelle SpainMCAP

Vice President Business Development Robert PricerUniversity of Wisconsin

Vice President Special Programs William A. Wat:1Susquehanna University

ICSB Representative George SolomonAlexandria, Virginia

Executive Secretary Joan GillmanUniversity of Wisconsin-Madison

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;MISSIONS OF USASBE DIVISIONS

SMALL BUSINESS DIVISION

The division is concerned with the management and growth of small firms andfamily-owned businesses after the venture initiation phase. Major topicsinclude, but are limited solely to: all of the functional areas of business asrelated to small firm management, obtaining capital for growth and expansion,franchising operations, mergers and acquisitions, and succession planning. Ourgoal is to develop and improve not only the theory of small business, but alsothe practice of small firm management within the United States. At times therewill be some overlap with other divisions, such as: public policy issues relatedto small firms (government); areas of concern involving minority owner-managers(minority); curriculum or instruction matters (education); etc. It is our inten-tion to work with the other divisions at these boundaries in joint efforts,rather than to usurp their prerogatives.

INDIVIDUAL ENTREPRENEURSHIP DIVISION

The mission of the individual Entrepreneurship Division of the United StatesAssociation for Small Business and Entrepreneurship is to expand the field ofknowledge and increase interactions among individual entrepreneurs, family busi-ness members, and educators by encouraging and sharing theory development, empir-ical research, and business applications and experiences.

CORPORATE ENTREPRENEURSHIP DIVISION

The division's domain is the identification and development of new opportu-nities, new resources, and new structures for doing business in areas beyond thecurrent field of operations of an existing company. Topic areas include internalcorporate venturing, intrapreneurship, strategic renewal, joint ventures, venturedivisions, innovation, product championing, structuring internal ventures, inte-grating internal ventures, spin-offs, and scope swapping.

ENTREPRENEURSHIP EDUCATION DIVISION

The division's domain is the study and delivery of entrepreneurship educa-tion programs including the instructional strategies for implementation of thefive stages of the lifelong entrepreneurship education model, which includegaining prerequisite basic skills, discovering entrepreneurship competencies,learning entrepreneurship competencies, becoming self-employed, and solvingbusiness problems.

BUSINESS DEVELOPMENT DIVISION.

The Business Development Division seeks to stimulate interaction among thoseconcerned with business and economic development related to entrepreneurship andsmall business. Managers and officials of local, state, and region:A govern-ments; managers and officials of federal government organizations; those con-cerned with university-related programs related to small business development andconsulting; and consultants and other interested parties will find this divisionappropriate to their interests.

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USASBE 1989 COMPETITIVE PAPER REVIEWERS

Diane GarsombkeUniversity of Maine

Gene GomolkaUniversity of Dayton

Hal BabsonColumbus State Community College

Dennis H. TootelianCalifornia State University

Keith B. MylesUniversity of Kansas

George S. VozikisMemphis State University

Harold P. WelschDe Paul University

Jeffrey C. SchumanBentley College

Kenneth J. LachoUniversity of New Orleans

Michael CurridSusquehanna University

Ray MarquardtUniversity of Wyoming

Wallace GrowneySusquehanna University

Daryl G. MittonSan Diego State University

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Carlos MooreBaylor University

Hugh a NeillUniversity of Connecticut

J Michael AlfordThe Citadel

Donald L. BradyMillersville University

Robert RussellRider College

P. JacobyPurdue University-North CentralCommunity College

James D. BrodzinskiKennesaw State College

Roger FordJames Madison University

Bruce PhillipsU. S. Small Business Administration

Dr. K. Mark WeaverUniversity of Alabama

Lanny HerronUniversity of South Carolina

Julio De CastroUniversity of South Carolina

Thomas W. GarsombkeUniversity of Maine at Presque Isle

Kendall Roth Beth B. FreemanUniversity of South Carolina Portland State University

Joyce Beggs ,red L. FryWest Virginia University Bradley University

John Lenti Jeff GibbsUniversity of South Carolina Ut,:7ersity of Ala-SBDC

Charles Edwards Richard MasonUniversity of South Carolina Susquehanna University

Ron Wilder Nancy Bowman-UptonUniversity of South Carolina Baylor University

W. Fred Keisner Cathy Lynn Nee leyLoyola Marl/mount University Northern IL. University

Alan Riley Ralph C. Hook Jr.University of WI-Madison University of Hawaii

Kathleen Brannen Herb JohnsonCreighton University Central Conn. State University

Herbert E. Kierulff John BebrisSeattle Pacific Univei-aity The Ohio State University

Tom C. Dandridge Erik K. WinslowS. U.N. Y- Albany George Washington University

Best Paper Judges1989 USASBE Conference

Chair James Chrisman, University of South Carolina

Frank Hoy, Georgia State University

Charles Hofer, University of Georgia

Richard Robinson, University of South Carolina

Trudy Vesper, Western Michigan University

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COMPETITIVE

PAPERS

United States Association for Small Businesses and EntrepreneurshipI989

A CHALLENGE TO THE SMALL BUSINESS WORKPLACE:FAIR COMPENSATION FOR ILLEGAL ALIENS

John F. Quinn, University of Dayton

ABSTRACT

Many small business employers who have tradition-ally relied on illegal aliens to make a profit will beaffected by the decision in Rajni Patel v. QualityInn South. Although Quality Inn South was a hotelfranchise, the agriculture, apparel manufacturing,construction, restaurant and household industriesare equally vulnerable. The court provided to illegalaliens the same Fair Labor Standards Act (FLSA)benefits that legal workers enjoy (minimum wage,overtime and others). The small business workplacemay be changed dramatically because of the Patelcase.

INTRODUCTION

This paper focuses on the fair compensation stan-dards for legal aliens in the work place. The legalcapacity of -...;-. alien to maintain an action forviolations of the Fair Labor Standards Act (FLSA)in light of the newly enacted Immigration Reformand Control Act of 1986 (IRCA) will affect all smallbusinesses.

A major case that illustrates the new standards inthe treatment of illegal aliens is Patel v. Quality InnSouth Inc. Rajni Patel worked in the hotel businessat the Quality Inn South where he performed jani-torial and maintenance duties for two years. Hewas working illegally since he overstayed theduration of his visa. His complaint against QualityIn was that he was not paid the minimum wage andovertime compensation as provided for under theFLSA. Cuality Inn contended that since Patel wasworking illegally, he could not seek protection underthe FLSA. The United States Court of Appealsheld that Patel was protected under the provisionsof FLSA despite his illegal status. This decisioncould seriously affect any Quality Inn type smallbusiness after the IRCA.

Patel will affect any business that hires illegal aliens,but especially a small business franchise, like Qual-ity Inn South. It simply was put out of business asa result of Patel and is now in the process of chang-ing its name to a nonfranchised small hotel. Thetrend for major manufacturing companies to goabroad does not apply to franchise hotels. They

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stay at home, but often stay and cut costs by hiringillegal aliens. The new fair compensation standardsthat apply to quality Inn South limit the employmentoptions available, especially to small businesses whomust keep their eyes on the bottom line.

PATEL V. QUALITY INN SOUTHAS A LANDMARK DECISION

This case was on appeal from the United StatesDistrict Court for the Northern District of Alabama(17). Mr. Patel, an undocumented alien broughtsuit to recover unpaid back pay, liquidated damagesand attorney's fees under the Fair Labor StandardsAct. The court entered a summary judgment forthe employer, Quality Inn (18). Mr. Patel came tothe United States from India on a visitor's visa in1982. He remained in the United States six weeksafter the expiration of his visa. He began to workfor the defendant, Sumani Corporation, at its hotel,the Quality Inn South, in Birmingham, Alabama.He performed various tasks at the hotel untilOctober of 1985 (18).

In August 1986 Patel brought this action against theQuality Inn South. He contended that his employerviolated the wage and overtime provisions of theFair Labor Standards Act and sought to recover$47,132.00 plus liquidated damages and attorneys'fees. In March, Quality Inn filed a motion forsummary judgment because undocumented aliens(illegal aliens) were not entitled to protection underthe FLSA. The court ordered the Department ofLabor to file a statement of its position on the issue.It stated that undocumented aliens were covered bythe provisions of FLSA and thus entitled to protec-tion. In May of 1987, the court granted employer'smotion for summary judgment and held that undoc-umented aliens could not recover for violations ofthe FLSA. The court could not find any authorityfor the notion that illegal aliens were protected bythe FLSA. It relied on the Immigration andReform Act of 1986 (IRCA) (13). IRCA makes itunlawful to hire illegal aliens and provides sanctionsagainst employers who violate the statute (18).

The district court found that the application of thewage and overtime provisions of the FLSA wouldconflict with the Immigration and Nationality Act

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United States Association for Small Businesses and Entrepreneurship - -1989

(INA) as amended by the IRCA. The court'srationale was that, if they allowed this action underFLSA, it would encourage support of illegalimmigration by small employers and undermine thepolicies under INA. The court stated that,

"the IRCA was intended to remove an economicincentive for illegal entry into the United States .. .and to correct a policy in the past of allowing illegalaliens the full protection of all laws designed toprotect workers legally within this country. Thus,the IRCA was designed to correct or amelioratethose provisions of the INA which in effect con-doned and encouraged unr-acumented aliens toenter this country to work. This court's decisionholding that an illegal alien cannot obtain a remedyfor violations by his employer of the provisions ofthe FLSA is fully consistent with the objectives offederal immigration law as now amended" (17).

The appellate court in reviewing the appeal,examined the FLSA in order to decide whetherillegal aliens were entitled to the protections underthis law. The act requires employers to pay theiremployees a statutorily prescribed 1. inimum wage,and prohibits employers fr^ quiring 'reiremployees to work more than forty hours per weakunless the employees are compensated at one anda half times their regular hourly .ate. For violationsof the provisions, the FLSA imposes criminal sanc-tions and allows mployees to bring an action torecover any unpaid minimum wages and overtime,plus liquidated damages and attorneys' fees (18).

The court also looked at section 3(e) of the FLSAunder which the term "employee was defined toinclude any individual employed by an employer."In addition, the United States' Congress set forthspecific exceptions. The court stated that, sinceCongress use a broad general definitional framework, followed by several specific exceptior.s, thisstrongly suggests that Congress intended an all-encompassing definition of the term "employee thatwould include all workers not specifically excepted(18).

The court also examined the FLSA's legislative his-tory. One Senator commented that the definitionof employee "is the broadest definition that has everbeen included in any one act (5)." The SupremeCourt also has interpreted the word "employee" verybroadly and reinstated the Congressional definition:"any employee employed by an employer (15)."

The court relied on another case that involved asmall business (20). In Sure-Tan, Inc. v. NLRB, thecourt held the position of the National Labor

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Relations Act, "Since undocumented aliens are notamong the few groups of workers expresslyexempted by Congress, they plainly come within thebroad statutory definition of employe,: (20)." TheSupreme Court in Sure-Tan weighed heavily infavor of Mr. Patel's argument that Congress did notintend to exclude undocumented aliens from theFLSA's scope (18).

The Department of Labor had already supportedMr. Patel's position. The Department traced backthe history to 1942, when the Wage and HourAdministra:or stated that alien prisoners of warwere covered by the act and therefore were entitledto be paid the minimum wage (7). The court alsofound that the Department had enforced that FLSAon behalf of undocumented workers on many occa-sions (18). In light of the evidence before the court,the defendant's contention that Congress did notintend to protect undocumented workers is contraryto the right of authority. The court could not findanything that suggests that Congress intended toexclude illegal aliens from that statutory definitionof "employee." Quality Inn tried to argue that inlight of IRCA, undocumented aliens are no longerentitled to recover under FLSA (18).

The court found that nothing in IRCA or its legis-lative history suggests that Congress intended tolimit the rights of illegal aliens under the FLSA.This is the case despite the number of small busi-nesses that pay less than minimum wages to illegalaliens. The court found that the FLSA's scope forundocumented aliens to be consistent with IRCAand the policies behind it. In examining thelegislative history, the court recognized that thesealiens would continue to be protected under FLSA(2). It based this claim on the House Educationand Labor Committee Report to the IRCA whichstated, the committee does not intend that any pro-vision of this Act would limit the power of State orFederal labor agencies such as the Wage and HourDivision of the Department of Labor in conformitywith existing law, to remedy unfair practicescommitted against undocumented employees forexercising their rights before such agencies. To dootherwise would be counter-productive ofour intentto limit the hiring of undocumented employees andthe depressing effect on working conditions causedby their employment (8).

Additionally, under section 111(d) of 1RCA, Con-gress specifically authorized the appropriation ofadditional funds for increased FLSA enforcementon behalf of undocumented aliens. Section 111(d)reads, "there are . . . such sums as be necessary tothe Department of Labor for enforcement activities

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United States Association for Smali 13usines,o-s end Ent -pretteursh:p--1989

of the Wage and Hour Division . . . in order todeter employers from exploiting aliens (17)." Fur-thermore, it is important to analyze the pcliciesbehind IRCA, which Congress enacted to reouceillegal immigration by eliminating the employers'economic incentive to hire undocumented aliens.To achieve this goal, there are many sanctions foremployees who hire illegal aliens. The FLSA'scoverage of undocumented workers has a similareffect in that it offsets what, according to the court,is the most attractive feature of such workers--theirwillingness to work for less theta the minimumwage. If thr FLSA did not cover illegal aliens,employers' would have an incentive to hire them.Employers of small businesses especially could findit economically advantageous to hire and underpayundocu .ented workers and run the risk of sanctionsunder IRCA (18).

The court recognized the continuing goal of discour-aging illegal immigration by allowing illegal aliens torecover under FLSA. The court doubted that mayillegal aliens enter United States' employment inorder to gain the protection of America's labor laws.Instead, it is the hope of getting any job, at anywage, that encourages illegal aliens to cross theCorder (18). Since these illegal aliens were"employees" under FLSA, they could sue employerslike Quality Inn for unpaid "ages and liquidateddamages. The judgmer.t of the district court wasreversed and the case was remanded for a deter-mination on the merits (18). Again this case putQuality Inn out of business. Quality Inn is typical ofmany small business franchises.

SHIFT IN PUBLIC POLICY FORSMALL BUSINESS

The number of illegal aliens in the United States isdifficult to measure. Most experts agree that thereare at least three million and as many as six million(6). These illegal aliens have entered the labormarkets and have become invaluable small businessemployees. The major labor markets include fourindustries: agriculture, apparel manufacturing,construction and the restaurant industry. The fourindustries employ thirty percent of the undocu-mented workers. Over thirty-nine per cent of theemployees on the apparel industries are illegal. Theleather and footwear industry employs thirty-sevenper cent of the illegal alien workers. Approximatelyfifty-two percent of the workers in private house-holds are illegal aliens (11). The unfortunate fact isthat many of these undocumented workers are beingsubjected to adverse wage and working conditions(10). The Immigration and Naturalization Serviceestimated that thirty per cent of the undocumented

workers are paid less than the minimum wage (13).Some argue that this percentage is unreliable andcould be much higher. The Percentage of undocu-mented workers subject to overtime without com-pensation has been found to b even higher 'Theseindustries and others like the hotel/motel businesshave -elied on illegal aliens in order to make anyprofit at all. An important reason for a smallmanufacturer, e.g., in the apparel industry to movefrom the North and East to the South and South-west is the ready supply of illegal aliens. In 1938the Fair Labor Standards Act was enacted to pre-vent inhumane treatment of employees by settingup minimum wage and overtime provisions (8).Many employees believe that undocumented work-ers do not fit under the protections of FLSAbecause of the workers illegal status. Therefore,many undocumented workers have not benefitedfrom the law. Additionally, many workers havebeen too fearful of deportation to attempt to bringan action and assert their rights under FLSA (4). Ithas been suggested that undocumented workersshould be protected under FLSA because allowingthis protection would help to control the illegal alienpopulation. If illegal aliens received the same laborprotection as those in the United States legally, theemployer's incentive to hire the workers woulddecrease (4), either because of the threat of lawsuitsor the promotion of humanitarian values (4).

The Immigration Reform and Control Act of 1986states that it is illegal for an employer to hire anundocumented worker. Employers who are foundto be knowingly employing undocumented workerscan be punished with sP.nztions (5). Section 1324(a)of the INA makes it a felony to willfully import,transport, or harbor an undocumented alien (12).Under IRCA, the sanctions imposed are civil penal-ties in different amounts. The smaller the business,however, the less the penalties. Criminal penaltiescan also be imposed (12). Socre believe neverthe-less, that the effectiveness of the sanctions isquestionable (4). Economic forecasts indicate thatemployer sanctions will reduce the employment ofillegal aliens by fifteen to twenty-five per cent only(11). In the light of this information, there arepublic policy reasons why undocumented workersshould be protected under FLSA. Additionally,protection will be provided because it is consistentwith tile policy set forth under IRCA.

Let us bok first to the policy behind the enactmentof the FLSA in order to understand what type ofbusiness behavior the law is trying to deter. TheFLSA is commonly referred t. as the wage andhour law which applies to employers, engaged incommerce, or in the production of goods for

United States Arsociation for Small Businesses and Entrepreneurship1989

commerce. Congress did not intend to rely ondetailed federal supervision of payrolls fit); violationsof FLSA, but instead, chose to rely on employees'complaints. It is therefore critical for the enferce-ment of FLSA. that employees will not lc penalizedor discriminated against by their employt -s eitlerbecause they are satisfied just with having a job orbecause they fear deportation. This fear often com-pels them to accfpt their lower wages, rather thanfile a complaint about their employer's abuses (4).

Despite all the stereotypes, stigma and negativeconnotations that the popular culture associates withbeing an illegal alien, a claim for wages earned is alegitimate claim. The workers have earned the rightto that wage and the employers have gained a bene-fit from the work done by the worker for which theemployer must compensate. It is the property rightof the undocumented worker that is taken awaywhen the worker is denied a minimum wage andovertime (4). The alien in fact earned that wage.When employers do not compensate workers fortheir time, they are taking advantage of or exploitingthe worker's situation. Since workers do not havethe proper documents to entitle them to work inthis country, the employer seizes an opportunity touse the employees to an unfair benefit or economicgain.

Many aliens enter this country because of the highunemployment in their countries and opportunitiesfor employment in this country. If workers wereprotected under FLSA, immigration would be deter-red because employers would be less motivated tohire illegals. If, on the other hand, there were nolegal barriers to the influx of illegal aliens, smallbusiness employers especially would encourageillegal immigration for clear economic reasons (4).These reasons clearly motivate companies to goabroad or overseas. Why not bring those cheaplaborers over here?

In applying the FLSA, courts have relied on thedecision in Fleming v. Hawkeye Pearl Button Co.This stated, "the manifest declared purpose of thestatute was to eradicate from interstate commercethe evils attendant upon low wages and long hoursof service and industry. . . . The statute is remedial,with a humanitarian end in view. It is thereforeentitled to a liberal construction (9)." According toA. H. Phillips, Inc. v. Walling, the FLSA has beenpraised for insuring that all working men andwomen receive a "fair day's pay for a fair day'swork." The court also added that because of itsremedial nature, any exemptions form the FLSAmust be "narrowly construed (1)." In the eyes ofPresident F. D. Roosevelt, FLSA was enacted in

12

response to the one third of the people in the U.S.in 1937 who were "ill housed, ill clad, and illnourished (22)." The FLSA was thus a response toexploitive conditions and a cry for "certain minimumlabor standards for all employees who fell under theprotection of the Act (14). It also had an economicmotivation behind it as well. It was designed toeliminate the unfair methods of competition thatrequire(' employees to work long hours for only afew cents an hour. Supporters of the legislation felt0..at it would increase efficiency in productionmethods (4).

ActoTding to some, if the courts exclude undocu-mented workers from the protection of FLSA, theywill be placing the aliens in the position ofbezoming the "ill housed, ill clad, ill nourished."These are the very conditions that Congress tried toeliminate. Should illegal aliens be denied protectionwhen they do not have the proper documents, thusfurnishing an economic advantage to a smallbusiness by the denial (4).

Should the economic advantage override the socialperformance of business? This common conflictbetween the economic and social performance of....siness is a frequent dilemma. Should the United

States place itself in the forefront of the promotionof humanitarian values and establishment of broadhuman rights laws (4)? The United Nations Uni-versal Declaration of Human Rights states that"everyone is entitled to the rights and freedoms setforth in this declaration, without distinction of anykind." These human rights include the right tofavorable conditions of work, the right to equal payfor equal work, the right to just and favorablerenumeration ensuring an existence worthy ofhuman dignity, and the right to form and join tradeunions (3). To do otherwise would be to encour-age substandard living conditions for certain humanbeings (4). This broad based ethical ideal is hardlyconvincing to a small business entrepreneur who hasan eye on the bottom line.

Another argument for allowing undocumentedworkers the protection under FLSA provisions hasbeen termed "the participation model." Under thismodel, aliens' rights are not determined by whetherthe alien is a citizen or not. Rather aliens retainmore rights "as they increase their identity with oursociety (4)." This argument was the premise onwhich the Supreme Court decided Plyer v. Doe.The Court decided whether a Texas statute wasunconstitutional because it denied undocumentedaliens access to public schools. The court statedthat the school children were not to blame for theirpresence in the United States and that education of

United States Association fc r Small Businesses and Entrepreneurship-1989

its children is a matter of "supreme importance" tothe public (16).

The court was also concerned with the quality of lifeexperienced by school children. The children wereliving in a community that consisted of citizens.Failure to provide education to the children wouldbe detrimental to the society as a whole. The court,therefore, held the statute unconstitutional (16). Ifthe children of illegal aliens should participate incertain benefits, i.e. school, should not the parentsparticipate in certain benefits, i.e. wages?

Thus the same humanitarian policy exists behindFLSA. The same opportunity to seek a decentstandard of living for all human beings underlies thelaw today, as in 1938. If we do not allow theundocumented workers the protection under FLSA,we are forcing them to continue to live at a povertylevel. The children of these workers will also bebrought up in the same conditions. By turning ourbacks to the exploitation within certain smallbusiness industries as the argument goes, we areonly hurting our own society, because we will allowpoverty to increase. Perhaps the crime associatedwith poverty as well will increase. In fact, there isevidence that the workplace is responsible for muchof the malaise in America: the crime among youngpeople, mental stress in all levels of society, chronicmental depression. Stress in the workplace createsstress in the community (16).

Employers will continue to take advantage of thesevulnerable people in order to produce a cheaperproduct or for the competitive advantage. Employ-ers would be encouraged to hire undocumentedworkers for the competitive advantage that anenvironment relatively free of labor safeguards mayoffer. This in turn could effect the Americanworkers who could be placed out of the job marketfor those particular jobs (18). Are we going toencourage American workers into our basic indus-tries or are we going to encourage illegal aliens forthe competitive advantage that they offer of cheaplabor? It is difficult in this transition period to beethical when the economic performance is soimportant.

The legal standards are, however, row clear: illegalaliens are entitled to the same standards as legalaliens under FLSA. Respect for this standard willavoid the kind of consequences that happened toQuality Inn South. Going out of business! QualityInn was an opportunistic employer exploiting avulnerable alien. There is a clear public policyagainst discrimination based upon alienage. This iseither under the Civil Rights Act of 1965 Title VII

13

or under the broad reach of section 1981 of theReconstruction Laws as recently interpreted by theSupreme Court. The Court interpreted the term"race" to include national origin and alienage. Thusthe trend is to protect aliens against discrimination.The fact that one does not have a document, doesnot justify the denial of dignity, respect and theother intangibles protected against by antidiscrimination laws.

The employee's position, especially an illegal alienin this age of bureaucracy, complex government reg-ulation, limited constitutional protection, and almostnonexistent press coverage, can be described as vul-nerable (19). Should the small business workplacehave the same fate as Quality Inn South? Mr.Patel, "an illegal alien who resided in Birminghammay have quite a bit of back pay coming to him . . .

$47,132, plus damages and attorney's fees (21)."Since a "three-judge panel . . . voted that theSupreme Court has historically adopted an expan-sive definition of the term 'employee' and thatCongress has clearly intended for undocumentedaliens to be protected under the FLSA (21)," whathappened to a franchise like Quality Inn South maybe repeated for any exploitative employer.

REFERENCES

[1] A. H. Phillips, Inc. v. Walling, 324 U.S. 490(1945).

[2] Birmingham Post-Herald. "Illegal Alien May GetBack Pay," 6/14/88.

[3] Comment, A Human Rights Approach to theLabor Rights of Uudoc.nnented Workers, 74 CalifL. Rev. 1715, 1723 (1986).

[4] Comment, Protection for Undocumented Work-ers Under FLSA: An Evaluation in Light of IRCA,25 San Diego Law Rev. 379 (1988).

[5] 81 Cong. Rec. 7656-57 (1937).

[6] Crowin, The Numbers Game: Estimates ofIllegal Aliens in the U. S., 1970.1981, 45 Law &contemp. Probs. 223 (1983).

[7] Donavon v. Burgett Greenhouse Inc., 759 F. 2d1483.

[8] Fair Labor Standards Act, 29 I. S.C. { { 201-219(1982).

[9] Fleming v. Hawkeye Pearl Button Co. 113 F. 2d53 (8th Cir. 1940).

United States Association for Small Businesses and Entrepreneurship-1989

[10] H. R. Rep. No 99-682 (II), 99th Cong., 2d Sess.8-9.

[11] Hill & Pearce, Enforcing Sanctions AgainstEmployers of Illegal Aliens, Econ. Rev. (May 1987).

[12] Immigration and Nationality Act, INA{{201-360, 8 U.S.C. {{1101-1503.

[13] Immigration and Reform Act of 1986, Pub. L.No. 99-603, 100 Stat. 3359.

[14] Mitchel v. U.S., 361 U.S. at 292 (1937).

[15] NLRA {2(3).

[16] Plyer v. Doe, 457 U.S. 202 (1982).

[17] Rajni Patel v. Quality Inn South, 660 F. Supp.1528 (1988)..

[18] Rajni Patel v. Quality Inn South, 846 F. 2d 700(1988).

[19] Robert Smith. Workrights, 45. Sage Publishing,New York, NY..

[20] Sure Tan, Inc. v. NLRB, 467 U.S. 883.

[21 The Birminhain News. "Illegal Local Worker,Others Now Can Sue Employers," 6/14/88 p. 1A.

[22] Tyson, The Fair Labor Standards Act of 1938:A Survey and Evaluation of the First Eleven Years,1 Liab. Li. 278 (1950).

United States Association for Small Businesses and Entrepreneurship--1989

ENDOWED POSITIONS IN ENTREPRENEURSHIPAND RELATED FIELDS

Jerome A. Katz, Saint Louis University

ABSTRACT

Results are reported from a survey of endowedpositions such as chairs and professorships inentrepreneurship and related disciplines (familybusiness, small business, free enterprise, privateenterprise). Ninety-three positions were identified.Using information on a subset of the positions,endowment amounts and growth in the number ofendowed positions are detailed. Cautions in the useof these analyses are included to help improve thedata gathering and analysis of future endowed posi-tion surveys.

INTRODUCTION

Just as nations take a small measure of their successin their counts of Olympic medals, academic:(largely deans) and the media see counts of profes-sorships and chairs as indicative of the strength ofa field. For the field of entrepreneurship, Vesperand Kierulff provided an overview of endowed posi-tions in the 1985 edition of Entrepreneurship Educa-tion (Vesper 1985). However the field's growthsince that time has been explosive. Recent guesti-mates of roughly 100 chairs have made media head-lines and have stood without verification or rebuttal.This paper seeks to analyze a substantial sample ofendowed academic positions related to the diverseinterests of the field of entrepreneurship.

POSITION SAMPLING: THE CASEOF ENTREPRENEURSHIP AND

RELATED DISCIPLINES

In this report, entrepreneurship is thought toinclude a number of related disciplines such asfamily business, free enterprise, private enterprise,and small business. Given the professional infra-structure of the field, these groups tend to havetheir own meetings, newsletters and to a lesserextent their own journals. However, they are funda-mentally concerned with the same general class ofbusiness firms, and the same situations of organiza-tional birth, earl ,I stage development, and organiza-tional transition: such as generational succession orbuy-out.

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Over the past two years, a number of small projectswere undertaken to ascertain the structure of thegeneral field of entrepreneurship. Many of thefindings were published in the Academy of Manage-ment's Entrepreneurship Newsletter. In one project(Katz 1989a), a complete list of dissertations in thefic1..d of entrepreneurship, including the above vari-ants, was obtained for 1987 and 1988. Of 19 titlesin 1988, only 5 were from management programs.The other fields represented included: individualand family studies, business education, politicalscience, accounting, sociology, home economics,adult education, American studies, and vocationaleducation. The 24 titles in 1987 added the fields ofagriculture, economics, environmental sciences,experimental psychology, geography, industrialengineering, industrial psychology, Latin Americanhistory, marketing, and nursing.

The second review (Katz 1989b) was of the BestPaper Proceedings of the national meeting of theAcademy of Management (Hoy 1988). Of 73papers listed in the 1988 edition, 3 were from theEntrepreneurship Division. Of the remaining 70,five other papers reflected entrepreneurship themesor used entrepreneur samples. Topically, entrepre-neurship was one of the largest sources of well-received ideas at the 1988 meeting.

The implication of these two reviews is clear,entrepreneurship as a general field transcends theboundaries of a single discipline. Given how widelyand correctly the concept is used in academia, itprobably is not wise to limit entrepreneurship ioonly those interested in small business or onlyfamily busir ess, or only high-growth businesses. Itis evident that good work in entrepreneurship,widely defined, is hardly limited to people who areself-declared entrepreneurship researchers.Informed by this, the collection of information onendowed position cast its net widely. This meantthat holders of positions in entrepreneurship, smallbusiness, family business, free enterprise and privateenterprise were included. Additionally, severalindividuals who are identified as being involved inentrepreneurship research or teaching but holdingendowed positions in other areas wet:: included.


Some examples, such as Arnold Cooper of Purdue,will seem instantly understandable. Others, such asDonald Hambrick of Columbia may be more opento debate. The goal of this listing is to be asinclusive as possible.

THE NATURE OF ENDOWED POSITIONS

There are two general categories of endowed posi-tions: chairs and professorships. Although theremay be some conventional wisdom as to the natureof each (e.g., chairs have greater endowments thanprofessorships), in practice across the nearly 100schools, there is wide variation on what each type ofposition entails. The purposes of an endowment,arbitrarily arranged from least to most ambitiousinclude:

Activity Support: This occurs when theamount of money available is relativelysmall. The activities supported mightinclude funding for: travel, long distancecalls, publication and mailing of papers,organizational membership, books or peri-odicals, computers and student researchassistance.

Salary Bonus: In some cases small endow-ments may generate funds used to supple-ment faculty salaries drawn from theuniversity's general budget.

Support Staff: Moderate endowment in-comes may be sufficient to support re-search, editorial, and/or secretarial staffona full- or part-time basis.

Sala:y Replacement: When endowmentsare substantial, the holder's entire salarymay be drawn against the endowment in-come. In some schools some of the facultysalary freed by the endowment is providedto the holder for support expenses. In thecases of the largest endowments, theendowment income is sufficient to providenot only salary replacement, but alsosupport staff and activity support.

The mission of an endowed position can vary dra-matically. Traditionally, holders of chairs in Free orPrivate Enterprise have included many of thisnation's most determined supporters of small busi-ness. In part this action reflects the mandatebehind the position as well as the type of peopleselected for such positions.

However, the personality of the holder of theposition can strongly effect the direction of theoffice. For example, Gerald Hills holds the DentonThorne Chair in Entrepreneurship and SmallerEnterprises at the University of Illinois at Chicago,while Donald Sexton holds the William H. DavisChair in the American Free Enterprise System atOhio State University. My own view of their workis that Sexton, despite holding a chair of freeenterprise, is a key proponent of the need to focuson firms with the entrepreneurial potential tobecome very big, such as Apple or Compaq. Onthe other hand, despite the entrepreneurial bent ofhis chair, Hills has promoted a populist approach tothe field, focusing attention on the needs and valueof the smallest enterprises.

Endowed positions also adhere to the traditionaltriad of work in academia: teaching, research, andservice. The impact of the endowed position is inmany cases to permit the holder to achieve a dif-ferent balance of the three tasks. It is not uncom-mon for endowment income to be used to buy-outsome of a holder's teaching time. Others use thefunds to pay for research assistants.

Ironically, discussion with several holders ofendowed positions indicates that the one task whichgrows uncontrollably is the service component.Because of the external ties and added attentionwhich are part of an endowed position, holdersoften become even more involved in community anduniversity service. Examples of this type of serviceinclude media relations, such as Frank Hoy'sappearances on Cable New Network as an occa-sional consultant on entrepreneurship issues, uni-versity development such as Jeff Timmons's workhelping universities to generate endowed positionsof their own, and Howard Stevenson's advisingalumni groups on entrepreneurship issues. Otheractivities include business awards, business plancompetitions, and serving as officers for the manyorganizations in the field of entrepreneurship.

The service element often also contains a clinicalcomponent. Virtually every endowed positionholder maintains some consultation to potential andexisting businesses. To some the greater publicservice is seen as part of their own obligation asrecipients of the community's largesse. Othersconsult pro bono in some cases, and for fees orequity in others. In almost every case, the clinicalcomponent of service is seen to increase with theattainment of the endowed position. This comes inpart because of the greater awareness of the com-munity and fellow academics of the endowed posi-tion holder.

United States Association for Small Businesses and Entrepreneurship1989

THE IMPORTANCE OFENDOWED POSITIONS

For an emerging field such as entrepreneurship,endowed academic positions serve symbolic andstructural purposes. Endowed positions representan important symbol of legitimacy as an academicdomain. Business schools have traditionally pridedthemselves on their close association with the worldof business. When businesses or executives arewilling to donate hundreds of thousands of dollarsto fund a position, the act of these importantexternal stakeholders funding positions legitimizesthe field.

Endowed positions in their own right are an impor-tant symbol to deans and university executives, sinceeach position contributes to the financial well-being,quality of faculty recruiting, and reputation of theuniversity. For university executives, endowed chairand professorship counts reflect a simple and robustway of evaluating the quality of a school, in muchthe same way that an Olympic medal is thought toreflect the quality of the athlete's country.

Another symbolic impact of the endowed positionoccurs at the level of the holder. Achieving anendowed position is one of the most desired out-comes for academics. Receiving an endowed posi-tion reflects and legitimi s the contributions of theholder, and garners the holder considerable addi-tional attention and respect from people within andwithout academia.

Many of these symbolic outcomes are buttressed bystructural impacts of having endowed positions.The financial and other resources of an endowmentgenerally make possible greater research, service,and dissemination activities on the part of theposition holders. This greater focusing of resourcesmake it possible for the holders of endowed posi-tions to have a greater than average impact on theirfield.

Endowment funds can be used as seed monies mak-ing possible the acquisition of larger or moredemanding external grants. With the time andother resources an endowment provides, it ispossible for the endowment rich to get richer.Additionally, endowed positions guarantee thecontinuation of the &ld by assuring support toentrepreneurship faculty for research, teaching andservice.

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DATA GATHERING

The initial analysis of endowed positions was basedon a list of positions compiled from a number ofsources:

The Vesper and Kierulff appendix inVesper's Entrepreneurship Education -1985,

The ICSB's Entrepreneurship Chairs andCenters (Kierulff 1985),

Enterprise and Education published by theassociation of Private Enterprise Education,

ENTRENOTES ACE's Networking news-letter for faculty and educators,

The biographies included in Babson'sFrontiers of Entrepreneurship Research from1980 to 1987,

Lists developed by Donald Sexton at a 1987Acadcm y of Managem ent EntrepreneurshipDivision Board meeting, and more widelyknown formal lists developed by CalvinKent at Baylor and Fran Jabara at WichitaState,

Job postings that came to the USASBE andAcademy officers, and finally,

The educated guesses of a number ofsenior people in our field, including KarlVesper, John Ward, and Jeff Timmons.

The resulting list and analyses, while detailed, islikely not to be comprehensive. The staff of theInstitute of Entrepreneurial Studies at Saint LouisUniversity, including Steven Carl, Crystal Dillard,Teri Horlocker, Katey Kaletta, Jeanne Rhodes, andTorn Walk, have called sites identified to confirmthe details of the endowed positions.

INTERPRETIVE CAUTIONSIN USING THE DATA

The various issues raised above frame a set ofcautionary concerns which should be heeded byanyone intending to use this analysis. First, not allpositions are created or kept equal. The fundingbacking the various positions can vary dramatically.There are examples of $500,000 chairs, and $1.5million professorships in the analyses below. Per-haps worst of all, it is possible that some of the


positions analyzed below are not fully funded (weasked for existing chairs, but this is subject tointerpretation).

Second, the Gata includes endowed positions,meaning professorships as well as chairs. Someprofessorships may be the equal of some chairs interms of financial backing, involvement with aresearch center, or status within the school.

Third, following Vesper and Kierulff, endowed posi-tions are included when either it is related toentrepreneurship (Vesper and Kierulff give theareas of entrepreneurship, small business, and freeenterprise, to which I have added family business)OR it is held by someone who is strongly related tothe field of entrepreneurship through research ceducation (e.g., Andy Van de Ven of Minnesota,Arnold Cooper of Purdue).

In the future perhaps the best way of deciding whoshould be included in the list would be based on athree-level analysis suggested by Frank Hoy ofGeorgia State. The first level, used in this study, isself-recognition by the position holder, eitherdirectly or through publications submitted by theposition holder or through organizational member-ships held. The remaining two levels would reflectmore of a stakeholder-analytic approach. In this,the second level of assessment might be the Dean ofthe appropriate school, and other relevant academicdecision makers such as college or university vice-presidents of development or research. The thirdlevel would seek the input of those who fundendowed positions to identify what areas theythought the position would address. Users of thisanalysis should understand that the underlying datawas not cross validated using stakeholderassessments.

ANALYSIS 1: THE GROWTH OFENDOWED POSITIONS

From virtually no schools teaching entrepreneurship20 years ago, the recent survey by the SBA foundover 400 universities, 4-year and 2-year collegesteaching entrepreneurship. The growth of endowedpositions in entrepreneurship and related fields hassurpassed the expectations of most of the people inthe field. The analysis identified nearly 100 chairsin 68 schools. Virtually all the chairs are inuniversities or 4-year colleges. The schools wereasked for the starting date of the endowed position.Based on incomplete information (48 of 93 posi-tions), the growth in the late 1980's has beenastounding. Below is a plot of the 48 endowed

18

position start-ups. Where in 1976 one positionexisted in this subsample, by 1981 eight positionsexisted, growing to 22 by 1986, and more thandoubling to 48 just two years later (see Figure 1).

Evident from a review of the analysis is the con-centration of endowed positions at some schools.For much of its history as an academic discipline,entrepreneurship and related topics were taught inmost schools by one full-time member,usually supported by one or more part-time adjunctfaculty. In such settings, achieving a critical mass ofacademics interested and working in entrepreneur-ship topics has been unlikely. With the growth ofendowed positions, a number of schools are struc-turing two or more people who will be devoting full-time study to entrepreneurship or its related fields.What also becomes possible is the catalytic andorganizing efforts of multiple endowed faculty tobring together and support with contacts and tangi-ble resources other faculty from across the campusinterested in entrepreneurship. The potential bene-fits of such efforts can be seen in the work of thecross-campus organizational behavior group atStanford.

The concentration of endowed positions is notable.Eleven schools of the 68 report two or moreendowed positions in entrepreneurship. These aregiven in Table 1.

What these universities hold is a potential for majorcontribution to the field of entrepreneurship. Thiscan occur from the presence of a critical mass forintellectual work, or even from a straightforwardpooling cif substantial financial resources. Thesepositions include the best endowed of those on thelist (see Analysis 2: Known Endowments), as wellas some of the most prestigious schools offeringentrepreneurship programs. It is worth consideringif the schools with multiple endowed positions canorganize themselves to make an even greater contri-bution to the field in general.

ANALYSIS 2: KNOWN ENDOWMENTS

Of all the information sought on endowed positions,the hardest to obtain was financial information.Sources for this information include reports fromthe schools, public announcements, and listings inthe newsletters mentioned above. In a surprisingnumber of instances, respondents contacted directlywere not sure of the amount of the endowment.There arc a number of reasons for this beside theobvious desire for pay secrecy. Reasons giveninclude:


Additional funding has been promised, butthe exact amount is unknown.

Funding includes an inflation adjustment.While the base amount is known, the exactamount for the prior year is not known.

Funding originally pi omised was to be paidin installme=ts, and one or more install-ments are either behind schedule, or willnot be paid.

Funding originally promised for a chair orprofessorship has been rerouted to otherpurposes by the school.

Endowment money is supplemented withfunds from the general operating funds ofthe school, so that in practice the pay islarger than the endowment would indicate.

Endowment money comes from generalendowment funds of the university or thestate, so that no particular amount ofendowment is earmarked for the position,but a particular salary is paid fromendowment funds.

The major question even with known endowmentamount is th-; return the university gets on theirmoney. In the group below, rates of return rangefrom 4% to 8%-plus. Knowledge about endowmentreturns was even sketchier than about endowmentamounts, and should be treated with extremeuncertainty.

Babson College, Hamilton Chair -

$1 million

Belmont College, Moensch Visiting Profes-sorship - $150,000

Beloit College, Coleman/Fannie MayCandies Chair - $1 million

De Pau: University, Coleman/Fannie MayCandies Chair - $1 million

Fairleigh Dickenson, Rothman Professor-ship - $1 million

Georgia State, Private Enterprise Chair -$1 million

Georgia State, Zwerner Professorship -

$500,000

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Harvard, Dimitri V. d'Arbeloff MBA Classof 1955 Professor of Business - $1.5 million

Harvard, MBA Class of 1954 Visiting Pro-fessor of Business Administration. -

$1.5 million

Harvard, MBA Class of 1960 Prole' or ofBusiness Administration - $1.5 mi'

Harvard, MBA Class of 1961 Visiting Pro-fessorship - $1.5 million

Harvard, Serafim-Rock Chair in Entrepre-neurship - $1.5 million

H.E.C. (Canada), Hunter Chair - $500,000

Louisiana State University, Saurage Chair -$1 million

Marquette University, Coleman/FannieMay Candies Chair - $1 million

Northwestern, Levy - $1 million

University of Cincinnati, Goering (?) -

$500,000

University of Illinois at Chicago, ThorneChair - $1 million

University of !evil., Pioneer Hi-BredChair - $500,000

University of Southern California, deBellProfessorship - $500,000

University of Southern California,Simonson Chair - $1.2 million

University of Texas, Professorships -

$100,000; Professorships - $500,000 -

$1 million

CONCLUSIONS

Chair counts or endowed positions counts, likecounts of Olympic medals, probably tell more aboutthe person seeking the count than about the peopleor medals or chairs which make up the count. Still,the count serves a symbolic purpose as a simplifiedyardstick for the growth of the field. This analysisdetails 93 positions. Of these, 49 are chairs and 42me professorships. Two positions were given as"either." Of the 93, four are outside the United


States, and this may represent a major underidenti-fication. As of April 15, 1989, 14 chairs and9 professorships arc open.

Based on data on 49 of 93 positions, the medianendowment for a professorship is $325,000 (range4.100,000 to $1.5 million) and for a chair it is$1 million (range $500,000 to $1.5 million). Arough extrapolation for the 91 specified positionsusing these numbers would suggest a total endow-me..st of $13,650,000 for professorships, and$49,000,000 for the chairs. The broadly definedfield taken as a whole would boast an estimatedendowment of $62,650,000. These numbers shouldbe viewed as speculative given the size and type ofsample reporting figures.

While the number taken by itself sounds impressive,it suggests an average endowment of $688,461.Using 5.5% as the median return on endowmentinvestments, chair holders are receiving $55,000 ayear on average from the endowment, while profes-sorship holders receive only $17,875 on average.Given these numbers Harvard's suggestion that allnew chairs or ptviessorships be funded with at least$2.5 million makes reasonable sense. It should alsobe noted that very few chairs have any provision forcost-of-living adjustments. As a result, a number ofthe chair holders have their endowment income sup-plemented by school operating funds.

Buying power problems notwithstanding, the growthof endowed positions in entrepreneurship andrelated fields suggests the short term vitality andlong term viability of the field in academia. Todayfinancially the largest part of the academic infra-structure of entrepreneurship is tied up in theseendowed positions. The existence of these positionsin 64 colleges and universities across America andfour schools in other lands demonstrates the growthand diffusion of the idea of entrepreneurship as anacademic discipline. These positions will structurea permanent place for entrepreneurship education,research and service in business schools of allstatuses in all ar as of America.

It is likely that the growth in the number ofentrepreneurship related endowed positions willcontinued at a fast pact for a number of year more.Figure one suggests that endowed Position growthlags somewhat behind the growth of the entrepre-neurial sector of the economy. Given the realitiesof endowment sizes, returns on the marketplace toget additional endowment funding to remain capa-ble of attracting high-quality faculty.

20

Another factor to recognize is the acceptance ofentrepreneurship and related fields within businessschools. Endowed position s can be found in IvyLeague schools such as Harvard, Dartmouth,Pennsylvania, Yale and Cornell, in major publicuniversities such as Purdue, Wisconsin, Virginia,Texas and Minnesota, and in top private schoolssuch as Carnegie-Mellon, Baylor, Northwestern andUSC. In effect, mcst of the top rated businessschools in the nation have one or more endowedpositions in entrepreneurship. Since the vastmajority of these positions are endowed by businesspeople, and the rate of creation is growing, it isclear that the field of entrepreneurship is beinglegitimized nationally by business schools and theirexternal stakeholders.

The very speed of the growth of endowed positionsholds some interesting prospects. With approxi-mately one-quarter of the positions unfilled, and therate of growth in new positions at a high rate, ashortage of faculty qualified for endowed positionsis likely for the immediate future. Some innovativeapproaches to resolving this are already being tried,such as using accomplished entrepreneurs withoutbusiness Ph.D.'s to take endowed positions. Inother cases, traditional business faculty have under-taken, or have been approached by schools andasked to undertake, some career redirection tobecome more involved in particular types of entre-preneurship issues in order to qualify for availablepositions.

If the population of entrepreneurs is considered, itis also evident that collectively the holders ofendowed positions under-represent important sub-groups in the entrepreneurial community. Thereare few positions oriented toward family businesses,although most firms are such. No positions focusingon minority enterprise or women-owned enterpriseswere apparent in performing the survey. Althoughthe most numerous single type of enterprise is afarm, agribusiness positions are very few. Despitethe tremendous interest that high-technology gene-rates in the entrepreneurial, financial, government,and media communities, few positions focus on thattype of entrepreneurship. This under-representationholds considerable promise as a means of distin-guishing one endowed position (and school) fromanother, as a means of targeting where newendowed positions should be developed (e.g., engi-neering schools, women's colleges), or the type ofinterests or people who should be sought after moreactively to balance the field and better representand relate to the entrepreneurial environment.


On balance, the collection of endowed positionsshould inspire confidence in the development andfuture of the broad field on entrepreneurship.There arc endowed positions throughout the countryand even overseas. Endowed positions can be foundin virtually every type of 4-year college and univer-sity, including the most prestigious business schoolsin America. The rate of emergence of newpositions appears to be growing. Acceptance ofentrepreneurship among business people andschools of business is evident by the existence andprominence of these endowed top-level professor-ships in chairs. If endowed positions are the"Olympic medals" of academe, then the field ofentrepreneurship can justifiably view itself as awinning discipline.

BIBLIOGRAPHY

[1] Association of Collegiate Entrepreneurs.ENTRENOTES: ACE'S Networking newsletter forfaculty and educators. Wichita, KS: Wichita Stint_University. (Used various issues from 1986-1989).

[2] Association of Private Enterprise Education.Enterprise and Education. Marietta, GA: KennesawCollege. (Used all issues from 1986-1988).

21

[3] Babson College. Frontiers of EntrepreneurshipResew-.. 1980. Babson Park (Weliesley), MA:Babson College. (Used all volumes from 1988-1989).

[4] Katz, J. (i989a) Dissertation topics 1988.Academy of Management Entrepreneurship News-letter, 5(2), 11.

[5] Katz, J. (1989b) Editorial. Academy ofManagement Entrepreneurship Newsletter, 5(2), 13.

[6] Katz, J. (1989c) Project: Endowed positions inacademia. Academy of Management Entrepreneur-ship Newsletter, 5(1), 10-11.

[7] Katz, J. (1989d) Endowed positions inacademia: Part 2. Academy of Managemer.: Entre-preneurship Newsletter, 5(2), 14.

[8] Kieru 1ff, H. E. (1985) Entrepreneurship Chairsand Centers. Seattle: Seattle Pacific University/International Council for Small Business.

[9] Vesper, K. H. (1985) Entrepreneurship Educa-tion - 1985. (With special attention to a listdeveloped by Vesper and Kieru 1ff. Babson Park(Wellesley), MA: Babson College.

United States Association for S411 Businesses and Entrepreneurship-1989

t4

UMB 50E

A

0 40F

E

N 30D0WE 20D

P

0 1C

SI

T

oI

NS

ENDOWED POSITIO\S:Entrepreneurship ana Related Fields

76 77 78 79 80 81 82 83 84 85 86 87 88

YEAR (19--)

IIII POSITIONS BY YEAR f-- CUMULATIVE GROWTH

Information available on48 of 93 positions

Figure 1

Table 1

UNIVERSTIIES REPORTING MULTIPLEENDOWED POSITIONS

UNIVERSITY NUMBER

Baylor 6Harvard 5University of Texas at Austin 5University of Pennsylvania 4Babson 2Georgia State 2James Madison 2University of Minnesota Twin Cities 2Univeisity of Southern California 2University of Tennessee, Chattanooga 2University of Virginia 2

22

0 P-1. J


ENTREPRENEURIAL LOAN REQUEST IMAGE VARIABLESAS PERCEIVED BY BANKERS AND ENTREPRENEURS

Michael L. Klassen, University of Northern IowaCharles H. Davis, University of Northern Iowa

ABSTRACT

This paper examines tin.; image entrepreneurs pre-sent to tankers concerning their preparedness toborrow funds. The image is studied comparingassessments by bankers and entrepreneurs them-selves. The findings indicate that bz.,...ers andentrepreneurs generally agree with each other onthe preparedness of entrepreneurs concerningmarketing variables, generally disagree on theirpreparedness concerning management variables, andhave mixed agreement and disagreement on loannegotiation variables depending upon the specificvariable being considered.

INTRODUCTION

Entrepreneurs and bankers are groups with diver-gent goals and attitudes, yet inextricably linked by aneed to work together. Entrepreneurs accept alevel of risk. They often would prefer not to financetheir operations with debt. However, cash flow-2.emands during start-up and operation often makeit necessary to borrow. Bankers are risk averse andshy away from speculative types of boars. Yet, inorder to earn a reasonable return for their stock-holders, and to diversify their portfolio, they needcommercial loans. The quandary that these unlikelypartners find themselves in may well be reflected inthe different ways in which each see the entrepre-neur and the risk associated with their transactions.

A clearer understanding of the relationship thatexists between lenders and entrepreneurial borrow-ers would appear to benefit both parties. To theentrepreneur, banks are an important link to funds.If they do not directly supply needed funds, manybankers can serve as a reference to potential ven-ture capitalists. To the banker, new small busi-nesses represent a potentially profitable market thatis not fully tapped today.

It is the purpose of this paper therefore, to studythe image entrepreneurs present to bankers con-cerning their preparedness to borrow funds from abank. This image study measures marketing, man-agement, and loan negotiation variables related to

23

the proposed loan transaction. It is hoped that byknowing how similar or divergent their views of theborrowing entrepreneur are, both bankers andentrepreneurs will be better able to market them-selves to each other.

CONCEPTUAL BACKGROUND

Personality inventories and studies of entrepreneursare numerous. While the intent in this paper is notto delineate the entire review of such variables here[see: (2) (3)] these studies do establish the credi-bility of behavioral work in the field. Further, theysuggest where differences in personality and behav-ior may separate the entrepreneur from the generalpopulation and corporate management. They alsosuggest that these variables play a significant role inentrepreneurial success (10). These studies do nothowever, establish the perceptions of others con-cerning entrepreneurs and detail the role these per-ceptions play when dealing with the entrepreneur.

The U.S. Government (21) points out that banksprovide up to 90 percent of small business short-term financing and 80 percent of their overall creditneeds. But, it also quickly points out that thesefigures exclude start-up capital. While in WestGermany 44.9 percent of that country's venturecapital funds now come from banks (11).Dunkelberg and Scott (7) state that small businessrepresents a profitable market that has not beenfully exploited by banks. Rose (17) anticipates thatinterstate banking "should increase the supply, andpossibly lower the cost of bank financing for smallfirms."

Articles in bank industry publications continuouslycall for institutions to become more active in allphases of new ventures--establishing SBIC's withstart-up capital potential (22) (4) (9) and throughmore loans for small business operations and expan-sion (13) (5) (15). But, most of what is publishedtoday make practical suggestions of "what" to doand/or not to do when seeking loans (8) (12) (16)(1), or tell banks seeking to stimulate theircommercial loan business "how to" do it (5) (19)(13).

United States Association for Small Businesses and Entrepreneurship

It appears that loan officers frequently use riskrelated factors when processing small business loanrequests. Ulrich and Arlow (20) identified fourmain factors that underlie a typical loan officerdecision. Three of these were risk-related and onecost-related. While at the same time Samuelson,(18) argues that bankers too frequently useinappropriate risk assessments when evaluating loanrequests by small businesses. Instead, he suggeststhat bankers inspect the businesses, follow typicalbusiness transactions, evaluate the people involvedin the management, and adjust financial ratios whenthey are used for comparison.

In an effort to inform the banking industry how theywere viewed by small businesses, Dunkelberg andScott (7) reported the results of the 1980 and '82NFIB (National Federation of Independent Busi-ness) surveys of the banking relationships desired bysmall business owners. They pointed out that themost frequently rated characteristic as "veryimportant" was finding a bank tha "knows you andyour business," followed by "reLable source ofcredit." "Offers the cheapest money" was the thirdmost important characteristic, pointing out thatinterest rates are not the prime characteristic smallbusiness persons and entrepreneurs look for. Interms of performance, rural banks were noted toreceive higher ratings on most characteristics thandid small city, city, and metropolitan banks.Significantly higher "good" ratings were given torural banks on the two important variables of"knows you and your business" and "reliable sourceof credit! Differences in ratings were also notedbetween unit banks and statewide banks.

In 1986, Montagno, Kuratko, and Scarcella (14) sur-veyed banker's and small business owner's attitudeson what constitutes personal characteristics forentrepreneurial success. There was general agree-ment among the groups that oral communicationand listening (communication characteristics),problem analysis and planning (business processcharacteristics), and self-motivation and determina-tion (personal characteristics) were of leadingimportance. Each of these six items were in bothgroup's top ten ratings. The largest perceptualdifferences however, were found on: confidence,caring, insight, leadership, organizing, encourage-ment, innovation, staffing, achievement orientations,delegation, and organizational sensitivity. Confi-dence, caring, and insight were ranked in the smallbusiness owners top ten characteristics, but weremuch lower in the banker's opinions. The author'sconclusion. were that entrepreneurs place moreimportance on less measurable characteristics thando bank loan officers and that entrepreneurs need

24

to concentrate on those items bank officers perceiveas important. Bank loan officers should also eval-uate whether they are looking at the right character-istics that lead to entrepreneurial success.

The research described here continues the conceptof characteristic assessment begun by Montagno,Kuratko, and Scarcella (14). In this study, bankersand entrepreneurs evaluate the image variablesentrepreneurs engender when making loan requests.It is thought that these variables likely affect thiscritical relationship.

METHOD

A census with 21 banks responding and 31 randomlyselected small business entrepreneurs were studiedfrom a region comprising approximately one-third ofa midwestern state. The banks were located inareas where numerous small business operationswere located. Table 1 provides summary demo-graphic data of the entrepreneur/small businessowners and bank /loan officers. Banks and entre-preneurs were screened for prior experientialinstances. Banks were screened to insure "commer-cial loans" had been made for start-up or operatingexpenses to entrepreneurs. Entrepreneurs werescreened to insure they had made a request for sucha loan and for workin- one-to-one situationswith a loan officer--, uccess of their loannegotiation notwithstanding.

Questionnaires were administered separately to loanofficers and entrepreneurs as part of personalinterviews. The questionnaires included variablesrelating to marketing, general business management,and loan negotiation. Each of these areas havebeen identified in management, financial, or busi-ness plan literature as relevant to seeking funds forstart-up capital or operations. Each of the variableswere couched in a statement illustrating behavior,and were measured on a seven point Likert stylescale.

Testing for differences between banker's and entre-preneur's image ratings was made by t-tests.

RESULTS AND DISCUSSION

Figure 1 provides a profile of banker versusentrepreneur perceptions of each entrepreneurialvariable. It displays the mean ratings for each itemand denotes on which statements significantdifferences occur. Table 2 provides a detailedsummary of the t-test results for each statement andthe levels of significant differences.

C)


Marketing Variables

In terms of image variables related to marketing,there appears to be general agreement among thebankers and entrepreneurs. Four of the six state-ments show surprisingly similar opinions. Bankersand entrepreneurs agree that entrepreneurs tend notto conduct market research. Instead, they rely ontheir "feel" of the marketplace, and when researchis conducted, it is often interpreted in a biased way.These findings are similar to Davis (6) who foundthat technological entrepreneurs display a poor levelof marketing understanding in their business plans.It is logical to assume that when research is con-ducted and reported in a biased view, that it isinterpreted in a light that will make the loanapplications more feasible. Further, this findingraises questions about the entrepreneur's perceptionof the typical banker's level of competency in mar-keting information and its proper applications. Is ittruly an attempt to bluff the banker?

There are two issues where significant differencesoccurinternational considerations and likelihood ofproviding a marketing strategy. Both bankers andentrepreneurs agree that entrepreneurs fail to con-sider international markets for their products, thedifference is over the strength of that belief. Thisdifference could perhaps be explained by the degreeof formality in making international considerations.Bankers might like such considerations incorporatedinto the formal materials which are presented tothem, while entrepreneurs tend to concentrate onthe immediate market with the international arenarelegated to the "back of their minds" and/orexpansion plans.

The fact that bankers and entrepreneurs disagreeover the provision of a marketing strategy is madeeven more important when the fact that they are onopposite sides of the scale in their beliefs. If a scalevalue of four is the midpoint or neutral valuebetween definitely yes and no, then entrepreneursappear to think they usually provide a marketingstrategy, while bankers do not. One could arguethat bankers do not need to know marketing stra-tegy for a loan request, but it must be rememberedthat bankers provide capital and bridges to outsidecapital for operations guided by what ever strategyis in place. Again, this rating by the entrepreneursmay reflect their assessment of the level of market-ing competency bankers possess.

Management Variables

Unlike the marketing variables, there appears verylittle agreement among bankers and entrepreneurs

when assessing the image of entrepreneurs as man-agers. There was disagreement on every itemexcept "likely to adopt strategic long-term man-agement approach." And on that issue, both groupsbelieved entrepreneurs failed to make such long-term considerations. This result may well be areflection of the belief that most loan requests areconsidered short-term--to get the business over "thehump." If this view of the loan were true, again thenecessity for long-term strategy presentation likelywould be viewed as unnecessary by theentrepreneur.

There exists a highly significant difference as towhether entrepreneurs are good managers. Bothgroups said they were good, but to very differentdegrees. Entrepreneurs obviously believe in them-selves much more than do bankers. Of course, theconclusion that entrepreneurs are self-assuredindividuals is well-founded in the literature.

Although the differences are not rated as significanton the other items, they are important becauseagain the bankers and entrepreneurial perceptionsfall on opposite sides of the scale midpoint. Bank-ers believe entrepreneurs are overly concernedabout their competition, while entrepreneurs do notthink they are. Entrepreneurs think they are on thewhole, realistic about their chances for success,while bankers think they are not. The ratings onthese issues may signal the confidence that entre-preneurs have about themselves and their ability tocompete or the banker's lack of confidence.

Loan Negotiation Variables

The image of entrepreneurs on making loanrequests is mixed. Bankers and entrepreneurs agreethat entrepreneurs usually do not overestimate theamount of money they need. It appears that theirrequests are considered reasonable in quantity.When this result is coupled with agreement on theentrepreneur being a welcome customer of thebank, it characterizes their financial relationship aspointed out in the earlier literature review. Bankersknow that commercial loans are important andentrepreneurs will at times need loans, thereforebankers are necessary to success.

Significant differences occur in the assessments ofI ow demanding entrepreneurs are and whether ornot they are perceived as good credit risks. Theentrepreneurial image to bankers is one of ademanding customer. On the other hand, entrepre-neurs think they are much less demanding. Theseviews may well reflect their perceptions of "power"in the loan negotiation transaction. Bankers may

25

30

United Stases Association for Small Businesses and Entrepreneurship

not be willing to give up their power, and theentrepreneur may view himself with significantly lessnegotiating power.

A large significant difference is found in theperceptions of entrepreneurial credit risks. Bankersthink they are less of a sound risk, while entrepre-neurs think they definitely are a sound risk. Theentrepreneur's rating on this item was the strongeston the entire questionnaire. Such a rating couldreflect frustration with the typical entrepreneurialimage or in their negotiations with bankers. Thedifferences in their ratings must reflect the confi-dence of the entrepreneur and their willingness toaccept some risk versus the banker who is basicallyperceived as risk averse and unwilling to become apartner to what they consider as speculative loans.

CONCLUSIONS

In summary, their appears to be general agreementon the marketing image of entrepreneurs, generaldisagreement as to the management abilities ofentrepreneurs, and confusion concerning the relativeroles and criteria used in loan negotiations. Perhapsthe most telling finding is the difference relating tocredit risk. Entrepreneurs obviously feel they aregood risks for banks even though they agree thatthey use less than perfect assessments of the marketand really could provide better insight into theirmarketing and management strategies. Bankers, bythe same token, rate entrepreneurs as decent man-agers (less so than do entrepreneurs themselves),but may use the same arguments--poor marketassessments and strategists--to consider entrepre-neurs as poor credit risks. While the image ofentrepreneurs converges on certain points, itdiverges on sufficient and critical points to makeeach group come to a very different conclusion as towhether or not entrepreneurs are sound creditcustomers.

The results of this study suggest several areas forfuture research. First, a larger based image studyneeds to be conducted on a wider scale to overcomesome of the limitations of this study. More banksand businesses covering a larger geographic regionwould provide a greater degree of confidence ingeneralizing these results. Second, entrepreneursshould be studied to determine their perception ofhow competent bankers are about marketing. Someof the marketing information that is not included inthe loan request may well be reflected in the diverg-ing perceptions of entrepreneurs as good creditrisks. Lastly, the whole loan negotiation processneeds to be studied to determine where the frictionpoints are and what are the expectations of each

26

party involved in the negotiation. The literature on"power" variables may provide a background forsuch research.

In conclusion, the personality literature surroundingentrepreneurs has converged on a set of generallyagreed upon variables. It is time to take those vari-ables and look at their generalizability into specificsituations. It is time to study the situation impactupon entrepreneurial behavior and the entrepre-neur's impact upon situations. Financial relation-ships are critical to entrepreneurs and banks are asupplier of such financial resources. This study hastried to make some progress in exploring the inter-actions of such variables in an actual businesstransaction.

REFERENCES

[1] Bennett, T. E., Jr. "Borrowers Should SeeThemselves as Loan Officer See Them." AmericanBanker (May 12, 1987), 10.

[2] Brockhaus, R. H. "The Psychology of theEntrepreneur," in C. A. Kent, D. L. Sexton, and K.H. Vesper (eds.). Encyclopedia of Entrepreneur:11in.Englewood Cliffs, NJ: Prentice Hall, Inc. (1982),39-57.

[3] Brockhaus, R. H., and P. S. Horowitz. "ThePsychology of the Entrepreneur," in D. L. Sextonand R. W. Smilor (eds.). The Art and Science ofEntrepreneurship. Cambridge, MA: BallingerPublishing Co. (1986), 25-48.

[4] Chase, A. G., and G. R. Every. "VentureCapital Through SBICs." Bankers Monthly Magazine(February 1985), 16-17, 20-21.

[5] Clark, D. M. "Small potatoes have appeal."ABA Banking Journal (June, 1987), 55-57.

[6] Davis, C. H. "Assessing The MarketingCompetency Demonstrated in Business Plans ofTechnological Entrepreneurs." 1988 Proceedings.UIC Symposium on Marketing and Entrepreneur-ship. Chicago, IL: The University of Illinois atChicago, 1988.

[7] Dunkelberg, W. C., and J. A. Scott. "SmallBusiness Evaluates its Banking Relationships."Bankers Meqazine (November-December 1983),40-46.

[8] Fishman, A. "Identify the reasons why loans areapproved or rejected, then develop youpresentation." Merchandising (August 1982), 73-74.

31


[9] Gilbert, N. "Should Your Bank Be in VentureCapital?" Bankers Monthly Magazine (July 1986),15-17.

[10] Ibrahim, A. B., and J. R. Goodwin. "PerceivedCauses of Success in Small Business." AmericanJournal of Small Business (Fall 1986), 41-50.

[11] In Its Infancy." The Banker (April 1987), 28.

[12] Justis, R. T. "Starting a Small Business: AnInvestigation of the Borrowing Procedure." Journalof Small Business Management (October 1982),22-31.

[13] Lansaw, B. "Good things in small businesspackages." ABA Banking Journal (October 1986),91-94.

[14] Montagno, R. V.; D. F. Kuratko; and J. H.Scarcella. "Perception of Entrepreneurial Success ofCharacteristics." At. "rican Journal of SmallBusiness (Winter 1986), 25-32.

[15] Ricklefs, R. "Small Businesses Look EverMore Alluring to Big Banks." Wall Street Journal(December 13, 1988).

27

[16] Riggenback, J. "How to Choose and Use aBank." Financial Independence (Summer 1984).

[17] Rose, J. T. "Interstate Banking and SmallBusiness Finance: Implications from AvailableEvidence' American Journal of Small Business(Fall 1986), 23-36.

[18] Samuelson, C. S., Jr. "The Role of BusinessSize in Risk Appraisal." Journal of CommercialBank Lending (August 1983), 44-50.

[19] Tamari, M. "Financing High Tech in SmallFirms." The Bankers Magazine (March-April 1986),52-55.

[20] Ulrich, T. A., and P. Arlow. "A MultivariateAnalysis of Commercial Bank Lending To SmallBusiness." American Journal of Small Business(October-December 1981), 47-54.

[21] U S. Government Report. The State of SmallBusiness: A Report of the President. Washington,DC: U.S. Government Printing Office, 1983).

[22] Williams, R. M. "Venture Capital - AGamble?" United States Banker (January 1983),26-29.


TABLE 1Respondent Characteristics

ENTREPRENEUR/BUSINESS CHARACTERISTICS

Entrepreneur:

Began present business = 77%Present business is first business ever begun = 71%Gender: Male = 81% Female = 19%

Business:

Average number of employees = 14Average gross sales in the previous year = $598,206Average loan amounts = $140,919Have received a commercial bank loan (not start-up) = 77%Have received a loan from source other than a bank = 40%Have received a start-up loan from a bank = 45%Have received a SBA loan = 10%Have received loans from other government sources = 3%

Loan Officer Respondents:

Bank:

BANK CHARACTERISTICS

Average length of employment = 8 yearsGender: Male = 81% Female = 19%

Average number of years in operation = 49Certified SBA lender = 62%Average number of employees who work with small business loans = 4Average annual gross amount of small business loans = $4,725,333Percentage of total loans disbursed that are small business loans = 19%


FIGURE 1

Banker and Entrepreneur Image Variable Profile

Definitely DefinitelyYes No1 2 3 4 5 6 7

MARKETINGLikely to underestimate what isneeded to market product

Typically have conducted (hard v v vdata) market research

Likely to interpret market v v 15fr v vinformation in a biased way

Likely to rely on "feel" than v v Av v vresearch for market potential

Likely to provide a marketing v v v13 vstrategy *

Likely to have considered how v v v v v 'bvto market product e:,7".

internationally *

v

v

v

v

v

v

v

v

v

v

v

v

v

GENERAL MANAGEMENTGood managers **

Overly concerned with thecompetition *

Realistic about chances ofsuccess *

Likely to adopt strategic,long-term management approach

v env kf v

v

,

\v v ev .1:: vt.

1:

IN Vbv v

LOAN NEGOTIATIONLikely to overestimate amount v v vof money needed

Too demanding * v v v by ev

A welcome customer of the ban's

A good credit risk * *

b = banker's mean responsee = entrepreneur's mean response

p=.05** p=.01

v

v

Figure I. Banker and Entrepreneur Image Variable Profile

29


TABLE 2Banker and Entrepreneur Image Variable Ratings

MeanBankerRatings

MeanEntrep.Ratings

TScore Diff.

MARKETING

Likely to underestimate what is needed tomarket product

2.90 3.19 0.71 NSD

Typically have conducted (hard data)market research

4.86 4.48 0.84 NSD

Likely to interpret market information ina biased way

2.95 2.83 0.32 NSD

Likely to rely on "feel" than researchfor market potential

2.86 2.48 1.02 NSD

Likely to provide a marketing strategy 4.48 3.58 2.07 .04

Likely to have considered how to marketproduct internationally

5.90 5.00 2.26 .03

GENERAL MANAGEMENT

Good managers 3.67 2.55 4.01 .0001

Overly concerned with the competition 4.71 3.68 2.31 .03

Realistic about chances of success 4.67 3.52 2.50 .02

Likely to adopt strategic, long-termmanagement approach

5.10 4.35 1.93 NSD

LOAN NEGOTIATION

Likely to overestimate amount of moneyneeded

5.10 5.23 0.29 NSD

Too demanding 3.90 4.90 2.27 .03

A welcome customer of the bank 2.81 2.74 .15 NSD

A good credit risk 4.33 1.81 8.90 .0001

30

0 J


ENTREPRENEURSHIP EDUCATION AND MICROBUSINESSDEVELOPMENT AS PART OF A COMMUNITY

REVITALIZATION PROGRAM EXEMPLIFIED BY"THE NEW BUSINESS FOR CHESTER PROJECT"

Larry K. Turnbull, RDC Institute, Inc.A. Douglas Bender, Widener UniversityWilliam C. Payne, RDC Institute, Inc.

John T. Meli, Widener UniversityCarl E. Russell, RDC Institute, Inc.

ABSTRACT

The New Business for Chester Project, the entre-preneurial training section, of a five part revital-ization effort in the highly depressed City ofChester, PA was designed through feedback fromthe community and interested participants to startsix successful businesses from a program of training,funding and ongoing support.

INTRODUCTION

Entrepreneurship education, neighborhood revital-ization, and economic development are conceptsthat have received a great deal of attention and havebeen written about extensively in recent years. Insome cases, these concepts have been linked.

In this paper we describe an experiment in educat-ing entrepreneurs as the basis of creating smallbusiness development linked to the revitalization ofa distressed community. Our focus has been differ-ent from the approach of others, namely, entrepre-neurship education as a basis for neighborhoodrevitalization and community development. Further,our experience in entrepreneurship education is witha segment of the population that has little in com-mon with the demographics and attributes of groupsthat are the subject of most studies of entrepre-neurial education. Thus the issues are very differentwith respect to the approach to the traditional viewof the entrepreneur.

Our experience is based on a project designed todevelop new business in a depressed communitythrough an entrepreneurship training and develop-ment program. This project is a joint effort of theRDC Institute, Widener University, and DelawareCounty Community College and is funded by thePew Charitable Trusts of Philadelphia, Pennsylvania.It is focused on the redevelopment of the East Sideof Chester, Pennsylvania, and is based on the belief

31

that the establishment of new businesses will aid inthe revitalization of this area and help reverse atrend which has reflected continuing decay andeconomic decline for the past twenty years.

We found that the factors that shaped the success ofthis project were not those that were incorporatedin the original project design. Accommodatingthese influences during the development of the pro-ject provided us with some new insights into theprocess of training and development of potentialentrepreneurs.

Among the things we learned were:

- A typical approach to teaching was inappropriateto this population and a rolling format was more inline with the needs of the group. The term "rolling'was taken from the admission policy of some col-leges and universities. To us it means that we willaddress the needs of each student and allow them toenter the program at any time. They progress at arate that is consistent with the stage of their ownpersonal and educational development.

- The participants did not share the typical charac-teristics of entrepreneurship such as independenceand risk taking, but instead required more groupsharing and participation as part of their experience.

- This group was not typical of the entrepreneursthat are singled out in studies and publications onthis subject. They required more coaching and selfdevelopment than the more traditional profile of theentrepreneurial student and they seem to thrive on,if not require, group interaction and support.

- The growth and development of the participantswas not simply focused on their future as entre-preneurs, but equally on their personal growth.Thus, many life function skills were included in theprogram. Starting their own business was not

r1Ob


simply an investment of their time and capital, butrepresented a change in their lifestyles and requireda new appreciation of their own talents.

The rest of this report is a description of ourexperience with this program and how we believesome of the things which we learned should beincorporated in programs that are planned with asimilar thrust and focus.

THE NEW BUSINESS FORCHESTER PROJECT

The New Business for Chester Project was part ofa five component program to stimulate the redevel-opment of the east side area in the City of Chester,PA one of the most depressed cities in the UnitedStates. The other parts of the program consisted ofBlock Beautification, a Food Co-op, A Neighbor-hood Housing Service and a Housing Co-opProgram.

The project, initially called the EntrepreneurialTraining Program, was renamed the New Businessfor Chester Project and coordinated by the RDCInstitute, a non-profit economic developmentorganization. Additional support was provided byWidener University and the Delaware County Com-munity College. The project was funded through a$100,000 grant from the Pew Charitable Trusts, oneof the largest foundations in the Philadelphia area.The objective of the project was to start sixsuccessful businesses in the east side of Chester andthus stimulate revitalization of the area.

The organizations participating in the program wereaware that various programs had been attemptedbefore with only marginal success. The previousprograms consisted of funding provided to start newbusinesses, as well as training programs to trainpeople to start new businesses. This program wasdesigned to incorporate the elements of severalprograms under one umbrella organization whichconsisted of a coordinating committee made up ofrepresentatives from the three participatingorganizations. It was felt that past programs hadnot been successful because of .heir approach anddesign.

The first six months were therefore spent designingand developing an understanding of the area inwhich the program was going to be held. In theplanning stages of the program, meetings were heldwith various organizations from the community atlocations in the community. In addition, groupmeetings were held where the types of training andservices to be provided were discusse I. When the

32

basic outline for the project was developed it wasadvertised and discussed at a number of meetingsattended by those expressing interest in partici-pating. It was decided that the project shouldcontain the following elements:

A series of weekly seminars on subjects importantto those starting and operating successful businesseswith and the Small Business Handbook used as thebasic information guide for these seminars.

The seminars were divided into the basic areas of:

Making the DecisionBusiness FoundationsDeveloping a Business PlanImproving OperationsThe Future of Your Business

* Other programs to be considered for presentationin conjunction with the above were as follows:

- Development of life, leadership and communica-tion skills.

- Use of a computer and potential benefit to thesmall business owner.

- Tours of small businesses in the area followed bydiscussion of why they are successful orunsuccessful.

- Presentation of various video topics relating tostarting and operating a small business.

* Assistance, on an individual basis, was provided inthe preparation of a business plan as well as thecompletion of the forms required in obtainingfunding from area banks and economic developmentorganizations.

The businesses that come out of the program wouldbe evaluated not only on their feasibility as abusiness but also if the potential success of thisbusiness appeared to be high for the area in whichit was to be located. Once the business plan wascompleted it was to be reviewed by the coordinatingcommittee of the project if approved a smallamount of seed funding would be provided from theoriginal grant. This funding, which came from$30,000 of the grant, was loaned in $5,000 amountson terms of three percent interest with the firstpayment not required for a year after the loan wasmade. In conjunction with this funding the individ-uals would be assisted in completing applications toarea economic development organizations as well asprivate banking institutions. To facilitate obtaining

3 7


bank loans, meetings were held with various bankrepresentatives in the area. After the businesseswere started, an ongoing support network was to beestablished consisting of participants, representativesof organizations of the project, consultants, and,other successful business persons in the area.

It was our intent that the basic program committeewould be very sensitive to and very flexible inchanging the program if the feedback received fromthe participants indicated that changes wouldenhance its success rate. Because of the structureof this program it is important to understand whothe individuals were that participated on thecoordinating committee and what their backgroundsand responsibilities in the program were. It is feltthat this had much to do with the initial success ofthe program.

The head of the coordinating committee was LarryK. Turnbull, Finance Director of the RDC InstituteInc., a private non-profit economic developmentorganization, located in Delaware County, PA. A sFinance Director he provided assistance to entre-preneurs in developing business plans, preparingdocuments required for obtaining funding, andproviding value added management assistance instarting their businems. In addition to this, hisexpertise was derived from approximately 20 yearsof experience assisting in starting and managingbusinesses in various industries. The othermembers of the coordinating committee consisted ofWilliam Payne, Planning Director of the RDC Insti-tute, the former Planning Director of DelawareCounty, PA with experience in real estate develop-ment as well. Mr. Payne had the ability to performin-depth studies in the areas where the businesseswere to be started. John Meli, Dean of the Man-agement School of Widener University, had oper-ated an entrepreneurial training program forWidener University a number of years before. Hehad lived in the Chester area, and thus had in-depthknowledge as to the history of the area and hadcontacts in the private as. well as the public and theuniversity sectors. A. Douglas Bender, Professor atWidener University and the instructor for the firstset of training programs, was also on the committee.Professor Bender provided the in-depth consultingsupport to the program and had the personal skillsrequired to identify readily with the participants andto assist them in understanding the areas in whichthey needed to gain additional knowledge. CarlRussell, President and CEO of RDC Institute, pro-vided in-depth economic development experiencefrom his 20 years of work with various economicdevelopment organizations on the east coast.Having participated in a number of economic

33

development programs, he provided r limtnsion inregards to the perception of how the total programwas being operated and provided the perspective ofwhether the project was progressing on a soundbasis.

The program was designed in such a way as to besensitive to a number of issues and to presentcertain criteria so that only the most motivatedindividuals would participate in the program. First,at the informational meetings held in the summer of1987, it was pointed out that the funding would notbe provided until a business plan had been com-pleted and participants had completed at least thefirst 18 week training course. Therefore, those whowished to participate needed to have the persever-ance and the time necessary to meet these require-ments. Secondly, as the training programs werestarted in September 1987, the instructors andmembers of the coordinating committee, whichattended the meetings, were sensitive to the interac-tion of the group. Because of this sensitivity tofeedback received from the participants, the pro-gram was developed into what was called a "rolling"style instructional program where the issues dis-cussed, and the interaction of the group was stimu-lated by the topics generated at each evening class.This was found to be one of the reasons for thehigh success ratio of the program because the par-ticipants developed a support group which hadknowledge of each other and whose interaction witheach other enhanced the success potential of eachbusiness being started.

This interaction became more and more importantas the first set of classes progressed. Peopleattending the =lasses had worked for various typesof businesses over the years and had developed whatcould be called a street-wise concept of how tosurvive in business in a community with a decliningeconomy. The way the class was structured and thesensitivity of the instructors allowed optimum valueto be received from the street-wise knowledge of theindividual participants. Conversations and discus-sions within the class, which many times becameheated, allowed all of the participants to get fullvalue from learning from others and their knowl-edge. The importance of this sensitivity cannot beover rated. One of the problems with many trainingclasses and programs which provide developmentalfunding in depressed areas is the wall or barrierwhich is placed between those coordinating andparticipating in the program and those that areattending the classes.

The first class was held from September throughDecember 1987, and approximately 20 participants

1.4i lied States Association for Small Businesses and Entrepreneurship 1989

started with the program and 15 continued to theend. This first class, was concluded with a grad-uation ceremony where graduation certificates werepresented to each of the individuals. The ceremonywas held with a dinner attended by area representa-tives as well as the families of the participants whocompleted the course. Because the design of tt-,project emphasized feedback, all those that partici-pated in the training classes as well as organizationsin the comr unity were requested to assist in plan-ning the next phase of the program. A meeting washeld in January where the individuals that partici-pated in the fall of 1987 were asked for theirrecommendations as to how the project should beconducted in the spring of 1988. These recom-mendations resulted in a change of how the pro-gram was designed. The weekly class format wasretained, however, the length of the classes waschanged to 2 hours with the first 1,.)ur consisting ofa group made up of the participants of the priortraining courses as well as any new participants inthe program. This allowed the new participants totake advantage of the interaction and mutual respectthat had developed by the initial group of partici-pants. The second hour the two groups were split.The prior participants were provided training inmore difficult subject matter while the new partici-pants attended the motivational informationexchange and basic technical training sessions.Approximately 30 new participants joined the springprogram which ran for eighteen weeks, 22 of whichcontinued through the end. Approximately 10 ofthe old participants continued to participate and 8continued through the end of the sessions.

Weekly sessions were again conducted as indicatedfrom February through May. At the end of thisprogram, graduation ceremonies were again heldwith certificates beinf; presented to the new partici-pants as well as the participants that had beeninvolved in the program for two years. The newparticipants were given Entrepreneurial Manage-ment Certificates and those completing both courseswere given Business Plan Certificates. A dinnersimilar to the previous one was held with the pressin attendance. We feel that this type of recognitionand publicity received by the participants wasanother important aspect of the program.

Listed below are the statistical details of the projectas of May, 1989.

FALL-87 SPRING-88 TOTAL

Participants 19 28 47

Number FromChester, PA 15 25 40

Businesses Started

Businesses AboutTo Start

Funding Provided

FALL-87 SPRING-88 TOTAL

05 05

01 01

03 02 05

34

TYPES OF BUSINESSES

Started

1. Frame Shop2. Restaurant - Barbecue3. Music Training4. Restaurant - Non-Alcoholic Beverage5. Importing and Sales of African Crafts6. Garment Manufacturing

Other

1. Portrait Studio2. Arrtment Rental3. Day Care Center4. Photograph And Video Productions5. Tax Preparation - Bookkeeping6. Automobile Detailing7. Hot Dog Stand8. Janitorial Service

In July, 1988, an entrepreneurial consultant washired to provide more intense direct support to thebusinesses in operation as well as those in process.Direct support was also provided by John Mc li andDoug Bender of Widener University as well asLarry Turnbull and William Payne, of the RDCInstitute. An additional aspect of this project is theassistance provided to existing businesses. Due tothe credibility developed from the program at leastfive existing businesses have requested and receivedor are receiving assistance. This assistance wouldprobably not have been requested if not for the NewBusiness for Chester Project.

To date we have had over 50 individuals participatein some aspect of the project. We have the poten-tial for starting, we feel, anywhere from 10 to 15new businesses. The five new businesses to date -1) Hudson, Barron and Jones, LTD - owned by awoman wishing to manufacture iisposable garmentsfor the hazardous waste indlistry; 2) Barbara Ann'sFramework - a woman who .tarted a frami.-g shop;3) Ernie's Place - a gentleman who started a

a0 0

United States Association for Small Businesses and Entrepreneurship 1989

seafood and barbecue restaurant; 4) "All AboutMusic" started by a woman to train b,:ade schooland high school students in the professionalattributes as well as techniques of various types ofmusic, and 5) Sierra Delco International, an importbusiness being started by a lady having tics to SierraLeone, South Africa. She is importing crafts,primarily masks, bags and belts to sell to specialtyshops in the United States. Her business wasopened and funds..! in January of 1989. Continuingone-on-one support is being provided to approxi-mately 3 other businesses. The longest any businesshas been open is one and a half years. It is Cieframe shop and still doing well.

What was learned from this project.

1. The Participating Organizations

In this instance we had one private, non-profiteconomic development organization and twr educa-tional institutions - a university and a localcommunity college. It was found that to manage acoordinating committee consisting of seven individ-uals was difficult at best and to coordinate theefforts from a physical and geographical locationwas also difficult. The community college was notclose to where the project was being conductedwhich caused their interaction to be minimal.Therefore, it is important to identify the partici-pating organizations, and their level of skills andinterest, and if, in fact, arc they located in ageographic area which will enhance their partici-pation in the project.

2. Prop.am Design

The program is one that can be used in futureprojects and refined to an even greater extent.There are a number of key elements in this.

A) Before the project is started it is important toanalyze and get involved in the area where theproject is targeted so that the; community is under-stood. You must understand the players in thecommunity and know what their expectations areand whether you can meet them.

B) Str,,ture the program to make sure that themost highly motivated individuals in the area are O.°ones that init ally come into the program. Thesecan act as a base group as n w individuals arebrought in, but you must have the strongest basegroup possible. The way this can be done is byfrank, honest discussions with community leaders aswell as with individuals that have a true desire tostart their own business.

35

s.

C) The training scions should not follow a typicalinstitution training format. The objective is to getthe individuals trained in the basic techniques ofnew business. To try to do this in a typicaleducational setting, with the type of group that weworked with would have been unsuccessfol. It isalso important to know the group well, and to iden-tify with them quickly so that you can help themassist others in the class in learning what theyalready know. Therefore, the "rolling" formatshould be used as well as having a basic topic whichyou are going to present. This combined with hav-ing instructors that are sensitive enough so that ifother topics come up that can be useful, the classmoves to that area and works on it. The instructor,however, must be able to move the group on to thenext topic of discussion when the current discussionis no longer useful.

D) When the particular individuals have progressedto the point where they are developing a businessplan it is important to make sure that they under-stand what the implications are of the business theyare starting. Do they, in fact, understand the pro-jections, do they understand the forecast, do theyunderstand the dollar amounts that may be involvedin making the business a success? Many individualsmay not ask questions. The instructor working withthese individuals must therefore go through thequestions that they should ask if they do not askthem. It is also important for the instructor tounderstand that if this individual should not go intothis business, they should be counseled in thatregard.

E) The last factor is that ongoing support must beprovided to these businesses after they have beenstarted. Many programs assume the objectives ofthe program have been met once the businesseshave beer started. This is an invalid assumption.Once the business has been started is when theactual work needs to begin. A formalized structureof human resources needs to be set up so that aconstant line of communication is provided betweenthe supporting organization as well as the businessand the business owner or owners depending onhow many are involved.

Conclusions drawn from this project as well astechniques to be used in future projects are asfollows:

".1. Evaluate the skills and interest of participatingorganizations and individuals to be sure iptimumefforts will be received.


2. Learn the area the where program is to beconducted from grass roots level.

3. Structure the introduction to the program so thatthe most motivated individuals participate.

4. Use flexible "rolling format" style of instruction.

5. Be sensitive of group feedback in makingprogram adjustments.

6. Address life as well as business skills required.

7. Encourage group interaction after as well asduring classroom sessions.

36

8. Have available some low cost early-stagefunding for starting the businesses.

9. Structure the program so follow-up, ongoingsupport will be available for several years afterclassroom instruction has been completed.

10. T'-ovide recognition to all participants for theiraccomplishments as they move through theprogram.

11. Be cognizant of outside influences which maybe impacting the response .-.4 project participants.


ENVIRONMENTAL CONTACT SELECTION ASA FUNCTION OF THE SMALL BUSINESS OWNER'S

DECISION STYLE

James D. Brodzinski, Fennesaw State CollegeRobert F. Scherer, Kennesaw State CollegeFrank A. Wiebe, University of Mississippi

Dean Kruger (Student), University of Mississippi

ABSTRACT

This study investigated the effects of small businessowner decision style on the search for externalassistance information, community information, andcompetitor contact. Results confirmed the existenceof decision style differences in utilizing externalcontacts. A conclusion is drawn that small businessow-rers effectively use contacts for gatheringoperating information, but need to developadditional contacts regarding competitor activity.

INTRODUCTION

Obtaining information form sources external to thesmall business organization has been linked to boththe survival and profitability of the firm. Dollinger[8,9], for example, found that although theimportance of any one source of environmentalcontact made by the small business owner was notsingularly related to performance, the amount oftime the owner spent engaged in external contactswas positively related to sales, net income, and anindex of profitability. Other investigations aimed atdescribing the networks developed by entrepreneurshave shown that these individuals seek contacts toimprove personal competencies and performance ofthe firm [3,5,7]. However, the types of informationsought by the small business owner m: afunction of the person's fit with and prmethod of interacting with the external envir onn..nt[10,16,21].

Aldrich and Zimmer [2] have suggested networksestablished by the entrepreneur serve the functionsor information passage, exchange of content, :.'nddevelopment of social relationships based nponexpectations of the networking participants.Stre'gth of the linkage between two or moreindividuals depends to a great extent on the level,frequency, and recir rocity offered by therelationship. These formally and informallyestablished networks with external constituenciesprovide the impetus for exploiting opportunitieswhich may benefit the small business organization.

37

Thus, entrepreneurs with high performing firms willhave ties to people who provide timely information,and resources to act as customers or provideservices to the firm [6].

The current study had as its objective to determineif differences in the primary informationgathering/processing mode of small business ownerseffects the type of environmental contacts selectedor networks cultivated.

THE FUNCTION OF BOUNDARYSPANNING ACTIVITIES

In order for organizations to monitor changes in theenvironment and orchestrate a fit between thesechanges and the business, individuals perform avariety of boundary spanning activities (BSA) whichafford decision makers the opportunity to assess andgauge the effects of these changes on theorganization [14]. Boundary spanners are definedas individuals who are at the interfaces of theorganization or the boundary between theorganization and its environment. The purpose ofBSA performed by these individuals are to filter,transact, buffer, represent, and protect theorganization [1].

In large organizations employees fill specificbohndary spanning roles to keep the organizationinformed. These positions are familiar ones such assalesperson, customer service representative,lobbyist, and purchasing agent, for example.However, in smaller organizations it is unlikely thatthe resources are available to support such specificjob descriptions and the employment of specialistsin each boundary spanning area. Therefore, manytimes it is the owner who takes a majority of theresponsibility for interfacing with externalconstituencies and forming network contacts atorganizational boundaries [8,9].

The small business owner acquires information fromthe environment and then translates thatinformation into opportunities for the organization


[111. A typical owner/manager spends more thantwo hours per day in external contact activity.Furthermore, the quality, clarity, and time span forgathering information about the environment are allimportant considerations for the small businessowner.

Although the criteria for assessing environmentalinformation has been investigated the importance ofspecific information types to small business ownersis not clear. Researchers in the area oforganizational decision making, though, haveproposed that when individuals are confronted withcomplex problems requiring synthesis of muchinformation, an incremental search for andevaluation of information is efficient [151.Additionally, Simon 119] has observed that adecision maker is bounded by personal values,personality, and collective experiences in gatheringand processing information. Given these limitationson the ability of an individual to process and act onenvironmental information it is reasonable that asmall business owner, with limited resources tospend on the acquisition and interpretation ofenvironmental information, would develop onlycertain information networks at organizationalboundaries.

DECISION STYLE AS ADETERMINANT OF BSA

Human information processing concerns thecognitive/affective and analytic/intuitive aspects ofdecision making and problem solving [201.Recently, there has been an interest amongresearchers in examining the effects of decision styleon strategy formulation [17,18], organizationaleffectiveness [101, and boundary spanning [31. Theapproach centers around classification of decisionmakers on two dimensions resulting in a definitionof one's psychological type [12].

An initial classification is made on the individual'smethod of gathering or perceiving information [131.This is labeled as either a sensation (S) or intuition(1) mode. A sensing individual prefers to acquireinformation that deals with hard facts and specificswhile an intuitive person seeks information thatdescribes possibilities and is more qualitative andsubjective. Processing the obtained information isperformed through either a thinking (T) or feeling(F) mode. Use of a thinking mode focuses onlogical evaluation and formal reasoning, and use ofa feeling mode revolves around the effects of thedecision on the stakes of the individuals involved.From these two dimensions four basic decisionstyles are defined as ST, 1%* ", SF, and NF.

38

This human information processing approach tounderstanding decision making offers an avenue toexplain and predict the specific types ofenvironmental contacts the small business ownerwill cultivate and the types of information sougilfrom the environment with limited resources forBSA. The ST decision maker prefers factual dataand has. an impersonal or analytical tendency. ANT decision maker deals with general concepts andis concerned more with broad issues andemphasizes the conceptual. The NF type ischaracterized by broad concerns of a social natureand is interested in idealistic concepts. The fourthtype, SF, is concerned with human relations and aninvolvement with facts.

Based upon decision style the decision maker shouldseek out information through external environmentcontacts which are congruent with style.Specifically, this means that the small businessowner will expend time gathering, processing, andacting on information which is the most compatiblewith his/her style. If this proposition is supportedthere would be implications for providing smallbusiness owners wiih assistance in developingcompetencies in selecting and processing other typesof environmental information and establishingnetworks to enhance the fit between organizationand environment. In the current study the followinghypothesis was tested:

H1: The environmental contacts developed throughthe boundary spanning activities of the smallbusiness owner will vary as a function of decisiorstyle.

METHOD

Sample

Subjects in this study were 57 (29 male and 28female) small business owners operating in asoutheastern state. For this sample the term smallbusiness was used to identify owners whose firmsemployed less than one hundred people and hadannual gross sales of less than one million dollars.Business types were primarily retail (27.5%),followed by service (19.6%), with the rest beingclassified as manufacturing, construction, andwholesale. These subjects were generallymiddle-aged (40-49 years of age) and relatively welleducated as evidenced by 46.8% of the participantshaving obtained at least some graduate education.

United States Association for Small Businesses and Entrepreneurship- -1989

Measures

Environmental Contacts. To determine the numberof contacts with individuals in the externalenvironment, as a gauge of BSA, subjects wereasked to record the number of face-to-face, written,and telephone contacts they had during a one weekperiod with (1) bankers, lawyers, accountants; (2)trade and business associations; (3) regulatoryagency officials; (4) stockholders; (5) privateconsultants; (6) civic and social organizations; and(7) competitors (see Table 1 for the average andpercentage of contacts for each item). Thesecategories of extern-I contacts were adapted fromDo Binger [8,9]. Composite measures wereconstructed by summing the number of face-to-face,written, and telephone contacts for eachenvironmental contact type.

Decision Style. In this study decision style wasoperationalized using a short-form version of theMyers-Briggs Type Indicator which has been used inpast small business research [4]. Respondentsevaluate eight sets of two questions each to identifyinformation gathering style and eight sets of twoquestions each to identify information processingstyle. From each two question set the respondentchooses the statement which is most representativeof personal individual behavior. The selectedstatements are summed and used to classifyindividuals into primary decision styles based uponthe highest scores for the information gathering andprocessing dimensions. This results in identificationof either ST, SF, NT, or NF as a primary decisienstyle.

Design and Analytic Strategy

Dimensionality and e environmentalcontact :terns were subjected to a principalcomponent,. factor analysis w2th varimax rotation todetermine if the,/ co ild be combined in aconce;,,ually meaningful way. Two factors wereextracted with eigenvalue.s geater than .00 andwere interpreted (see Table 2). No item loaded lessthan .79 on its primary factor or greater than .27 ona secondary factor except for competitor contactwhose loading on both factors was negligible.Factor I was labeled "external assistanceinformation" (ASTIN) and Factor H was labeled"external community information" (COMIN). Sincecompetitor corn (COPIN) did not load well oneither factor it was used as a third conceptuallydistinct dimension in all analyses.

A reliability check of the decision style items wasperformed employing the KR-20 formula for

39

dichotomous data. For the information gatheringdimension a reliability coefficient of .70 wasobtained. The information processing dimensionyielded a coefficient of .60 across the items. Giventhe small sample and the relatively large number ofitems contained in each dimension, these twomoderate coefficient values were deemed highenough to construct primary decision styles.

Grouping and Analytic Techniques. Each subjectwas grouped according to primary decision stylewhich resulted in four groups of individuals beinglabeled as either SF (n = 20), ST (n = 7). NF (n =24), or NT (n = 6). Because BSA was defined asbeing multidimensional in nature, composed ofthree separate dimensions, the primary analytictechnique used was multivariate analysis of variance(MANOVA). Scale scores for the externalassistance and community information dimensionswere computed by summing the number of contactsfrom each item included in each factor. These wereused as the first two dependent measures. Totalnumber of competitor contacts was used as the thirddependent variable.

Given a sigr.acant omnibus F for the MANOVAtest several post h techniques were employed toinvestigate the specific nature of between groupdifferences. First, a multivariate extension of theScheffe t was used to determine specific betweengroup differences. Second, cent. yids were evaluatedto determine the nature of these differences. Theseprocedures were followed up by a review of possible.inivariate differences Imween groups on each ofthe three separate environmental contactdimensions.

RESULTS

Descriptive statistics for the threeENVIRONMENTAL CONTACT variables areincluded in Table 1. A significant MANOVA resultwas found (p < .05) indicating that decision styleeffects the manner in which small business ownersuse environmental contacts (see Table 3). Thisresult supports the hypothesis that environmentalcontacts developed through boundary spanningactivities of the small business owner will vary as afunction of decision style. Several post hoc analyseswere conducted to understand the exact nature ofthis effect.

Using a multivariate extension of the Scheffe test,D2, significant differences were found between theNT SF, NT - ST, and NT - NF decision styles(p = .05, .08, and .06 respectively). Thesedifferences were explained by looking at the


canonical discriminant functions. An examination ofthe canoni:al discriminant functions evaluated at thegroup centroids indicated that the first function,representing ASTIN, is predominantly used by NTs,the second function, representing COPIN, ispredominantly used by STs, and the third function,representing COMIN, is a weak SF function (seeTable 4). NF did not load high on any function,suggesting that NT decision style users employ avariety of environmental contacts without apredominant contact.

Following the multivariate analyses, univariateanalyses of variance were conducted in order todetermine the effect of decision style on each of thedependent variables. Significant results wereobtained with ASTIN (p < .05), indicating thatdecision style affects the use of external assistanceinformation; results with COMIN and COPIN werenonsignificant (see Table 3).

Given the significant univariate results of decisionstyle on external assistance information usage,further examination of group differences waswarranted. Post hoc analyses determined significantdifferences in external assistance informationcontacts (p < .05) between NT - NF, NT - ST, andNT - SF groups. These results paralleled thoseobtained with the multivariate post hoc tests. Noother mean comparisons were significant. In' eachof the above comparisons, the NT decision styleaccessed more information through ASTIN contactsthan the other decision styles.

DISCUSSION

The current investigation had as its objective todetermine the -,ffect of decision style on the BSA ofsmall business owners. Assuming that the smallbusiness owner has to take responsibility forinterfacing with external constituencies in order tomaximize business performance, it was hypothesize_that decision style would affect the manner in whichtl:s interfacing took place. As hypothesized, decisionstyle was shown to affect boundary spanning activity,as represented by quantity of external informationcontacts.

The multivariate post hoc analyses revealed threedimensions related to decision styles. Owners withan NT style, based on general concepts and broadissue development engaged in a greater number ofexternal contacts than owners exhibiting any of theother four styles. These contacts include activitiessuch as interacting with business and tradeassociations, regulatory agencies, private consultants,and bankers, lawyers, and accountants. Since NTs

140

gather information on possibilities that is qualitativein nature, and process that information logicallywith formal reasoning, one might conclude thatthese contacts are for the purposes of facilitating thedevelopment and operations of their business.

Owners with an SF style, based on gathering hardfacts and specific information with a humanrelations focus engaged in external contact activitiessuch as involvement in civic organizations andinteraction with stockholders. The results suggestthat the nature of these contacts is towarddeveloping relationships and improving companyimage in the community.

Owners with an ST style, based on gathering factualdata and logically analyzing it, focused on externalactivities related to developing information aboutcompetitors. This information might be used toeither gain a competitive advantage, or monitorcompetitor activities in similar markets.

Owners with an NF style, represented by broadconcerns of a social nature, did not employ aspecific pattern of external contacts. These smallbusiness owners apparently used a variety ofcontacts across multiple categories.

These style/contact relationships are consistent withthe scenario attributes developed by Nutt 1171.Small business owners appear to be using boundaryspanning activities consistent with their decisionstyles. Given these results, it would be appropriateto suggest that owners may need to broaden theirdecision styles to include gathering information witha broader external focus (i.e, informationconcerning competitors). The fewest number ofcontacts across all styles resulted from thecompetitor infoim ation dimension. This isconsistent with previous research which found thatsmall business managers are most concerned withimproving the internal efficiency of theirorganizations 110].

Application of cognitive theory to small businessmanagement offers a viable approach to investigatethe manner in whih small business owners makedecisions that effect the performance, and ultimatesuccess, of their enterprises. To build upon thecurrent findings, research is necessary to determinemore specifically the congruence of environmentalcontacts with primary decision style.

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[11] Hoy, F., & Hellriegel, D. "The Kilmann andHerden Model of Organizational EffectivenessCriteria for Small Business Managers." The

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Academy of Management Journal, 25, No. 2 (1982),308-322.

[12] Johnson, J. L., & Kuehn, R. "The SmallBusiness Owner/Manager's Search for ExternalInformation." Journal of Small BusinessManagement, 25, No. 3 (July 1987), 53-60.

[13] Jung, C. G. Psychological Types. London,England: Rutledge & Kegan Paul, 1923.

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[17] Nelson, G. W. "Information Needs of FemaleEntrepreneurs." Journal L.:. Small BusinessManagement, 25, No. 3 (July 1987), 38- 44.

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[20] Simon, H. A. "Rational Decision Making inBusiness Organizations." The American EconomicReview, 69, No. 4 (September, 1979), 493-513.

[21] Tarert, W., & Robey, D. "Minds andManagers: On the Dual Nature of HumanInformation Processing and Management."Academy of Management Review, 6, No. 2 (1981),187-195.

[22] Welsch, H. P., & Young, E. C. "TheInformation Source Selection Decision: The Roleof Entrepreneurial Personality Characteristics."Journal of Small Business Management, 20, No. 4(October 1982), 49-57.


Item

TABLE 1Descriptive Statistics for Environmental Contact Items

PleanPercentage ofTotal Contacts

Busines, and Trade Associations ,.33 33.31Regulatory Agencies 1.26 15.02Private Consultants 1.79 6.31Bai kers, Lawyers, Accountants 3.33 11.74Civic Organizations 8.40 29.73Stockholders 1.11 3.89

Descriptive Statistics for Dependent Variables by Decision Style

Decision Style Variable Mean s.d.SF 20 ASTIN 6.40 8.79ST 7 7.57 14.69NF 24 7.83 13.46N1' 6 87.83 199.77

SF 20 COMIN 15.80 30.70ST 7 6.14 6.67NF 24 6.12 6.11NT 6 6.33 9.46SF 20 COPIN 1.45 2.23ST 7 8.43 20.13NF 24 2.50 4.19NT 6 5.00 5.93

TABLE 2Principle C&mponents Factor Analysis of Environmental

Contact Items (Varimax Rotation)

Item Factor I' Factor IlbBusiness and T.ade ikssociationst .98 .13Regulatory Agencieis 15.3 .11Private Consultants .95 .09Bankers, Lawyers, Accountants'!

.11Civic Organizations2 -764 .88Stockholder .27 -.7§

Eigenvalue 3.79 1.30% a Variance 63.1 21.6

'External Assistance Information (ASTIN).bExternal Community Information (COMIN).'Factored items comprising ASTIN.2Factored items comprising COMIN.

42


TABLE 3Multivariate (Manova) end Univariate (Anova) Results for theEffect of Decision Style oil Environmental Contact Variables

Test Value Apprex. F df Sig. of F

Pillais .30028 1.965 9.159 .047

EFFECT HYPOTH SS ERROR SS HYPOTH MS ERROR MS df Sig. of F

ASTIN 34896.83 206464.68 11632.28 3895.56 3,53 .039

COMIN 1206.12 19486.02 402.04 367.66 3.53 .360

COPIN 283.48 3106.66 94.49 58.62 3,53 .198

TABLE 4Canonical Discriminant Functions Evaluated at Group Centroids

GROUP FUNCTION 1 FUNCTION 2 FUNCTION 3

SF .15 - .22 .37

ST - .19 .74 - .22

NF -.11 -.06 -.16

NT 1.17 .12 .32

United State:, Association for Small Businesses and Entrepreneurship-1989

MANAGEMENT AND SMALL BUSINESS SUCCESS:A PRELIMINARY INVESTIGATION

Lloyd W. Fernald, Jr., University of Central FloridaGeorge T. Solomon, The George Washington University

ABSTRACT

While there are numerous varia :s affecting smallbusiness success, one of the primary areas which hasbeen empirically shown to have a relationship topredicting small business success is management.Management is defined by Szilagyi (1989) andKoontz, O'Donnell and Weihrich (1984) iscompetently performing the functions of planning,organi7ing, staffing, directing and controlling. Thispaper reviews the pertiner` literature, centering itsdiscussion on management functions and theirrelationship to small business success. It concludesthat small business success is very much a functionof understanding and utilizing good managementpractices. Further, it provides a classification modelof management functions of successful versusunsuccessful small businesses, gathered frominterviews with over 150 entrepreneurs.

INTRODUCTION

According to Dun & Bradstreet's annual survey offinancial data on businesses, one of the majorcauses of all business closings, almost 90%, isdirectly related to poor management of the firm. Infact, according to these surveys, of all businessesstarted in year one, almost 80% of these will nolonger exist by year five.

A number of factors influence this phenomena,including environmental factors like governmentregulations and shifting markets. However, most ifnot all the closings can be linked to failure to attendto the management functions of planning,organizing, staffing, directing and controlling.

The purpose of this preliminary investigation is toempirically examine the relationship of thesemanagerial functions to the success of a smallbusiness. More importantly, for the small businessowner-manager, the issue is more basic. "What ismost importan' to me if I am going to besuccessful?"

This paper is an attempt to present: (1) a briefdiscussion and definition of success, includingfactors which primarily affect success and (2) a

145

discussion and graphic illustration of how themanagement functions are executed whichdifferentiate successful versus unsuccessful smallbusinesses, based on a selected sample of over 150entrepreneurs.

LITERATURE REVIEW

In 1988, almost 600,000 new business start ups wererecorded. This represents a growing number ofAmericans who are going into business forthemselves (Small Business and The AmericanEconomy, 1988). In au economic climate thatencourages and nurtures entrepreneurship, hundredsof thousands of corporate executives, MBAs,retirees, housewives and individuals interested in acareer change are opening their own business.

According to the latest Internal Revenue Serviceprojected figures, there are 18.6 million smallbusinesses in the United States. The U.S. SmallBusiness Administration reports that smallbusinesses, including the self-employed, account for58 percent of the U.S. workforce and 40 percent ofthe gross national product. A substantial number ofcurrent -mall business owners are women. Theyown 3.74 million small businesses and generatemore than $65 million annually in gross receipts.Between 1977 and 1983, women-owned businessesincreased at twice the rate of businesses owned bymen (Small Business and The American Economy,1988).

Perhaps equally important, National ScienceFoundation analysis reveals that small business hasbeen a more prolific soarce of innovation perresearch and development dollar than large business(Feature Article, 1988).

Business Success

The success of small business is becomingincreasingly vital to the economic well-being of ournation. Acco-ling to David Birch, all new net U.S.jobs for the period 1976-1984, were created by smallbusinesses. In examining the small businesspopulation, it becomes difficult to quantify andclarify success. Many inherent problems exist,


including the availability and the truthfulness of thebusiness financial records, as well as the lack of adefinite benchmark to differentiate success fromfailure.

Often small businesses do not keep accuratefinancial data and, of those who do, these data mayhave been revised to reduce taxes. Also, smallbusinesses do not have to make their accountingrecords publicly available because most of them aresmall, privately-held and do not have public stockofferings. Finally, the level of profit whichdistinguishes a small business as a success or failureis not universal (Cohn and Lindberg, 1974).

What then is success? The Random HouseDictionary defines success as: "1. the favorable orprosperous termination of attempts or endeavors.2. the attainment of wealth, position, honors or thelike. 3. a successful performance or achievement.4. a thing or a person that is successful." One writerstates that success must be measured in terms thatare related to satisfaction. success in a businessoccurs when those who have an interest in it aresatisfied. A small business owner will think of thebusiness as successful when it provides a profit(Sullivan, 1977).

Some researchers in the small business area,however, generally label businesses that survive formore than three years as successful (Liles, 1974). Itis known that three out of five new firms are out ofbusiness after the first two years. They may nothave declared bankruptcy, but they quit for onereason or another (Harmon, 1979).

One writer developed a life cycle for small business.He believed that the first three years constituted thecrucial period of the business life cycle. The smallbusiness that survived the first three years had thehighest probability for continuance and success(Liles, 1974). For this study, we have adopted Lilesdefinition of success, which is that a business issuccessful if it has existed for three or more years.

Variables Affecting Success

Many researchers also have attempted todifferentiate successful from unsuccessful smallbusiness by examining and analyzing numerouspersonality traits, attitudes and values of theowner-managers (Brockhaus, 1980; Sexton andBowman, 1983; Solomon and Fernald, 1988).

The empirical literature regarding variables affectingsmall business success, however, is often categorized

46

into two main groupings: exogenous andendogenous variables.

The primary exogenous variables are: (1)government regulations, (2) taxes and (3) theeconomy. The primary endogenous variables can beclassified into two major subgroupings: (1)management functions and (2) the functional areasof management (i.e. marketing, finance andaccounting). The management functions most citedare: planning, organizing, staffing, directing andcontrolling. With respect to the exogenousvariables, most writers agree that small businessfailures are not caused by government regulations,taxes and the economy. Most small businessfailures are caused by the owner's incompetence orlack of experience in specific areas (Kuehl andLambing, 1987; Harmon, 1979; Peterson, Kozmetskyand Ridgway, 1983; Hodgetts and Kuratko, 1986).

Small business owners who fail often have anexcellent technical background but no business skillsor knowledge. Unless the business owner has ageneral knowledge (se many business skills,managing the business .nay overwhelm him or herKuehl and Lambing, 1987; Ibrabim and Goodwin,

1986; Wichmann, 1983). Of these skills, themanagement of resources, e.g., motivating anddirecting employees, is critical. This is especiallytrue as the business grows.

In many cases the small business owner is capableof operating the business when it is first started but,as the business continues to grow, it eventuallyexpands beyond the owner' skills and expertise(Banazewski, 1981).

The management functions have been shown to playa key role in the success of small businesses (Steinerand Solem, 1988; Harmon, 1979). This is supportedby a survey conducted by Peterson, Kozmetsky andRidgeway in which they concluded that the majorcause of small business failure was the lack ofman igement &1 ills Olson, 1987). Further, a SmallBusiness Adr. listration official is quoted as saying"Poor management is the greatest single cause ofsmall business failure" (Feature Article, 1988).

The functional areas of marketing, finance andaccounting tend to be subordinated to the functionsof management inasmuch as the latter apply to howthe functional areas are performed. Though poormanagement is generally stated as the major causeof small business failures, improper managementmanifests itself in many ways. Examples includepoor inventory control, poor collection of


receivables, poor financial planning, poor marketingand poor pricing structures (Kuehl and Lambing,1987). Thus, this paper will examine thecharacteristic which differentiate between successfuland unsuccessful small businesses using themanagement functions cited above.

METHODOLOGY/STUDY RESULTS

A research of the literature was conducted todetermine the extent to which the five basicm?-^"ement functions were utilized by successfulana unsuccessful small businesses. The informationobtained was then placed in table format, one foreach of the management functions.

An interview protocol was developed, designed in astructured format, to cover major areas suggestedby the current literature. The interview method waschosen to allow a free range of responses from theinterviewees within the developed structure; to allowthe responses to emerge from the subjectsthemselves, in their own words; and because of ourown Has toward interviews as a "rich" source ofdata.

The sample was obtained through interviewsconducted by graduate students on entrepreneursthey either knew of, or who had been identified invarious media. Over 150 entrepreneurs wereinterviewed from 1985-1989, as part of the courserequirement in a graduate level Entrepreneurshipcourse. Because of the diversity of students, and thelongitudinal nature of C.le study, a structuredprotccol was developed to minimize bias.

The data were analyzed using content analysis froma sample of 150 entrepreneurs The entrepreneurswere identified according to our preferred definitionof an entrepreneur as "one who starts and issuccessful in a venture and/or project that leads toprofit (monetary or personal) or benefits society."

The resporns were then tabulated in concert withthe management functions discussed in th.:literature. We will readily admit interpretative bias,since the purpose of this study was to find evidencesupporting our suppositions about behavioraldifferences between successful and unsuccessfulentrepreneurs.

Planning

"Planning" s the owner-manager's decision-makingfunction. It requires decisions about a future courseof action or goal setting. Because planning is a

147

thinking process, action-oriented business personssometimes postpone it in favor of activities moredirectly involved in operations (Longenecker andMoore, 1987). Empirical studies have shown,however, that there is a statistically significantdifferer ce between level of planning sophisticationand financial performance in small businesses(Bracker and Pearson, 1987; O'Neill and Duker,1986).

Table 1 shows the different approaches orcharacteristics gxhibited by both successful andunsuccessful businesses for the planning principle, asgleaned from the interview data. It clearly depictsthat successful small businesses take the necessarytime to plan, often including strategic planning(Gilmore, 1971; Stoner and Fry, 1987; Thurston,1983; Steiner and Solem, 1988). On the other hand,unsuccessful businesses rarely plan and, if they do,it is generally short-term in nature (Robinson, 1982;Sexton and Van Auken, 1982).

Successful small businesses give planning adequateattention, develop goals and objectives and monitorthese factors relative to the level of success.Unsuccessful businesses do not (Steiner and Solem,1988; O'Neill and Duker, 1986).

Organizing

"Organizing" is the first step in the implementationof business plans and goals. It involves classifyingand dividing the work or activities of a business intomanageable units. Like planning, the organizingfunction must be performed continuously becausebusiness and economic conditions are constantlychanging (Baumbeck, 1988).

Table 2 provides data from the interviews relativeto the function of organizing. Successful smallbusinesses have a formal organization structure andchart with clear lines of authority and , -sponsibility(d'Amboise and Muldowney, 1988). Unsuccessfulbusinesses have an informal organizational structure.The organizationai arrangement is usually hazy inthe minds of em:14ees because of the lack of anorganization chart.

While some writers state that in the very smallbusiness this may be satisfactory, they also state thatit is desirable that relationships among members ofthe organization be logically conceived andthoroughly understood by all employees(Longenecker and Moore, 1987). The latter is bestensured through the exercise of putting thisinformation in written form.


Successful firms also have criteria for theirorganizational structure based on product line,geographical marketplace or managerial function,with a relatively high degree of vertical andhorizontal integration within the business. Suchorganizational policy generally covers the way inwhich responsibility and authority are distributed todifferent members of the business. An axiom ofgood organization is that responsibility and authoritymust always be equal.

A correct balance between delegating sufficientauthority to relieve the owner of certainresponsibilities, on the one hand, and maintainingsufficient control over the business, on the otherhand, is the hallmark of good organization it: thesmall business (Cuba and Milbourne, 1982).

A common weakness in unsuccessful businesses isthe failure to delegate sufficient authority to leavethe owner free to concentrate on the moreimportant management functions (Baumbeck, 1988;Sullivan, 1977).

Staffing

"Staffing" is finding the right person for the right joband is the next step after organization. As shown inTable 3, successful small business criteria for staffselection is based on objectivity in terms of theneeds of the business, thus work assignments aremeaningful and challenging (Baumbeck, 1988;Longenecker and Moore, 1987; Featured Article,1988).

For example, Olson has concluded that it is notessential to employ people with highly developedmanagement skills (marketing, production, financeand human resources) in the start-up phase. Thesetalents are much more important during the rapidexpansion of the growth phase (1987). Also,successful businesses have a formal recruitmInt andselection system, a performance appraisal systemand compensation commensurable with the level ofwork effort.

Recruitment and selection in unsuccessful smallbusinesses rest with the owner-manager and tendsto be highly subjective. Generally no performanceappraisal system exists and compensation frequentlyis not commensurate with the level of work effort.The expected result is predictable. Successful smallbusinesses have better employees, therebypermitting the owner-manager to spend more timewith the customers - the ultimate source of the sales(Hand, Sineath, and Howie, 1987).

148

Di rect:ng

"Directing" is the function of supervising andcoordinating the activities of subordinate individuals(Baumbeck, 1983). In successful small 13usinesses,the owner-manager is firm, fair and consistent (seeTable 4). He/she delegates a great deal ofauthority and responsibility, as previously noted.Supervision is largely an exercise in leadership. Itis accomplished by means of the communication ofideas and instructions to subordinates, and basedon an understanding of what motivates people(Baumbeck, 1988).

The successful small business owner-manager tendsto use positive rather than negative techniques tomotivate his/her employees. The business is run ona high level of trust and communication andempinyees are given a "wide latitude" in which tooperate (Cohn and Lindberg, 1974).

In the unsuccessful small business, there appears toexist little or no delegation of authority andresponsibility. The owner-manager uses a greatdeal of negative motivational techniques withemployees. There is a low level of trust and anabsence of good communications. In addition,employees are given a narrow latitude in which tooperate. Hardworking, high performing employeescan make the difference between a successful andunsuccessful firm. Through leadership/propersupervision, the owner-manager can gain thecooperation of others. Through motivation, theowner-manger encourages employees to strivepersistently for high job performance (Longeneckerand Moore, 1987).

Controlling

The last function of management to be discussed isthe controlling function. The plans of the businessare the standards against which the actual behaviorof the business is compared. Planning withoutcontrol would be of little operational value."Controlling" is the function that measures, evaluatesand makes corrective adjustments to the operationsof the business in response to the standardsdeveloped by the plan (Scarborough and Zimmerer,1984).

Table 5 suggests that in the successful smallbusiness there exists a budget, accounting recordsand an inventory system, as well as definitive criteriafor measuring and reporting the performance of thebusiness. There also is an established qualitycontrol function where standards of performance

52


are defined and stated. Finally, based on theestablished standard and measurement ofperformance, corrective actions are taken to bringthe business in line with overall objectives.

Table 5 also suggests that for the unsuccessful smallbusiness, if budgets, accounting records or inventorysystems do exist, they are rarely used. If they areused, they are used poorly. Quality control oftenexists, but is the sole responsibility of theowner-manager. Also, controlling is perceived as amore negative than positive approach by theowner-manager.

Finally, the criteria for measuring businessperformance in unsuccessful small businesses iseither subjective or inconsistent. The controllingfunction is used to spot problems, but is not used toplot and establish the business objectives.

CONCLUSION

Small business is becoming an increasinglyimportant factor in the political, economic andsocial fabric of the United States, as well as in manyother free-world nations. Their success, therefore,is becomir essential to the well-being of theirhome nation. Thus, researchers, consultants,teachers and practitioners of small business need tofind ways in which to help achieve success for thelarge number of small businesses being established.In order to help small businesses be successful,however, more information is needed as to how theycan successfully compete.

There are many factors affecting the success orfailure of a small business. There is considerableevidence, however, that the exogenous variables ofgovernment regulations, taxes and the economy havea far less adverse affect on small business success orfailure than many believe. Conversely, there isconsiderable evidence that the endogenous variableof management is likely the major factor affectingsmall business success or lack thereof.

It is clear that the owner-manager of a smallbusiness must understand and successfullyimplement the functions of management. Theowner-manager must perform the following basicfunctions if the business is to be successful:

1. Planning, or selecting the future courses ofaction for the business. The major difference foundin this study between successful and unsuccessfulsmall businesses is that of planning for the futureversus focusing on daily existence. The successful

small business "maximizes the probability ofsuccess," while the unsuccessful small business"minimizes the probability of failure." This reactivemode exhibited by the unsuccessful small businessforces the owner-manager to constantly "put outfires" as opposed to eliminating the factors whichcontribute to starting the fires.

2. Organizing, or classifying and dividing the workor activities of a business into manageable units.The successful small business owner-managerunderstands the importance of a formalorganizational structure and the associatedorganizational chart in order to provide clear linesof authority and responsibility. Further, the effortinvolved in such an exercise helps theowner-manager to question and be proactive indetermining the organization best suited for his orher business. By providing a clear delineation ofemployee lines of authority and responsibility, theemployees of the business are better able toperform their assigned duties.

3. Staffing, or finding the right persons for the rightjobs, including retaining them. The successfulbusiness is started based on business need throughformal recruitment and selection procedures. Workassignments are meaningful, a perfirmance systemexists and is used, and employee compensation iscommensurable with the level of work effort.

4. Directing, or supervising ani coordinating theactivities of subordinates. The successful businessowner-manager is firm, fair and consistent, usingpositive techniques to motivate his or heremployees. The owner-manager freely delegatesauthority and responsibility in order to spend moretime on other important management functions.Also, successful small businesses are managed insuch a way as to provide a high level of trust andcommunication, giving employees a "wide latitude inwhich to operate.

5. Controlling, or measuring and correcting theactions of subordinates to ensure that plans for thebusiness are fulfilled. Within the successful smallbusiness there exists a budget, accounting recordsand an inventory system. Quality control is basedon established standards of performance.Corrective actions are implemented to bring 0-business in line with overall objectives.

In summary, the path to success for a small businessheavily depends upon good management and theadherence to following the above statedmanagement functions. Often, when questioned, the

r.r)00


unsuccessful small business owner-manager arguesthat there never is time to plan, organize, staff,direct and control. Clearly, based upon the resultsof this study, all owner-managers of a smallbusinesses may be well advised to consider thesefive management functions as their "Small BusinessCommandments."

REFERENCES

[1] i3auazewski, John. "Thirteen Ways To Get aCompany in Trouble." Inc., pp. 98-101, September1981.

[2] Baumbeck, Clifford M. How to Organize andOperate a Small Business, (Eighth Edition).Englewood, NJ: Prentice Hall, 1988.

[3] Baumbeck, Clifford M. Basic Small BusinessManagement. Englewood Cliffs, NJ: Prentice-Hall,Inc., 1983.

[4] Bracker, Jeffrey S., and John N. Pearson."Planning and Financial Performance of Small,Mature Firms." Strategic Management Journal, Vol.7, 'pp. 503-522, 1986.

[5] Brockhat.s, Robert, Sr. "Risk Taking Propensityof Entreprenctirs." Academy of ManagementJournal, No.3. pp. 509-520, 1980.

[6] Cohn, Theodore, and Roy A. Lindberg. Survival& Growth. New York: AMACOM, 1974.

[7] d'Amboise, Gerald, and Marie Muldowney."Management Theory for Smaii Business: Attemptsand Requirements." Academy of ManagementReview, Vol. 1, No. 2, pp. 226-240, 1988.

[8] Feature Article. "Winning Ideas for SmallBusiness Success." Small Business Success, pp. 5-25,1988 Edition.

[9] Gilmore, Frank F. "Formulating Strategy inSmaller Companies." Harvard Business Review, pp.71-81, May-June 1971.

[10] Hand, Herbert; W. Palmer Sineath, Ill; and W.Evans Howie. "Small Business Concepts and theirRelationship to Performance: A field Study ofRttail Service Stations." Journal of Small BusinessManagement, Vol. 25, No. 2, pp. 55-63, April 1987.

[11] Harmon, Paul. Small Business Management (APractical Approach). New York: D. Van NostrandCompany, 1979.

50

[12] Hodgctts, Richard M., and Donald F. Kuratko.Effective Small Business Management (SecondEdition). Orlando: Academic Press CollegeDivision, 1986.

[13] Ibrahim, A. B., and J. R. Goodwin. "PerceivedCauses of Success in Small Business." AmericanJournal of Small Business, pp. 41-50, Fall 1986.

[14] Koontz, Harold; Cyril; andWeihrich, Heniz. Management, 8th ed.McGraw-Hill, New York, 1984.

[15] Kuehl, Charles R., and Peggy A. Lambing.Small Business Planning and Management. Chicago:The Dryden Press, 1987.

[16] Liles, Patrick. New Business Ventures and theEntrepreneur. Homewood, IL: Richard D. Irwin,Inc., 1974.

[17] Longenecker, Justin G., and Carlos W. MooreSmall-Business Management (Seventh Edition).Cincinnati: South-Western Publishing Co., 1987.

[18] Olson Philip D. "Entrepreneurship andManagemcnt." ',Junin/ of Small BusinessManagement, pp. 7 -:3, July 1987.

[19] O'Neill, Hugh M., and Jacob Duker. "Survivaland Failure in Small Business." Journal of SmallBusiness Management, pp. 30-37, January 1986.

[20] Peterson, P ',ben A.; George Kozmetsky; andNancy Ridgwa, "Perceived Causes of SmallBusiress Failures. A Research Note." AmericanJournal of Small Business. Vol. VIII, No. 1, pp.15-19, July-Sept 1983.

[21] Robinson, Richard B., Jr. "The Importance of'Outsiders' in Small Firm Strategic Planning."Academy of Management Journal, Vol. 25, No. 1,pp. 80-93, March 1982.

[22] Scarborough, Norman M., and Tho:nas W.Zimmerer. Effective Small Business Management.Columbus: Charles E. Merrill Publishing Company,1984.

[23] Sexton, Donald L., and Nancy Bowman."Determining Entrepreneurial Potential of Students:Comparative Psychological Characteristic Analysis."Academy of Management Proceedings, Dallas, pp.408-412, 1983.


[24] Sexton, Donald L., and P. M. Van Aucken."Prevalence of Strategic Planning in the SmallBusiness." Journal of Small Business Management,Vol. 20, No. 3, pp. 20-26, 1982.

[25] Solomon, George T., and Lloyd W. Fernald."Value Profile If Male and Female Entrepreneurs."International Small Business Journal, Vol. 6, No. 3,pp. 24-33. April-June 1988.

[26] Steiner, Michael P., and Olaf Solem. "FactorsFor Success in Small Manufacturing Firms." Journalof Small Business Management, pp. 51-56, January1988.

[27] Stoner, Charles R., and Fred L. Fry. StrategicPlanning in the Small Business. Cincinnati:South-Western Publishing Co., 1977.

[28] Swain, Frank, and Abdnor, James (eds.). SmallBusiness and the American Economy. U.S. SmallBusiness Administration, GPO, 1988.

[29] Sullivan, Daniel J. Small Business Management:A Practical Approach. Dubuque, IA: Wm. C.Brown Publishers, 1977.

[30] Szilagyi, Andrew D., Jr. Mangy lent andPerformance, 3rd ed. Scott-Foresr -ittle andBrown, Glenview, IL, 1989.

[31] Thurston, Philip H. "Should SmallerCompanies Make Formal Plans?" Irarvard BusinessReview, pp. 162-188, September-October 1983.

[32] Wichmann, Henry. "Accounting andMarketing - Key Small Business Problems."American Journal of Small Business, Vol. VII, No. 4,pp. 19-26, 1983..

TABLE 1Classifying Successful vs. Unsuccessful Small Businesses

Using the Management Function of Planning

Successful Small Businesses

1. Time is allocated for planning.

2. Planning receives considerable attentio-..

3. Both long-term and short-term customerplanning is conducted and integrated into oneconsistent purpose

4. Objective goals and objectives are developed.

5. Monitoring systems_ are created to provideinformation concerning the level of success inachieving goals and objectives.

51

Unsuccessful Small Businesses

1. Planning is only done if time is available.

2. Primary area of attention is obtaining sufficientbase.

3. Planning effort is short-term.

4. Goals and objectives are general and subjective.

5. No monitoring system developed or if oneexists, poorly used, or ineffective.

6. Planning is used only to assist in reacting tomarketplace.

7. All planning is done by.. indiyidualowner-manager; often with no additional inputssought or used.



Using the Management Function of Organizing

Successful Small Businesses Unsuccessful Small Businesses1. Formal organizational structure. 1. Informal organizational structure.2. Printed organizational chart. 2. No stated or printed organizational chart.3. Clear lines of authority and responsibility. 3. Unclear lines of authority and responsibility.4. Criteria for organizational structure based on

product line, geographical marketplace ormanagerial function.

4. Organizational structure, if existent, based ondesires of owner-manager.

5. High degree of vertical and integration. 5. Virtually no vertical and horizontal integration.6. Seldom reorganizing. 6. Constantly reorganizing.


Using the Management Function of Staffing


1. Criteria for staff selection is based onobjectivity.

2. Staffing is based on the business' need.

3. Opportunity for on-the-job training and learningavailable.

4. Staff is encouraged to expand theircompetencies.

5. Work assignments are meaningful andchallenE-.ng.

6. Compensation is commensurable with the levelof work effort.

7. Formal recruitment and selection process ofemployees exists.

8. A perfo.diance appraisal system exists and isused.

52


1. Criteria for staff selection rests withowner-manager and may be highly subjective.

2. Staffing is based on the desires of owner -managec rather than needs of the business.

3. On-the-job training is left to the individual.

4. Expansion of individual's competence is theresponsibility of the individual rather than thebusiness.

5. Work assignments are not always meaningfuland far from challenging.

6. Compensation is not commensurate with levelof work effort.

7. A lack of any process to recruit and select forall employees. High incidence of nepotism.

8. No formal performance appraisal system.

r:


TABLE 4.Classifying Successful vs. Unsuccessful Small Businesses

Using the Management of Directing

.'ucceseful Small Businesses

L The manager is firm, fair, and consistent inhis/her actions.

2. A high_ level of delegation of authority andresponsibility exists.

3. All internal resources are efficiently andeffectively used.

4. The manager aes.positive rather than negativetechniques to motivate employees.

5. Managers tend to use outside sources ofassistance to provide needed feedback andadvice.

6. The business is run on a high level If trust andcommunication.

7. Employees are given "wide k. Rude" hr which tooperate.


1. The manager adopts a highly individualized"I'm the Pro" attitude toward many activities.

2. There exists little or no delegation of authorityand responsibility.

3. Internal resources, are not effectively orefficiently used.

4. The manager uses a great deal of negativemotivational techniques with employees.

5. Absence of outside source use for advice,counsel or feedback.

6. A low level of trust and communication exists.

7. Employees are given a narrow latitude in whichto operate.

TABLE 5.Classifying Successful vs. Unsuccessful Small Businesses

Using the Management Function of Controlling


1. There exists a budget, accounting -ecords, andat inventory system.

2. There is an established quality control function.Standards of performance are defined andstated.

3. Controlling is used to assist the manager indaily operations and future planning.

4. There are definitive criteria for measuring andreporting the business' performance.

5. Major emphasis of controlling is on efficiency.

6. Based on the established standards andmeasurement of performance, corrective actions

implementedmplemented to bring business back in linewith overall objectives-success.

53


1. If a budget, accounting records or inventory..ystem does exist, they're either never or poorlyused.

2. Quality control exists, but generally is the soleresponsibility of the owner-manager.

3. Controlling is used to alert the manager todaily operational issues.

4. The criteria for measuring the business'iperformance is either subjective or inconsistent.

5. Contro allows managers to spot prqblemsbut often not used to plot and reestabli h thebusiness' -Jje..ctives.

6. Controlling is perceived of as a more negativethan positive approach by the manager.

United States Association for Small Hu.inesses and Entrepreneurship-1989

PERSONNEL PRACTICESIN THE SMALL BUSINESS MANUFACTURING SECTOR

James W. Carr, West Georgia CollegeFrank R. Hunsicker, West Georgia CollegeThomas C. Padgett, West Georgia College

ABSTRACT

This study examined differences in personnel prac-tices among small Georgia manufacturing firms.Survey results were also compared with PersonnelPolicies Forum data representing very large firms.Significant differences between large and small firmswere found regarding use of written policies, formaljob analysis and the personnel responsible for hiringdecisions.

INTRODUCTION

There is reason to believe that personnel practicesin small businesses will differ in many respects fromthose in large organizations. For example, verysmall businesses have an insufficient volume of per-sonnel related activities to warrant a full timepersonnel manager. In addition, the small businessmanager must be a generalist, and may not beinformed of or have the opportunity to apply avail-able knowledge of personnel practices. This paper

present survey findings regarding personnelpractices of small businesses in the manufacturingsector, and identify differences in personnelpractices that may be related to differences in size.

REVIEW OF THE LITERATURE

Studies of personnel policies and practices in smallfirms have described strengths and weaknesses andhave characterized small business managers asmaking limited use of cost effective techniques.This pattern is illustrated by the following fourstudies.

Hoy and Vaught [4] interviewed 150 small businessowner-managers in firms with five to fiftyemployees. Problems identified by the intervieweesinvolved recruiting, selecting, training and moti-vating employees. Employers blamed these prob-lems on external factors such as a lack of skilledlabor, disincentives like minimum wage laws andwelfare payments and on cultural changes whichdc- emphasize the work ethic.

55

v0

McEvoy [6] interviewed the person responsible forpersonnel management in 54 small businesses with25 to 250 employees. Seventy-seven percent of allfirms .iced written personnel policies Lough areascovered varied from firm o fL m. More than Lnethird did not maintain 'ten job descriptions.Seventy-three percent p d their staffing needsless than one month prior to recruitment. Seventy-one percek' had a formal performance evaluationsystem. However, forty-two percent used perfor-mance review meetings for simultaneous feedbackand discussion of compensation for merit increases,a clear violation of good personnel practice. Mostfirms relied heavily on advertising and walk-ins forrecruiting with little use made of employment agen-cies, peg. nal cotacts, professional associations, orhigh schools and colleges. Or 'he-Job-Training(OJT) was the preferred training approach ofeighty-four percent of the respondents. Very fewfirms used formal training programs. Only twenty-eight percent of the firms used formal wage surveysand only three firms used formal job evaluationsystems to assure external and internal equity intheir compensation structures.

Respondents in this study kept current by readinggeneral publications such as the Wall Street Jour-nal or Business Week. Few read professionalpersonnel journals or periodicals.

Aziz and Anderson [1] surveyed 300 businesseswith fewer than 200 employees. The study evalu-ated their personnel policies concerning workanalysis, staffing, training and development,employee appraisal, compensation and maintenance.Respondents gave opinions of the quality of the jobdone with respect to the above factors and theresponse wa:, correlated with organizational size.The results indicated that smaller firms were felt tobe doing a legs than adequate job in nearly all areaswhile their larger counterparts were felt to be doinga much more satisfactory job. The authors con-cluded that larger firms are more likely to have aseparate personnel department with a specializedstaff to develop an effective personnel program.Little [5] surveyed 960 Louisiana firms having fewerthan 10C employees to identify which personnel

Unita! States Association for &no.' Etadneues and Enorpeneurship-1989

functions are performed and who performs them.He found that the owner-manager usually per-formed most of the personnel-related functions, butthe likelihood of a firm having a full time personnelemployee increased as the numb( of employeesincreased.

The previous two studies show that personnel prac-tices differ somewhat between small and largerorganizations and the differences begin to appear inorganization.s with fewer than 200 employees. Blauet al RI using data from 110 New Jersey manufac-turing concerns employing 200 or more personsreported that size affects structure, personnelcomponents and spans of control.

More recently, in a study of small and medium-sized businesses, Geeraerts [3] found that owner-managed organizations were much less likely thanprofessionally managed organizations to implementformal structure and control techniques to cope withincreased size. Geeraerts reasoned that owner-managers were reluctant to give up personal control.

Many factors may contribute to differences inorganization structure and the use of managerialtechniques. Because organization size is one ofseveral dominating influences, it continues to be amajor focus of research.

The above literature tends to support the ideasstated in the introduction, but leaves some issuesunresolved. An increase in size does appear to beaccompanied by increased use of formal personnelconcepts and techniques, but these are applied lesseffectively in the small business environment, andare influenced by the fact that small business owner-managers behave differently than professionalmanagers. None of the studies specificallyaddressed the idea of sep, rating the effects of sizeand the effects of knowledge of managerial and per-sonnel practices on the way that small businessesreact to their environment. The research describedbelr w attempts . add to the body of knowledge in0- respect.

RESEARCH METHODS

The Questionnaire and Sample

A c 'estionnaire was developed to identify personnelpractices and policies in small organizations, andincluded items covering personnel policy, jobdescriptions, staffing, performance appraisal,training and compensation. Respondents reasked to consider only non-managerial and non-supervisory employees.

A random sample of 354 companies having 20 to400 employees was drawn from the 1984 GeorgiaManufacturing Directory. Businesses whichwere divisions cr subsidiaries of larger companieswere excluded.

The mailed questionnaire was returned marked"addressee unknown" by forty-two selected com-pautes. Useable responses were returned by 127 ofthe remaining 312 companies, for a response rate of41 percent.

Analysis

The survey questionnaire provided response fre-quencies describing the personnel practices of smallbusiness firms. It included six items which used afive point preference scale to rate the importance oreffectiveness of several personnel practices, and sixother itens that asked whether or not certain prac-tices were b ling used. To determine the effect ofsize on the ..:aswers, responses were divided into twogroups, seventy-nine with fewer than one-hundredemployees and fort,- tight with one-hundred to fourhundred. These two groups will be referred tohereafter as group I and group II, respectively. Thebreak point between the two groups was set at one-hundred because the literature indicated thatchanges of the type being measured could beexpected to occur as the number of employeesreached this size. The Chi-Square test and the testfor the difference between two proportions wereused to identify significant differences in practices ofthe two groups. The significance level is reported incases where the alpha error is .1 or less. The find-ings of this study are more meaningful when com-pared to the practices of large firms. Where possi-ble, the Persimnel Policies Forum (PPF) studies(published by the Bureau of National Affairs) wereused for this purpose. The PPF surveys three-hundred personnel executives on a variety of per-sonnel concerns. The selection of executives ischanged every two years but represen:..; a consistentdemographic sample, and is assumed for purposesof this paper to be drawn from the same population.

RESULTS

Frequency Distributions

It was expected that personnel policy disseminationwould become more formal in businesses ofincreas-ing size, since oral communication would becomeincreasingly difficult. The results supported this.F are 1 indicates that the proportion of firmsretying primarily on oral policies decreased betweengroup I and group II, while the proportion relying

primarily on written policies increased. A Chi-Square test for the differences between two groupswas significant at an alpha level of .05.

The results showed a sign;licant increase in the useof formal job descriptions between the two groups.Only thirty-seven percent of group I used formal jobdescriptions, while sixty-five percent of group IIused them. A test for the difference between twoproportions was significant at the .005 level. Thoseusing a formal job description were asked how itwas developed. Figure 2 shows that the highestpercentage in both groups developed it through aformal analysis. The other methods were deter-mination by the supervisor, adaptation from jobdescriptions of similar jobs, and interviews ofemployees holding the job. A Chi-Square test onthe responses to the items in Figure 2 showed nodifference between the two groups.

The person making the hiring decision also seems tochange when the organization gets larger. Figure 3shows the response to the question asking who wasprimarily responsible for making the hiring decision.The results indicate that the top manager is moreinvolved in the goup I organizations, while thedecisLa is delegated to line managers and specifiedpersons (such as the personnel manager) in thelarger, group II organizations. However, theChi-Square test for this response was significantonly at the .1 level of significance.

The Personnel Policies Forum reports that mostfirms surveyed place the responsibility for the hiringdecision with either the immediate supervisor forthe position or the head of the department wherethe position is open [10,p.21]. So, with respect tothe hiring decision, the tendency to decentralizebegins with organizations having at least one-hundred employees and is prevalent in much largerfirms with competent subordinate managers.

No significant differences were fo I between thet.vo groups of companies regarding one presence offormal performance evaluation systems, primary use,disposition and frequency of use. However, com-parison with PPF data reveals interesting differ-ences. Only sixty-three percent of group II andfifty-three percent of the group I organizations inthe small business survey reported having formalsystems. In contrast, approximately ninety percentof all PPF firms have them [8, p. 3].

The top three uses among the respondents to thesmall business survey were to evaluate newemployees during a probationary period forpermanent employment followed by evaluation for

United States Association for Small Businesses and Entrcreneurs, p-1989

57

training and termination purposes. The least impor-tant use was for making wage adjustments. ThePPF survey reported that the top three uses forappraisals among large firms were for determiningwage /salary adjustments, making promotion deci-sions, and developing communication betweensupervisors and subordinates, respectively [8, p.12].One might conclude, therefore, that when formalappraisal systems are used in small businesses, theyare used for more basic, less sophisticated purposesthan is the case for large businesses. This is snp-ported by the results to the question concerning thedisposition of the evaluations.

Figure 4 summarizes the responses concerning thedisposition of the evaluations after their completion.

These results indicate that the appraisal process inthe small businesses is more informal than in thelarger firms reported by the PPF. Only about fiftypercent of the time is a formal written evaluationrequired of the superviscr, and only fifty-fivepercent of the time is the evaluation retained onfile. Virtually all (99%) of PPF respondents retainperformance evaluations on file for some timeperiod. Seventy-two percent of the large companiesretain them indefinitely [8, p. 20]. Other disposi-tions shown in Figure 4 cannot be compared directlybecause PPF responses are categorized somewhatdifferently. However, the PPF data show that morethan ninety percent of responding companies haveperformance evaluation systoms that include thedisposition components shown in Figure 4. Thesecompanies have complex systems which include dif-ferent programs for different employee categories,emphasis on employee participation and appeal pro-cedures and documentation [8, pp. 1-23]. Theseforms of sophistication are perhaps more necessaryand more affordable by large companies.

The responses to the question concerning thefrequency of performance evaluations weresomewhat consistent with the practices found inlarge businesses in that annual evaluations were themost common. Only forty-five percent of Cie smallbusinesses reported annual evaluations in contrast toeighty-three percent of all PPF respondents [8, p. 5].This difference may be attributable to the smallbusinesses' use of performance evaluations duringthe probationary period, often less than a year induration.

Results of Q. ,ns Using Rating Scales

The following di cussion concerns that fart of thesurvey where respondents were asked to rate aseries of items on a scale of one to five with one

Co

United States Association for Small Businesses and Entreprenewstup*-1989

being very ineffective/unimportant and five beingvery effective/important. None of the responses inthis and the remaining areas showed a statisticallysignificant difference between grout I and group ILHowever, as in the preceding section, comparisonsto PPF data are made. PPF reports describe fre-quency of practice, so at some risk of accuracy,relative importance can be inferred.

Small business respondents reported presentemployee contacts as the most effective and employ-ment services (private and government) as the leasteffective mean.. of recruitment. Ninety-one percentof all PPF companies use employee referrals and atleast seventy percent use private and state employ.ment agencies [10, p. 7].

Work experience and frequency of employerchanges were the most important screening factorsused by small business managers. These factors areamong those most frequently used by all PPFcompanies [10, p. 22].

Attend' ace was one of the melt important con-cerns of small companies that checked applicants'work histories. Cooperativeness and ability to workwith others were of only slightly less concern.Productivity, efficiency, accuracy and completenessof work were all much less important. PPF datadoes not provide specific insight regarding thesefactors. However, seventy-three percent or more ofthe PPF respondents do check employment recordsand other reference information [10, p. 22]. Itfollows that information regarding attendance, jobattitudes and performance is requested.

Figure 5 shows the average ratings given to varioustools used for selecting employees. Both smallcompany groups rated the interview as the mostimportant item, with physical exams, personalitytests and aptitude tests being among the leastimportant. The use of employment tests, particu-larly aptitude and ability tests, can greatly enhancethe productivity of the selection process. This is anadvantage taken more frequently by larger firmssince sixty-three percent of PPF firms reportedusing a skill performance test or work sample andfifty-seven percent required a medical examination[10, p. 17]. The frequent use of medical examsreflects growing compliance with federal and statelegislation as well as awareness of the need for selfprotection provided by benchniark exams.

Figure 6 summarizes the average ratings r'ven to anumber a factors used for setting ern, Jyee paywith job evaluation, company wage history and thegoing rate being the most important items. The

58

mid-range rating for the formal wage survey indi-cates that it is not used extensively by small busi-nesses. The PPF survey, however, reported thatninety-three percent of all companies use wage andsalary surveys, with fifty-five percent rating them asessential, Thirty percent as very helpful and fifteenpercent as "of s )me use as a guideline." Job eval-uation is used to establish internal equity in paystructures. Wage survey data help companies to beexternally competitive regarding compensation.Small companies are apparently most concernedwith internal equity while large companies are veryconcerned with being externally competitive. PPFrespondents were not asked if they conducted jobevaluation, i)ut they were asked other question;relevant to internal equity. For example, Thirty-onepercent use outside consultants in establishing man-agement pay structures and Twenty -three percentuse them in establishing nos- management pay struc-tures. Fifteen percent use outside consultants forother compensation related duties, primarily toconduct formal job evaluation [7, p. 4]. Thirty-eight percent of HT companies also report usingcommittees of four to six members to deal withsome wage/salary issues including job evaluation [7,p. 18]. From this and other reported activity it isapparent that thei e is also much concern forinternal equity among large con- anies.

Respondents were asked to rate the importance ofvarious kinds of training programs for new employ-ees. On-the-Job-Training (OJT) was the mosthighly rated item, followed by coaching, formalin-firm training, job rotation and formal externaltraining. Intuitively the authors believe the termOJT was interpreted as a broad range of non-formaloptions. The top two items were rated 4.3 and 3.6respectively. None of the remaining items wereabove mid-scale, which indicates that they are notviewed as being s;...ry important. In contrast, only afew PPF respondents relied -,xclusively on OJT.Most supplemented extensively with formal, struc-tured training programs. Ninety percent of all PPFfirms conduct formal in-house training programs formanagement and non-management prsonn"1.Eighty-seven percent of all PPF companies providein-house training programs for non-managementemployees [9, pp. 1-3]. Ex .rnal training programsof various types ' re provided to first line supervisorsand managers (there was no mt. ,tion of non-managerial employees). For example, attendance atoutside seminars is provided at company expense byseventy percent of large companies for first linesupervisors and by seventy-six percent for middlemanagers. Also, thirty-seven percent of largecompanies provide university programs for executivedevclopment to their middle managers [9, p. 20].

The difference in training in large and smallcompanies appears to be one of resources. Largercompanies may have training professionals todetermine training needs and provide programs tosupplement OJT. Small firms may not have theseassets, thus they depend more heavily on OJT.

SUMMARY AND CONCLUSIONS

Significant differences between the two groups fromthe small business sample were found in the use ofwritten policies, formal job analysis and delegatedhiring decisions. No significant differences werefound in the use of performance appraisals, or inthe responses concerning the importance of a num-ber of factors pertaining to recruiting, staffing,compensation and training. P'fferences were found,however, when these factors were compared topractices in the large business organizationsreported in the PPF.

PPF firms use performance evaluation systems morefrequently, administer them in different and moresophisticated ways and are more likely to retain theevaluations on file.

Both small businesses and PPF firms consideremployee contacts to be the most effective means ofrecruiting and are consistent with respect to gather-ing background information on job applicants.However, PPF iirms make frequent use of privateand government agencies and structured selectionprocedures such as skill performance tests andmedical examinations. The small business samplerated all of these items as relatively unimportant.

Sre.,:l companies place heavy emphasis on internalequity in pay structures and less on external com-petitiveness whereas PPF companies conduct wagesurveys, demonstrating concern for externalcompetitiveness.

Finally, small companies consider OJT to be themost important training technique whereas PPFcompanies frequently use structured in-housetraining programs (rated as relatively unimportantby small businesses).

The differences found between the small businesssample and the PPF firms are all as expected.Some are related primarily to size. As the numberof employees increases, it becomes necessary todelegate hiring decisions and formalize policy andselection procedures simply because the more directand informal methods become ineffective. The factthat the small business sample showed differencesin these factors between group I and group H

United States Association for Small Businesses and Entreprenaaship-1989

59

suggests that these changes tend t -, occur fairly earlyin the growth cycle of a small business.

Many of the other items, such as use of perfor-mance evaluations, performance tests, wage surveysand formal in-house training programs requirespecialized knowledge and professional administra-tion. A possible explanation for the lack ofdifference in these factors between the two smallbusiness groups is that small organizations are notlikely to have the resources (including professionalpersonnel managers) to administer the more sophis-ticated personnel practices. There is readilyavailable puolished information and training, andthere are employer associations and consultingservices. However, the small business managerseems disinclin d to take full advantage of theseresources. Further research will be necessary toclarify this point

REFERENCES

[1] Aziz, Abdul, & Anderson, Robert. "PersonnelPolicies in Small Business." Presented to theSouthern Management Association, Atlanta,Georgia, 1986.

[2] Blau, Peter M.; Falbe, C.; McKenley, W.; andTracy. "Technology and Organization in Manufac-turing." Administrative Science Quarterly, 21, No. 1(March 1976), 21-40.

[3] Geeraerts, Guy. "The Effects of Ownership onthe Organization Structure in Small Firms."Administrative Science Quarterly, 29, (June 1984),232-237.

[4] Hoy, Frank, and Vaught Bobby. "The RuralEntrepreneur: A study in Frustration." Journal ofSmall Business Management, 18, (January 1980), 19-24.

[5] Little, Beverly L. "The Performance ofPersonnel Duties in Small Louisiana Firms. aReseach Note." Journal of Small BusinessManagement, 24, (October 1986), 66-69.

[6] McEvoy, Glen M. "Personnel Practices inSmaller Firms: a Survey and Recommendations."American Journal of Small Business Management, 8,No. 2, (Oct.-Dcc. 1983), 32-39.

[7] Personnel Policies Forum Survey No. 131. Wageand Salary Administration. Washington, DC.:Bureau of National ACairs 1981.

United States Association for Small &abysses and Dumprenmaship-1989

[8] Personnel Policies Forum Survey No. 135,Performance Appraisal Programs. Washington, DC:Bureau of National Affairs, 1983.

[9] Personnel Policies Forum Survey No. 140.Training and Development Programs Washington,D C: Bureau of National Affairs, 1985.

60

[101 Personnel Policies Forum Survey No. 146, 1988.Recruiting and Selection Procedures. WashingtonDC: Bureau of National Affairs, 1988.

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United States Association for Snail Businesses and Entrepreneurship--1989

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United States Associat' ion for Small Basil' sesses and Entrepreneurship-1989

RURAL ENTREPRENEURSHIP RESEARCH: AN INTEGRATIONINTO THE ENTREPRENEURSHIP FIELD

Max S. Wortman, Jr.Iowa State University

ABSTRACT

Rural entrepreneurship is one of the newest areasof research in the entrepreneurship field. It hasbecome -mile of the most significant supportive fac-tors for rural economic development. This paperdefines rural entrepreneurship, integrates ruralentrepreneurship research into an entrepreneurshiptypology, critiques current rural entrepreneurshipresearch, analyzes data sources and research meth-ods being used, and proposes future research pros-pects in rural entrepreneurship.

INTRODUCTION

In the past decade, entrepreneurship has become arecognized area of management research. Evenmore recently, considerable attention has beenfocused on entrepreneurship and small business iniural communities. This interest in rural entre-preneurship has been brought about by changes inrural society. The loss of manufacturing industriesand the restructuring of agriculture have caused thecontinuing displacement of workers and the needfor non-farm income to support farming operations.Many families are unable or unwilling to leave ruralcommunities, and need to find alternative sources ofincome within the community. The encouragementof new v.-^tures is viewed as a means to increasingincome and employment as well as providing stabil-ity and growth in rural communities. Moreover,rural entrepreneurship may be the means toimprove the quality of life in rural areas byproviding goods and services to rural communities.

Although this interest in rural entrepreneurship hasaroused considerable thotAght by governmental agen-cies such as the U.S. Department of Agriculture(USDA) and the Small Business Administration(SBA), there has not been a similar interest bymainline researchers in agricultural economics,agribusiness, management, marketing, finance, andaccounting. Indeed, most of the research has beencarried out under the auspices of federal agenciessuch as the USDA or SBA. What little researchthat has been carried out in the academic commun-ity has also been sponsored by federal or state

63

agencies (e.g. Small Business DevelopmentCenters).

The purposes of this integrative paper are to: (a)define rural entrepreneurship; (b) integrate ruralentrepreneurship into a typology of the field ofentrepreneurship; (c) critique rural entrepreneurshipresearch in light of that typology; (d) analyzeresearch methods currently being used ;n ruralentrepreneurship research; and (e) propose futureresearch prospects in rural entrepreneurship.

DEFINITIONS OF RURALENTREPRENEURSHIP

Unfortunately, most rural entrepreneurship researchhas failed to use a definition of "rural entrepr,ship" at all. Most of the authors have assumed thateveryone knows what "rural entrepreneurship" is.At a 1987 USDA conference, Hoy (40, p. 7) notedthat a popular image of a rural entrepreneur is:

. independent-natured, risk taking, achievementoriented, self-confident, op'inistic, hard working,and innovative."

Watkins and Allen (77, p. 17) suggested that entre-preneurs are:

. the founders and owners/operators of smallbusinesses."

Hoy then stated that "entrepreneurship" in a ruralcontext is focused upon "creating new employmentopportunities via creating new ventures" (40, p. 7),and Watkins and Allen p. 17) stated that "entre-preneurship" has been defined qualitatively as:

. . a characteristic or set of characteristics,associated with persons who possess the drive, capa-bilities. and organizational skills to obtain andmanage the variety of inputs necessary to success-fully undertake a business venture."

Both of these sets of definitions were taken frompredominantly urban contexts.

United States Association for Small Businesses and Entreptrnetaship-1989

One attempt to provide entrepreneurship definitionsin one place was that of Frederick and Long (28,pp. 5-30). Although this was a USDA publication,practically every article in the annotated bibli-ography came from an urban context. Indeed, thereare few definitions in these research articles. Twoauthors have attempted to define entrepreneurshipin a rural context (6)(41).

Based upon a recent definition of entrepreneurshipdeveloped by Spann, Adams, and Wortman (69)from previous research and based upon two keydimensions of the entrepreneurship process (e.g.,structural autonomy and degree of innovation), anadapted definition of "rural entrepreneurship" wouldbe:

". . . the creation of a new organization thatintroduces a new product, serves or creates a newmarket, or utilizes a new technology in a ruralenvironment."

In this definition, rural entrepreneurship couldinclude new organizations that: (a) introduce a newproduct from an agricultural product--the utilizationof corn starch in biodegradable plastics; (b) serve orcreate a new market -- bacteria which prevent frostinjury to cold sensitive crops; and (c) utilize a newtechnology--genetically engineered crops which aretolerant to certain herbicides. Clearly, this is adefinition which could be used as a place to start for"rural entrepreneurship" definitions. (For additionalwork on entrepreneurship definitions and processes,see Adams, Wortman, Spann (1)).

CONCEPTUAL UNITY IN RURALENTREPRENEURSHIP RESEARCH

In 1986, Wortman (82) suggested a framework anda set of typologies for integrating the research in thefields of entrepreneurship and small business. Inthat framework, he analyzed the interfaces between:(a) small business and individual erorepreneurship;and (b) individual entrepreneursh, :id corporateentrepreneurship (e.g., intrapreneur .yip). Both theentrepreneurship and small business typologies werebased upon current empirical research in bothfields. Previous research studies were restructuredinto a coherent whole in the typologies and futureresearch studies were suggested toward efforts thatwould advance both fields of entrepreneurship andsmall business more rapidly.

This paper has adapted the Wortman typology toassess the current empirical research in ruralentrepreneurship (see Table 1). In evaluating therural entrepreneurship research, the same criteria

that were used in the Wortman study were employ-ed (82, p. 262). First, studies involving studentswere not considered because subjects very widely inlevels of experience and education in entrepreneur-ship. Second, no case studies were included exceptas illustrations. Even the field of rural entrepre-neurship already has too many case studies andinsufficient numbers of empirically-driven researchstudies. Third, studies of management assistanceagencies (e.g., Small Business Development Centers,Small Business Institutes) related to rural entrepre-neurship were included with the exception of thosestudies evaluating the ;mpact of management assis-tance agencies. Fourth, only data-oriented researchstudies were included in the analysis. The literaturethrough 1988 was included in the analysis.

CRITIQUE OF RURALENTREPRENEURSHIP RESEARCH

In the past five years, researchers have begun toanalyze rural entrepreneurship. Most of theseresearchers are in the government or are in govern-mentally affiliated management assistance agenciesat either the federal or state level. Since much ofthe work has been completed by agricultural eco-nomics or agribusiness researchers, the studies havetended toward macro-oriented analyses. The fewworks that have been completed by businessresearchers have tended to be micro-orientedanalyses (e.g., case studies as the unit of analysis).Moreover, many of the studies have tended toexamine governmental attempts to stimulate entre-preneurial behavior (e.g., rural incubators and ruralenterprise zones). However, nor,; of the ruralentrepreneurship studies has been oriented to acomprehensive overview of a field of entrepreneur-ship or of rural entrepreneurship (sub-field).Therefore, in the nert few paragraphs, these fewrural entrepreneurship research studies will lexamined in the context of the revised Wortmantypology (see Table 1).

Theoretical. At the present time, there are notheories in the entrepreneurship field. AlthoughFrederick and Long (28) have titled their bibli-ography with the words Entrepreneurship Theo-ries, they would have been far more accurate ifthey had entitled it with the words The Entre-preneurship Field. Although there have beenattempts at frameworks for research (with few or notheoretical constructs), but they have been narrowlybased. At the present time, the Wortman t,pologyis the broadest in the current literature.

In terms of rural entrepreneurship frameworks, onesuch model has been suggested by Hoy (40, p.

64C6

As a rural venture creation model, he discusses theimpact of demographics, behaviors, and attitudesupon the rural entrepreneur and the supportsources from tl community, resources, and mobil-ity. The entrepreneur then moves to his/her newventure and job generation .11 of this occurs inseveral macro environm( , including: (a) eco-nomic; (b) competitive; k,..) legal; and (d) cultural.Other than this model, no other frameworks havebeen suggested for the study of rural entrepreneur-ship. Moreover, no models of any type (e.g., mathe-matical, causal) have been proposed or studied.

Historical. Although entrepreneurs and entrepre-neurship have been studied by historians for manyyears, most of their studies have centered on urbanentrepreneurs and have been focused in many dif-ferent regions of the world. Studies that have beencompleted on such persons as Henry Ford andCyrus McCormick have not been classified as ruralentrepreneurs (although they might well be classi-fied this way today).

Environmental. Most of the rural entrepreneur-ship studies can be catego,:zed as environmental orfunctional. Moreover, most of the macroenviron-mental studies are oriented toward rural develop-ment in both international and national contexts. Inthe international environment, little or no researchhas been carried out on rural entrepreneurship inindustrialized nations. Indeed, it appears that me estudies have been carried out on rural entrepreneur-ship in Third World countries than have been initi-ated in industrialized countries.

In two studies, the concept of the "core-satellite"model was examined (33)(42). The core Ate Hite

model is one in which corporate food processes linkup with small farmers through production contracts,exchanging agricultural inputs and services forassured deliveries of produce. The first studyanalyzed twelve cases in four countries in Centraland South America (Mexico, Guatemala, Honduras,and Bolivia), three countries in Africa (Kenya,Tanzania, and Nigeria) and one country in Asia(Thailand) (33). This study examined the impact ofthe model and provided policy recommendations.The second study provided a conceptual model andcase studies from Thailand, the Philippines, theSudan, and Turkey (42). It also provided policyrecommendations. Using twenty case studies,DeBruijn and DeBoe, (21) analyzed the concept ofsmall-sca:e industry service centers in Asia(Indonesia, India, Sri Lanka, Fiji) and in Africa(Liberia, Cameroun, Nigeria, Togo, Ghana, and TheSudan). In their analysis, they concluded that thesmall-scale industry service centers were performing

United States Association for Small EtsifilleSSef and Fastreptrneurlup"-1989

65

far below expectations and provided recommenda-tions for the improvement of these centers. In athird study, Ahwireng-Obeng (2) developed a newconcept of cooperation for use in production coop-eratives that stresses entrepreneurial sovereignty,individualism, and decision-making. In the fourthstudy, El-Namaki (24) employed secondary dafrom the International Labor Organisation to showthat new enterprise creation and maintenance is avery slow process in developing countries and sug-gested ways in which to encourage entrepreneurs.In a final study of rural entrepreneurship in aninternational environment, Fleming (2G) pointed outintrapreneurship within the government is a possiblemeans of promoting agricultural market develop-ment, particularly in small developing nations suchas those in the South Pacific region.

In macroenvironmental studies carried out on anational basis, rrral entrepreneurship research isusually oriented toward a larger picture of ruraldevelopment (11)(23)(30)(38)(39)(58)(59)(62)(63)(65)(67)(70)(71). However, few of t 'iese articles areempirically-based studies. Moreover, there is a realneed to classify and integrate the studies on ruraldevelopment that are even distantly related to ruralentrepreneurship. Empirical studies that have beencarried out usually employ secondary data sourceson a macro basis.

For example, Miller (51) studied the question ofwhether or not small businesses arc the answer tocreating jobs in rural environments. In anotherstudy, Bluestone and Miller (9) examined thegrowth of employment in rural services and its rela-tionship to goods-producing industries. Smith (68)analyzed the ways in which to diversify smalltownrural economies .arough the utilization of nonmanu-facturing companies. Killian and Hady (43) lateranalyzed the payoff from such diversification inrural economies. Lastly, Flora and Darling (27)investigated the ways in which to aid rural develop-ment through community capacity building.

In microenvironment terms, most entrepreneurshipstudies have been carried out in itrban or metro-politan environments. However, the federal gov-ernment has attempted to impact the developmentof rural entrepreneurs through various types ofpolicies (14)(29) and programs. These programshave included: (a) rural community research parks;(b) rural enterprise zones (10)(22)(25)(34)(35)(36)(37)(53)(55)(60)(80); (c) governmental and quasi-governmental organizations (13)(61); (d) SmallBusiness Development Centers (8)(44); (e) small -srale industry service ce,,ters (21); (f) rural

tbators (3)(4)(78)(79); (g) rural financial

United lima Association for Small Busineses and Entrrprounaship1989

institutions (12)(25)(42); (h) rural entrepreneurshipextension operations (7)(64); and (i) rural entrepre-new-ship education programs (5)(52)(66)(75).Unfortunately, many of these are conceptual studiesor are advocacy statements. Few of these articleshave been useful in the sense of building a field ofrural entrepreneurship.

These same policies and programs have been sub-jected to much evaluation research upon theirimpact upon rural development and rural entrepre-neurship. Normally these impact studies haveattempted to measure both efficiency and effec-tiveness of the programs. Impact studies related toSmall Business Development Centers have analyzed(a) public sector assistance upon the performance ofnew ventures (16) and pre-ventures (17); (b) thedevelopment of new ventures (18); (c) value ofSBDC consulting services (19)(20); and (d) generalimpact studies related to changes in sales, employ-ment, profits, and market value of services (15)(46)(56)(72)(73). Most of the data in these studies weremicrodata laid were gathered by survey or fieldinterviews.

Two major national studies have analyzed theimpact of SBDCs upon state and federal economies.The first study (32) measured the economic growthof small businesses that had received help from anSBDC. Data from nine different states were eval-uated including sales revenues, profits, and employ-ment generated by the small businesses and theincreased tax revenues that the businesses gener-ated. In this study, the impact of state and federaltax collections exceeded the estimated percentage ofthe SBDC budget devoted to long -term client coun-seling by a maring of four and one-half to one. Thesecond study (47)(48) evaluated on the basis of:(a) economic impact; (b) market niche; (c) quantityand quality of services; and (d) ancillary benefits.The Metametrics studies have shown the positiveimpacts of SBDC counseling include higher sales offirms counseled than those not counseled, firmsimproved their sales following counseling, firmsjudge services to be excellent or good, and ancillarybenefit,., appear to have accrued to firms undergoingcouns :ling, However, cost effectiveness evaluationshave generally been ineffective. Small BusinessInstitutes were also evaluated in this study andfound to 1.y.:. quite effective. Clearly, the impactstudies are a major portion of the literature on ruralentrepreneurship.

Organizational. Major organizational contextscover businesses, government agencies, nonprofitorganizations, and international organizations.There are no studies of rural entrepreneurship in

66

these contexts at the present time unlesswe were toconsider the operations of the programs listed abovein the micros ironmental section.

Functional. Corporate entrepreneurship (intrapre-neurship) research in a rut il context is nonexistent.Although the field of entrepreneurship has shiftedtoward a major emphasis upon intrapreneurship inthe past five years, there is no rural intrapreneur-ship research. Most of the functional studies havebeen carried out in individual entrepreneurship andmost of those studies have been related to the struc-ture of individual entrepreneurship.

Under the structure classification, new ventureformation appears to be the major area of focus inrural entrepreneurship. Specifically, one set ofstudies examines business incubators in rural areas.These studies (3)(79) used both macro data andcase studies of individual rural incubators. The nextset of research works analyr:d financial institutionsin rural development. Two of these studies investi-gated !I-rat banks (49)(50). These studies employedsecond data from the U.S. Federal ReserveBoard and the U.S. Department of Agriculture.The third research work analyzed rural finai.cialinstitutions in the future (54). None of t'ue:,e studiesused statistical analysis ,..f any type.

Another set of studies are also related to new ven-tures. The first study is a case study of a pilotprogram by the Texas, Agricultural Extension Ser-vice (39). Specifically, the study analyzed a programof rural development throng!! its entire conLeptuali-zation and implementation. The next study (45)examined business startups and business failures bysector and examined the factors influencing newfirm formation in rural areas. Specific new startupsin rural Maine were investigated in depth byVaughan (74). These rural startups ranged fromneedlepoint design to clock repair and restoration toa gristmill to a musical instruments. Olinger (57)laid out the business continuity concerns of theclosely-held small business owner. Lastly, Hobbs(38) characterized rural entrepreneurs and exam-ined their support needs.

In the public policy segment of individual entre-preneurship, several studies have been attempted onrural enterprise zones and whether or not theywould work. Two of the works (60)(80) dealt withthe financial aspects, ;Irimarily tax incen'ives, ofsuch zones. Both studies utilized financial data.The .second (60) also employed an analysis of stateenterprise zone legislative attempts. Tee third study(55) was a case study, clustered among nine urbar.

case studies, of a rural enterprise zone inMinnesota.

Discussion. There is a tremendous differencebetween most of the research in the larger field ofentrepreneurship and the sub-field of rural entre-preneurship research. In the larger field, most ofthe empirical work has been carried out in the func-tional classification of the the typology. In thesub-field, most of the empirical work has been car-ried out in the environmental area. Much of thatwork has been related to impact studies of policiesand programs implemented by federal, state, andlocal governments. In both the Feld and the sub-field, very little work has been attempted in thetheoretical and historical areas. Moreover, fewstudies have been attempted in the government,nonprofit, and international classifications althoughthere has been increasing use of the concepts ofentrepreneurship (individual and corporate) in all ofthese types of organization.

CRITIQUE OF RURALENTREPRENEURSHIP

STATISTICAL METHODS

At the present time, data in rural entrepreneurshipstudies are primarily macro data from the U.S.Census or similar databases. Almost all data inthese studies has come from secondary sources infederal, state, or local governments. The significantdifference is in the data used in the impact studies.Almost all of the data are micro data and have beengathered in the field or by interview. Indeed, itappears that two different sets of methodologistshave been doing the research. One set uses macrodata and does little Cr no statistical analysis of thedata, while the other set uses micro data andattempts to use some statistical analysis. Currently,the sub-field of rural entrepreneurship is signifi-cantly behind the field of entrepreneurship in termsof sources of data used, types of data employed,research methods utilized, and statistical methodsused.

In the past five years, corporate entrepreneurshipstudies have begun using. (a) mathematical models;(b) multiple regression analysis; (c) cluster analysis;and (d) factor analysis. However, in the past tenyears, there has been little change in the types ofstatistics employed in individual entrepreneurshipstudies. Although there is occasional use of analysisof variance, MANOVA, discriminant analysis, andmultiple regression, many of the studies still employrciatively unsophisticated statistical methods such asranking, standard deviations, and linear correlation.

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Therefore, the contrast effect between corporateentrepreneurship and rural entrepreneurship studiesis quite evident in terms of statistical methods used.Even when contrasting individual entrepreneurshipand rural entrepreneurship studies, the different e isvery noticeable.

RESEARCH PROSPECTS ON RURALENTREPRENEURSHIP

Every classification and subclassification of theWortman typology could be characterized as virginalterritory for exploratory research. Due to theabsence of rigorous research foundations in entre-preneurship, propositions and hypotheses are notgermane at this time However, every one of theclassifications does lend itself to research questionsthat be raised in the rural context. The followingsections suggest a few potential research studies.

Theoretical Studies. A comprehensive frame-work of rural entrepreneurship as a sub-field ofentrepreneurship as a total field needs to bedeveloped. Such a framework would include theo-retical v :iables and the relationships between thosevariables. Such a framework should be based uponwhat we know about rural entrepreneurship andwhat we conk! conjecture might be the shape of thatfield. This framework would even more clearlyshow the major studies that need to be completed.

What is needed in the framework is not just what ishappening in each of the sub-classifications, but asystematic analysis of the rural entrepreneurshipresearch and conceptual we *- (e.g., economic) fol-lowed by a theoretical framework which woulddemonstrate the interrelatedness of parts of the sub-framework and of the sub-framework to the com-prehensive framework.

A definition of rural entrepreneurship still needs tobe developed that would be and could be adoptedby the researchers in the field. Fort tr.,,tely, we havevery few definitions of rural entrepreneurship at thepresent time. We do not have the unfortunateproblem of the entire field of entrepreneurship inwhich researchers h2.ve very little agreement upona definition of entrepreneurship and in whichresearchers appear to suggest their own definitionsin every new article and book published

Historical Studies. At the present time, any his-torical study of a rural entrepreneur would beuseful. Moreover, by codifying studies of ruralentrepreneurs which have been completed, butisolated from the sub-field of rural entrepreneur-ship, would assist in development of the

United States Association far Sma2 Businessesand Entreprosesaship-1989

sub-field. By codifying the studies, researcherswould be able to examine urban-rural differencesand cross-cultural orientations in entrepreneurialbehavior. A few s'iggested historical questions are:

HI. What types of biographies of rural entrepre-neurs should be developed?

11.2. What happens to rural entrepreneurs overtime? How much do they change and why?

14.3. What types of historical records can be usedto provide some semblance of uniformity for ruralentrepreneurship studies?

Environmental Studies. Although much of thediscussion of rural entrepreneurship research abovedealt with environmental studies, most of the arti-cles were not empirically-driven research. Most ofthe studies were pure data with little or no statisticalanalysis. Therefore, studies examining the programsand policies noted above would be useful if theyemployed significant research designs and utilizedstatistics in order to make the research more gen-eralizable. Studies examining environmental factorsare neeied on both macro and micro bases. Asample of these questions follows (82, p. 327):

E.1. What external or internal factors have had animpact upon the effectiveness of a rural entrepre-neur or agribusiness intrapreneur?

E.2. What relationships exist u... 'teen rural envir-onmental factors and individu Al characteristics of arural entrepreneur or agribusiness intrapreneur?

E.3. What are the relationships between internaland external environments for rural entrepreneurs?

Organizational Studies. Comparative studies ofentrepreneurs and entrepreneurship in urban andrural contexts would be useful in examining theeffectiveness of rural entrepreneurship instrengthening rural economic development. Com-parative studies of rural entrepreneurs inindustrialized countries versus underdevelopedcountries could strengthen rural entrepreneurship inboth types of countries. International joint teamresearch (in terms of two or more countries) wouldalso help use understand rural entrepreneurshipacross cultural boundaries. Several examples oforganizational studies would be the following:

0.1. Are agribusiness intrapreneurs different indifferent types of organizational context (e.g.business, government)?

68

0.2. Do rural entrepreneurs or rura intrapreneursserve different roles in different typ .. of context andorganizations?

FLnctional Studies. Although there is a tremen-dous amount of research on individual entrepre-neurs, there is practically no research on individualrural entrepreneurs. Of course, if we could teasethis information out of prior studies, it would bemuch easier to examine individual rural entrepre-neurs and intrapreneurs. Clearly, there is a greatneed for study of all parts of rural corporate entre-preneurship and rural individual entrepreneurship.

The research of rural intrapreneurship needs toexamine the types of new venture capital, newventure formation, and venture management in agri-business film s. With respect to new ventures, thefollowing questions should be studied:

F.1. Why is new venture capital so difficult toobtain in rural areas?

F.2. I . establishing new ventures in a rural environ-ment, what patterns of financing are the mosteffective?

F.3. In establishing new internal ventures in a ruralenvironment, are certain forms of dependent orindependent structures more effective? In terms ofshortening time periods for the development of newproducts?

With respect to new venture operations, the follow-ing questions should be analyzed:

F.4. In the life cycle of the internal new venture,what operations take place in each of the cycles?Are these operations similar or dissimilar to thosetl.at take place in standard business operations inthe life cycle?

F.S. Are there more new ventures in rural busi-nesses than in comparable urban settings?

Although the behavior of individual intrapreneurs inurban contexts has been widely studied, the behaviorof rural intrapreneurs has not been studied: A fewsuggestions follow:

F.6. What personal characteristics does a ruralintrapreneur have? Are these personal characteris-tics the sa,ie or are they different from those ofrural individual entrepreneurs? Are these personalcharacteristics different for an urban intrapreneur?

F.7. What skills must a rural intrapreneur have inorder to be successful?

A well-developed r .odel of the personal cbarac er-istics of a rural entepreneur needs to be developed.At this need, r.-0 generalizable study of these char-acteristics has been published. Many comparativestudies could be done that are related to earlierstudies on the personal characteristics of urbanentrepreneurs. Some questions on individual ruralentrepreneurs should be asked:

F.8. What relationship does o rural entrepreneurhave to the actual structure of the organizationwithin which he or she operates?

F.9. Are rural entrepreneurs better at one or moreof the usual managerial functions of an organiza-tion? How are these related to the cnccess of theorganization?

F.10. What personal characteristics does a ruralentrepreneur have? Are these characteristicsdifferent than thosz of an urban entrepreneur.'

F.11. What roles co other business functions (otherthan long-range pi-laming) play in the developmentof an entrepreneur's organization?

Studies of new venture f-Tmation for individualentrepreneurs are jut beginning to emerge. Similarstudies in a rural environmen. would be useful. Forexample,

F.12. What entry strategies are most successful fora neophyte rural entrepreneur?

F.13. What types of organizational structure areuseful to new rural entrepreneurs?

F.14. In the establishment of new ventures in arural environment, what patterns and sources offmancing are the most effective?

Studies of rural entrepreneur careers could be quiteuseful. Career research questions could include thefollowing:

F.15 Is career pathing of the lack of organizedcareer pathing related to the development of anindividual rural entrepreneur?

F 16. Are individual rural entrepreneurs interestedin the development of career opportunities of theiremployees?

United States Association for Small Businesses and Enttypnctiewship-1989

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Studies on the job characteristi-s of rural entre-preneurs could be helpful in the development of therural entrepreneurship sub-field. Two examples ofjob characteristics for rural entrepreneurs follow:

F.17. Is there a relationship between individualrural entrepreneur characteristics and task char-acteristics? What are successful and unsuccessfultask characteristics for rural entrepreneurs?

F.18. Are there distinct competencies for individualrural entrepreneurs?

These exploratory research questions suggest thatthe sub-field of rural entrepreneurship is in itsformative stages. Not only are these questions atvery elemental stages, so are the research methodsand statistical methods. The research designs,research methods, and statistical methods must besignificantly upgraded in order to achieve thegeneralizability th, t would be useful in strength-ening the rural enuepreneurship field a d in turnstrengthening rural development.

CONCLUSION

In the development of the research in rural entre-preneurship, high priority should be given to theconceptualization and definition of rural entrepre-neurship. Alth -ugh a definition for "rural entrepre-neurship" was given earlier in this paper, it is onlyan initial effort at defining the term. The relation-ship of rural entrepreneursl:p to rural communitydevelopment, rural economic development, a:rural cultural development needs to be systematic-ally explored. The relationship of rural entpre-neurship to urban entrepreneurship needs to beexamined. Conceptuauzation in the rural compon-ent of entrepreneurship is probably more importantthan further data gathering on a macro basis withlittle or no statistical analysis. In other words,conceptualization must lay the groundwork forresearch on the component parts of rural entrepre-neurship and for research on the relationshipsbetween those component parts.

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[61] Robb, C. S. "Unique Rural Economic Devel-opment Efforts in Virginia." New Dimensions inRural Policy: Building Upon Our Heritage. StudiesPrepared for the Use of the Subcommittee on Agri-culture and Transportation of the Joint EconomicCommittee, Congress of the U.S. Washington, DC:U.S.G.P.O., 1986, pp. 481-486.

[62] "Rural Economic Development in the 1980's:A Summary." Agriculture and Rural EconomyDivision, Economic Research Service, U.S. Depart-ment of Agriculture, Agriculture Information BulietinNo. 533. Washington, DC: ERS Publications,Rt Summary, 19L', pp. 1-12.

[63] Sauer, R. J. "Agriculture and the Rural Com-munity: Opportunities and Challenges for RuralDevelopment." Interdependencies of Agriculture andRural Communities in the Twenty-first Century.- TheNorth Central Regior., eds. P. F. Korsching and J.Gildner. Ames, IA: North Central Regional Centerfor Rural Development, Iowa State UniN,.rsity, 1986,pp. 1-11.

[64] Saylor, M. "Home-Based Ente prise Develop-'rent and Crafts Marketing." National Rural Entre-

eneurship Symposium, eds. B. W. Hon-Idle and J.N. Reid. Knoxville, TN: Southern Rural Develop-ment Center, August 1987, pp. 57-69.

[65] Sears, D.; Reid, N.; Rowley, I.; and Yetley, M.Di,-,cussion Paper for U.S. Department of Agricul-ture, January 17, 1989, p. 2.

[66] Sharpies, D. K. "Rural Community Colleges:Venture Team for Success." New Dimensions inRural Policy: Building Upon Our Heritage. StudiesPrepared for the Use of the Subcol,unittee on


Agriculture and Troy sportation of the Joint EconomicCommittee, Congress of the United States.Washington, DC: U.S.G.P.O., 1986, pp. 547-551.

[67] Sloan, J., Jr. "Small Business and the Fate ofthe Rural Economy." Ne Dimensions in RuralPolicy: Building Upon Our Heritage. Studies Pre-pared for the Use of the Subcommittee on Agricultureand Transportation of the Joint Eco comic Commit-tee, Congress of the U.S. Washington, DC: U.S.G.P.O., 1986, pp. 403-405.

[68] Smith, S. M. "Diversifying Smuiltown Econ-omies with Nonmanufacturing Industries." RuralDevelopment Perspectives, 2 (October 1985), 18-22.

[69] Spann, M. S.; Adams, M.; and Wortman, M. S.,Jr. "Entrepreneurship: Definitions, Dimensions andDilemwas." Proceedings of the Therd Annual Confer-ence, U.S. Association for Small Business and Entre-preneurship. Kennesaw, GA: 1988, pp. 147-153.

[70] Summers, G. F. "Rural Industrialization." TheRural Sociologist, 6 (November 1986), 181-186.

[71] Tweeten, L. G. "Element, of a Sound RuralDevelopment Policy." Research. in Domestic andInternational Agribusiness Management, Vol. 9.

Greenwich, CT: JAI Press, 1988, pp. 103-111.

[72; University of Georgia, Small Business Devel-opment Center. "Impact of 1984 Georgia SBDCCounseling on State and Federal Revenues."Athens, GA: 1987, 25 pp.

[73] University of Georgia, Small Business Devel-opment Center. "Impact of 1985 SBDC Clients inGeorgia on State and Federal Taxes." Athens, GA:1987, n.p.

[74] Vaughan, R. "Entrepreneurship in RuralMaine." Rural Development Perspectives, 4(February 1988), 20.

73

[75] Wall, M., and Luther, V. "Making the Con-nection: Rural Schools and Economic Develop-ment." A presentation to Pioneer Hi-Bred Inter-national Conference on Education, March 15-17,1988, Des Moines, Towa, 14 pp.

[76] Watkins, D., and Allen, T. G. "PriorityResearch Needs: Rural Entrepreneurship."National Rural Entrepreneurship Symposium, eds. B.W. Honadle and J. N. Reid. Knoxville, TN:Southern Rural Development Center, August 1987,pp. 132-133.

[77] Watkins, D. A., and Allen, T. G. "Problems ofStudying Entrepreneurship in Rural Areas."National Rural Entrepreneurship Symposium, eds B.W. Honadle and J. N. Reid. Knoxville, TN:Southern Rural Development Center, August 1987,PP. 15-28.

[78] Wr , S. A. "Opportunities and Constraintsin Dev, ag Rural Incubators." National RuralEntrepreneurship Symposium, eds. B. W. Honadleand J. N. Reid Knoxville, TN: Southern RuralDevelopment Center, August 1987, pp. 138-141.

[79] Weinberg, M. L. "Business Incubators GiveNew Firms in Rural Areas a Head Start." RuralDevelopment Perspectives, 3 (February 1987), 6-10.

[80] Witthaus, F. "Will Enterprise Zones Work?"Journal of Small Business Management, 22 (July1984), 9-17.

[81] Wortman, M. S., Jr. "Entrepreneurship: AnIntegrating Typology and Evaluation of theEmpirical Research in the Field." Journal ofManagement, 13 (1987), 259-279.

[82] Wortman, M. S., Jr. "A Unified Framework,Research Typologies, and Research Prospectuses forthe Interface Between Entrepreneurship and SmallBusiness." In The Art and Science of Entrepreneur-ship, eds. D. Sexton and R. W. Smilor. Cambridge,MA: Ballinger, 1986, pp. 273-331.


TABLE 1Research Typology on Entrepreneurship

L TheoreticalA. Theories of entrepreneurship

1. Corporate2. Individual

B. Frameworks1. Comprehensive2. Psychological3. Sociological4. Economic5. Political6. S,.;;;.ial

C. Definitions of entrepreneurshipD. Models of entrepreneurship

II. HistoricalA. Corporate entrepreneurshipB. Individual entrepreneurship

III. EnvironmentalA. Macroenvironment

1. International2. NL. ional

B. Microenvironrnent1. Urban2. Rural

IV. OrganizationalA. BusinessB. GovernmentC. NonprofitD. International

V. FunctionalA. Corporate entrepreneurship

(intrapreneur ship)1. Structure

a. New venture formationb. Venture managementc. Innovationd. Techrologye. Public policy

2. Behavior (total organization)B. Individual entrepreneurship

1. Structurea. New venture for.-Aationb. Operationsc. Public policy

2. Behaviora. Careersb. Personal characteristicsc. Job characteristics

VI. Futue of entrepreneurship

Adapted from: Max S. Wortman, Jr. "A Unified Framework, Research Typologies, and Research Prospectusesfor the Interface between Entrepreneurship and Small Business." In The Art and Science of Entrepreneur-hip,eds. D. Sexton and R. W. Smilor. Cambridge, MA: Ballinger, 1936, pp. 278-279.

74

Unitt States Association for Small Businesses end Entrepreneurship 1989

A UNIFIED APPROACH FOR DEVELOPING RURALENTREPRENEURSHIP IN THE U.S.

Max S. Wortman, Jr.Iowa State University

ABSTRACT

Rural entrepreneurship is one of the foundations ofrural economic development. However, rural entre-preneurship has only recently been defined and fewmajor research studies have been attempted. This'aper analyzes current research on rural entrepre-neurship, examines current strategies and programsin the area, proposes a unified public-privateapproach to rural entrepreneurship and suggests anintegrated program to support rural entrept eneurship in the United States.

INTRODUCTION

In the United States, rural development programshave been analyzed by the federal government formore than 90 years (32). Problems facing ruralareas have changed dramatically as the years havepassed. Today, rural areas in the United States facethe problems of continuous depopulation and anincreasingly older population. In discuss)ng ruraldevelopment, Sauer (36) noted that it includes: (a)encouragement of farm-related enterprises; (b)technical and management assistance for ruralentrepreneurs; (c) analysis of impact of federal farmpolicies; (d) technical assistance to local govern-ments located in rural areas; (e) rural transporta-tion; (f) -Ira] telephone service and informationservices, (g) natural rescurce management; (h) ruralfinancial industry; (i) rural families; and (j) familymanagement in rural areas.

Proponents of rural economic development havestressed that rural entrepreneurship is one of tileprimary facets through which economic developmentcan be achieved in rural areas (14) [e.g., diversifi-cation of rural economies (20); biotechnology as asolution for rural problems (7); and small businessin the rural economy (40)]. Rural economic devel-opment in the 1990s may depend upon our under-standing of rural entrepreneurship (35).

This paper: (a) defines rural entrepreneurship andits relationship to rural development; (b) placesrural entrepreneurship research in the context of anentrepreneurship typology; (c) examines currentstrategies and programs related to rural entrepre-

75

neurship; (d) proposes a urt)ied public-privateapproach to rural entreprenet...,s.i.p; and (e) suggestsan integrated program `o support ruralentrepreneurship.

RURAL ECONOMIC DEVELOPMENT ANDRURAL ENTREPRENEURSHIP DEFINED

Economic development and entrepreneurship areclearly interrelated. More than two-thirds of allnew jobs are developed through the entrepreneurialspirit involved it- mall businesses. Therefore, ruraleconomic doveloi,ment and rural entrepreneurshipshould also be clearly related.

Currently, there is no commonly accepted definitionc.f rural development. indeed, rural developmenthas been equated wit) Ira' industrialization (43),community economic de lopment (31), communitydevelopment (12), and cultural assessment of ruralresources (10). Sears, Reid, Icowley, and Yetley(38) believe that "rural development comprises allthose conditions and actions which enhance thewell-being of rural people and the communities inwhich they live." They feel that rural developmentis a continuum ranging from economic well-beingoverall well-being. 'i l:erefore, rural entrepreneurshipwould be related to that end of the rural develop-ment confi mum dealing ,rith economic well-being.

Definitions of rural entrepreneurship have tended tovary widely (13). Two of these definitions havebeen based upon numerical analyses of businessowners in Texas (18) and of business entrepreneursin Maine (45, pp. 17-19). Still others hav definedentrepreneurship in a rural context (3) (19).

One recent definition of entrepreneurship by Spann,Adams, and Wortman (42) was developed from pre-vious research and based upon two key dimensionsof the entrepreneurship process (namely, structuralautonomy and degree of innovation). Therefore, anadapted definition of rural entrepreneurship wouldbe:

"Rural entrepreneurship is the creation of a neworganization that introduces a new product, serves

United States Association for Small r.asinesses and Entreprneurship*-1989

or creates a new market, or utilizes a new tech-nology in a rural envircament."

In this definition, . entrepreneurship couldinclude new organizations that: (a) intrc lime a newproduct from an agricultural product--the utilizationof corn starch in biodegradable plastics; (b) serve orcreate a new market--bacteria which retard spoilagein silage in silos (although this essentially is ,tiso anew product); and (c) utilize a new technology--useof bacteria (instead of pesticides) to protect theplant against insects.

RURAL ENTREPRENEURSHIP RESEARCH

In 1987, Wortman (49) provided a integrative typol-ogy for research in the entrepreneurship field (seeTable 1). Rural entrepreneurship research wouldbe placed throughout the typology. Ho- muchof the work which specifically relate ruralentrepreneurship could be placed under the environ-mental classification. Presently, work on ruralentrepreneurship is being carried out in ThirdWorld countries (international) and work in theU.S. is being carri .1 out in microenvironmentalcontexts. If there were many rural entrepreneurshipstudies being implemented, they would be placedunder the various categories in the typology.Studies of rural entrepreneurship processes could bealso integrated into the paths and processes con-cepts suggested by Adam-, Wortman, and Spann(1).

However, very little empirical research has beenalempted on rural entrepreneurship in the U.S.Many of these studies have been oriented towardthe larger picture of rurci economic developmentand have used macro data, usually from the U.S.Census. In this first set of macro studies, Miller(25) studied the question of whether or not smallbusinesses are the answer to creating jobs in ruralenvironments. In another study, Bluestone andMiller (6) examined the growth of employment inrural services and its relationship to goods-producing industries. Smith (41) analyzed the waysin which to diversify smalltown rural economiesthrough the utilization of nonmanufacturing com-panies. Killian and Hady (20) later analyzed thepayoff from such diversification in rural economies.Last, Flora and Darling (12) investigated the waysin IA hich to aid rural development through commun-ity capi city building. In all of these studies, macrodata we re used to answer questions of rural devel-opment. Generally, no statistical analysis of anytype was used.

76

A second set of studies focusec. on rural enterprisezones and whether or not they would work. Two ofthe works dealt with the financial aspects, primarilytax incentives, of such zones (33)(48). Both studiesutilized financial data. The second employed ananalysis of state enterprise zone legislative attempts(33). The third study was a case study of a ruralenterprise zone in Minnesota (29).

The third set of studies examined business incuba-tors in rural arias. These studies u..ed both macrodata and indiv",dual case studies of individual ruralincubators (2)(47). The fourth set of researchworks analyzed financial institutions in ruraleconomic development. These studies investigatedrural banks (23)(24) P. d employed secondary datafrom the U.S. Federal Reserve Board and the U.S.Department of Agriculture. A third study analyzedrural financial institutions in the future (28). Noneof these studies used statistical analysis.

The fifth set of studies was a miscellaneous groupincluding: (a) a case study by the Texas Agricul-tural Extension Service, which analyzed a programof rural development through its entire conceptuali-zation and implementation (17); (b) an analysis ofbusiness startups and business failures by sector andthe factors influencing new firm formation in ruralareas (22); (c) specific rural startups in Maine,which ranged from needlepoint design to clockrepair and restoration to a gristmill to musicalinstruments (44); and (d) the business continuityconcerns of the closely-held small business owner(30).

In summary, the studies in the U.S. have Jsed pr:-marily raw macro data, financial data, and field casedata. There has been little or no statistical analysisof these data even when the samples approadiedstatistical significance. From these studies, there islittle or no theory that can be suggested for he evo-lution of a rural portion of the entrepreneurshipfield. There Las been so little research that prac-tically nothing is generalizable from the studies thathave been campleted. Lastly, the research has sug-gested few points that might improve the evolutionof either entrepreneurship as a field or the better-ment of rural economic development.

STRATEGIES AND PROGRAMS RELATEDTO RURAL ENTREPRENEURSHIP

Many different types of strategies and programshave evolved in the United States for the support ofentrepreneurship and small business. In predomi-nantly rural areas, these strategies and programshave infrequently been related to rural

entrepreneurship. Management and economic assis-tance efforts have included: (a) rural communityresearch parks and technology corridors; (b) ruralenterprise zones; (c) agribusiness intrapreneurship;(d) governmental and quasi-governmental organiza-tions; (e) small business development centers; (f)small-scale industry service centers; (g) rural incuba-tors; (h) rural financial institutions; (i) rural entre-pretnurs::ip extension operations; and (j) ruralentrepreneurship education programs. In each ofthe growth phases of entrepreneurship, some ofthese strategies and programs are red to ruralentrepreneurshil (see Figure 1). These relation-ships are not always clearly identifiable in a ruralco text. Moreover, most of these programs are notcoordinated in a unified effort to assist ruralentrepreneurs and rural economic development.indeed, some of the programs do not even knowthat the others exist. A brief summary of theserelationships are discussed in the followingparagraphs.

Rural Community Research Parks. Across theU.S., industrial parks of the 1960s and 1970s havebecome the research parks and technology corridorsof the 1980s and 1990s. I:owever, rural communityresearch parks have seldom encouraged rural entre-preneurs, but have rather encouraged intrapreneursof larger agribusiness corporations or attempted toentice plants of larger agribusiness corporations.Although there are extensive studies of urban andmetropolitan industrial and community researchparks, little is known about the establishment oreffectiveness of rural community research parks.

Rural Enterprise Zones. Although federa ruralenterprise zones were first proposed in 1981, andboth 1988 presidential candidates discussed them,few steps have been taken at the federal level (16).But states have moved rapidly into the enterprisezone arena. Enterprise zones are usually smallgeographic areas of concentrated economic activityin which the financial and regulatory burdens ofbusiness are minimized and small businesses arencouraged. Major incentives are usually relal Jderegulation and to taxes (11)(15)(27). Over theyears, insufficient conceptualization has been givento the concept of rural enterprise zones. Fewefforts have been made to encourage rural entrepre-neurs in being established in these zones.

Agribusiness Int. apreneurship. in the U.S.,there has been increasing interest in the support ofentrepreneurship within the corporation (known alsoas corporate entrepreneurship and intrapreneur-ship). Agribusiness corporations believe that newproducts and new markets are likely come from

United States Association for Small Businesses and imreprenesaslup*-1989

77/ /

these efforts. Clearly, spinoffs from largeagribusinesses have encouraged ruralintrapreneurship.

Governmental and Quasi-GovernmentalOrganizations. To support rural economic devel-opment, other types of governmental and quasi-governmental (e.g., nonprofit organizations) haveevolved. In the southern part of the U.S., theTennessee Valley Authority established a commer-cial business development program to assist theservice sector in its development (9). Indeed, itsfunctions are very similar to the functions ofSBDCs.

In 1985, the Commonwealth of Virginia establishedthe Virginia Small Business Financing Authority(34). To support urban and rural entrepreneurship,the authority Provides: (a) tax-exempt IndustrialDevelopment ,onds (IDB); (b) u. IDBs toprovide s.nall firm access to public markets' attrac-tive rates; and (c) a working capital loan guarantyprogram. These state programs have not been eval-uated in t--;rms of their effectiveness, but theyappear to be programs which will encourage ruralentrepreneurs.

Rural Business Development Centers. In theU.S., Small Business Development Centers (SBDC)have supported the development and expansion ofsmall businesses. Specifically, these SBDCs haveprovided: (a) free management assistance toexisting and potential small businesses; (b) freeaccess to information on market data, technicalresources. and other specialized small businessresource and (c) low cost training seminars andworkshops addressing problems of small businesses(21). Some SBDCs have operated in rural states(5). Although SBDCs have helped some ruralentrepreneurs, they occasionally do not furnish thetechnical assistance necessary to solve technical (i.e..not managerial) problems of new entrepreneurs andnew small business persons. For example, the tech-nical assistance of the Center for IndustrialResearch and Service (CIRAS) noted bciow wou' Ihave been helpful.

Small-Scale Industry Service Centers.Although not called small iliklustry service centers inthe U.S., there have been some efforts to solve thetechnical and engineering problems of neophytebusinesses. Approximately twenty years ago, onesuch center (CIRAS) was established in Iowa tohelp inventors, entrepreneurs, and small businessowners with their tcchnical problems. With itsexpert services, CIRAS has been deemed to a be ahighly successful operation and has helped in rural

IL 'ed States Association for Small Businesses and Entrepretteurslup'-1989

development. At the Georgia Institute of Tech-nology, a similar center has been established.

Internationally, DeBrnijn and De Boer have (9)described the functions of small-scale industryservice centers which include: (a) direct supportactivities (e.g., using a mechanical workshop); (b)indirect support activities (e.g., training ofpersonnel); and (c) need assessment an generaldevelopment activities (e.g., identification oftechnological needs). Unfortunately, these small-scale industry service centers have not been aseffectiv" as they were hoped to be. This ineffective-ness may be due to the fact that more businessadvice and consultation was m ,dcd.

Clearly, there is a real need for the concepts ofSBDCs and small-scale industry service centers tobe integrated as a single operational concept. Therelationship to rural entrepreneurship has not yetbeen considered,

Rural Incubators. Although incubators are quitenumerous in the U.S., they are usually located inurban areas or in university settings. Incubators areoperating in at least thirty rural communities in theU.S. (46). For lon3 term development, rural incu-bi tors provide a nurturing environment for ruralentrepreneurs. Incubators usually provide: (a) phy-sical space for the business; (b) business develop-ment expertise (e.g. planning, marketing or finan-cial); (c) business support services, and (d) access toventure capital. Unfortunately, the concepts ofenterprise zones, SBDCs. rural incubators, educa-tion, and financial services have seldom, if ever,been 0 nbined at one time or one location.

Rural Financial Institutions. i wancing theneeds of rural entrepreneurs is far more difficultthan for urban entrepreneurs due to the types ofrural financial institutions (9). As conservativeinstitutions, they have not willing to take the risksnecessary to support rural entrepreneurs. More-over, these financial institutions are seldom relatedto, nor closely aligned with venture capitalists. Oneof the major challenges for rural entrepreneurs is toobtain venture capital from existing financial institu-tions. Indeed, in many rural areas, there are few (ifan1 venture capitalists. For example, there is only( . formal venture capitalist in the entire state ofIowa. Moreover, rural entrepreneurs have an extra-ordinarily difficult time in locating informal venturecapitalists, who do have money to invest in suchprojects.

Rural Entrepreneurship Extension Operations.Extension services usually have been related to

either agriculture or home economics in the U.S.Business has not been its first priority (4).However, with the long-run trend of women enter-ing the work force, extension services have movedinto the support of home-based enterprkes in ruralareas. In one study, the businesses ranged fromcrafts (such as woodworking, pottery, basketmaking)to bakeries to custom yarns (37). If extensionservice personnel were trained to deal with home-based entrepreneurs, they could make a significantcontribution to rural entrepreneurship.

With the long-run trends of farmers working at aprimary job off the farm and continuing to farm andthe increasing complexity of the farming business,extensicn agents are very gradually moving towardbuilding up skill bases in business so tha: ruralentrepreneurs and rural small business owner-operators obtain help from them.

Rural Entrepreneurship Education Programs.One of the most effec.ive programs has been that ofvocat'lnal education in secondary schools and com-munity colleges (26)(39). These educational insti-tutions have done a good job of rural entrepreneur-ship education. The Future Farmers of Americaprobram has been pushing entrepreneurship in ruralareas fog more than a decade.

Although universities, state colleges, and privatecorporations have given support to the concept ofrural entrepreneurship and its place in ruraldevelopment, few efforts on rural entrepreneurshiphave been attempted in executive and managementdevelopment programs. Graduate and undergrad-uate courses in entrepreneurship are frequentlyoffered, but contain little information about ruralentrepreneurship.

A UNIFIED PUBLIC-PRIVATE APPROACHTO RURAL ENTREPRENEURSHIP

At the present time, there is no single successfulapproach to the support of rural entrepreneurship.Indeed, there is little interrelationship between themany different types of programs that have beenutilized to support rural economic development andrural entrepreneurship. Literally hundreds ofindustrial parks and research parks have been devel-oped in small rural towns that do not have theinfrastructure (governmental, educational, social,and economic, religious) to support the needs ofpotential companies. In many of these small com-munities, the infrastructtat. .las been deterioratingfor a long period of time. Rural cities and townsthat have popul-''ons of 3,500 and above have beengrowing. Is.4,1,1y cities and towns under this size have

78

SO

become primarily bedroom communities for therural cities and towns that have been growing.However, all of these cities and towns regardless ofsize have been attempting to lure businesses andentrepreneurs to eieir communities by many differ-ent techniques ranging from tax incentives to rent-free buildings to free space for new buildings. Mostof these efforts have not been successful.

Since World War II, the infrastructure of thesecommanities has been changing 2;:owly. Economic-ally, businesses have left the small communitiesranging from the local dairy cooperative to theprofessional services (such as doctors, dentists,accountants, and attorneys) to the grocely store.Many have moved to larger communities that are afifteen mile drive down the road. Rural banks areunable to lend sufficient capital to support the grandplans of the town government to fill the industrial orresearch park. In most of these rural areas (even inlarger cities and towns), there are few venturecapitalists to support new ventures of rural entre-preneurs. In terms of education, the local schoolboards have been consolidated into larger units forefficiency and effectiveness. Today, the socialservices have been consolidated into larger units.Even the state extension service in many states nolonger operates on a county-by-country basis. Gov-ernmentally, there has been discussion of whetherthe county is viable unit in rural areas for more thana quarter a century.

Therefore, the time has come for a unified public-private approach to focus upon what it would taketo support rural entrepreneurship and rural eco-nomic development in light of the deterioratinginfrastructure in smaller cities and towns. Such aunified focus would be possible only if governmentalentities in rural areas began to work together with

_private companies to determine the "greater good"for the region rather than a given city or town orcounty. Everyone involved in these efforts shouldunderstand the goal or goals of the rural economicdevelopment effort and that the support of ruralentrepreneurship or intrapreneurship is the founda-tion of that economic development effort.

A UNIFIED PROGRAM TO SUPPORT AUNIFIED APPROACH FOR RURAL

ENTREPRENEURSHIP

Based upon the premise of the deteriorating infra-structure above, a unified program for rural entre-preneurship and the strengthening of rural economicdevelopment can he established. Assuming thatleadership in four to ten county areas can lead theway to new infrastructures, rural economic

United States Association for Small Businesses and Entrypnmesaslup*-1909

79

development zones (REDZ) would be established ator very close to the center of the regional area (seeFigure 2). This would be based upon the commutetime for workers to the REDZ (normally con.;id-ered to be one hour or less in most rural areas). Bybasing this upon commute time, the rural transpor-tation system would be considered. REDZs wouldattempt to take an integrated approach to support-ing rural economic development and rural entrepre-neurship by eliminating duplicate programs ordeveloping new agencies which do integrate someof the now diffuse services (e.g., business andtechnical services).

REDZs, as a significantly broader concept than therural enterprise zone concept and the research parkconcept, attempt to integrate the tax and financialincentives as well as the incentives of being locatedin a research park. Moreover, the rural incubatoris part of the REDZ core. The rural incubatorwould provide space for the new rural entrepreneurand the REDZ core would provide business supportservices (e.g., secretarial) and a multibankautomatic teller machine for minimal banking ser-vices. The REDZ coordinator would encouragerural entrepreneur to begin their operations in theincubator and would be the advisor on the specialservices unit, which would be available throughtelecommunications. The REDZ coordinator wouldalso be working with both intrapreneur businessopportunities and new plant operations by estab-lished agribusiness companies. These new agri-business operations could also utilized the supportservices of the REDZ core.

Special service units would be set up on the basis ofdemand and geography. With the advent of com-puter tie-lines, telecommunications, and satellites,special services do not have to be located at everyrural incubator and every REDZ. In most ruralstates, a special service unit would probably be setup at a centralized location. Accounting and legalservices are frequently the services most needed byneophyte entrepreneurs. These services would beavailable by video-transmission. If the problemwere more complex than could be answered throughsuch interactions, an attorney or an accountantcould be sent from the special service unit.Financial services and advising would also beavailable through the special services unit. Suchservices would consist of providing informationabout sources c. ,apital, insurance, banking andfinancial institutions, and contacts with venturecapitalists.

Business and technical services woul.i be providedthrough an integrated service. Presently far too


many of our present management assistance agen-cies and programs can provide business information,but little or no technical information and ourpresent technical and engineering services providetechnical and engineering service, but little or nobusiness information on how to handle marketing,financing, and operations. These services would beintegrated and provided by request through the spe-cial services unit. This does mean that some of ourprograms would have to be far better integratedthan in the past or they would be bypassed by neworganizational units.

Lastly, educational services would be coordinatedthrough the special services unit. These educationalservices would be provided through the Small Busi-ness Administration, community colleges, statecolleges, and universities. Educational serviceswould include both vocational and managerialcourses. Courses in new ventures, starting a newbusiness, and entrepreneurship could be offered ondemand at the REDZs. Space would be used at thenearest educational unit.

Throughout this unified program, the various com-ponents could be offered by public or private units,depending upon the most efficient and effective wayof handling a particular operation. Rural incubatorscould be publicly or privately handled. Many of theservices provided in the REDZ core could be pro-vided on a pub& or private basis. Certainly, specialservices could be handled on either basis.

CONCLUSION

In the next twenty-five years, rural entrepreneurshipis going to become increasingly important due to themajor shifts in our rural populations Larger andlarger farms will require that more and more farm-ers be employed in jobs off the farm even whenthey continue to farm less than optimal size farms.More and more families have become dual-careerfamilies. Therefore, rural entrepreneurs will have toprovide the employment opportunities for literallyhundreds of thousands of workers in rural areas inthe United States.

By developing a unified approach for REDZs whichencourages rural entrepreneurs and through thatencouragement the development ( 1 strong ruraleconomic development in the U.S., the rural econ-omy will be strengthened. Based upon this uniiiedeffort, rural entrepreneurship programs and struc-tures hopefully will be more efficient and effectivein the future.

80

REFERENCES

[1] Adams, M.; Wortman, M. S., Jr.; and Spann, M."Paths and Processes: An Integrative Model ofIndependent and Corporate Entrepreneurship."Proceedings of the Third Annual Meeting, U.S.Ass jation for Small Business and Entrepreneurship.Ket..tesaw, GA: WS8, pp. 127-133.

[2] Allen, D. N. "Business Incubator Life Cycles."Economic Development Quarterly, 2 (1988), 19-29.

[3] Berkmz.11, J. "The Age of the Entrepreneur."Food Management, 19 (July 1984), 72, 116, 118, 120.

[4] Bcrnhagen, W. R., and Mott, W. T. "SmallBusiness: An Opportunity for Extension." Journalof Extension, 24 (Fall 1986), 8-10.

[5] Bernier, R. E., and McKemey, D. R."Entreprenzurial Excavating: A Case Stthly inRural Business Development." National RuralEntrepreneurship Symposium, eds. B. W. Honadleand J. N. Reid. Knoxville, TN: Southern RuralDevelopment Center, August 1987, pp. 46-55.

[6] Bluestone, H., and Miller, J. P. "EmploymentGrowth in Rural Services Depends on Goods-Producing Industries." Rural DevelopmentPerspectives, 4 (Febr' 1988), 15-18.

[7] Butte', F. H. "Biotech Tradeoffs in the RuralEconomy." Rural Development Perspectives, 3 (June,1987), 12-15.

[8] Carpenter, M. A. "Entrepreneurs and Bankers."Journal of Arboriculture, 13, No. 4 (April, 1987),108-11CL

[9] Cartwright, J. M. "TVA's CommercialAssistLnce Program." National RuralEntrepreneurship Symposium, eds. B. W. Honadleand J. N. Reid. Knoxville, TN: Southern RuralDevelc pment Center, August 1987, pp. 70-72.

[10] Elkind-Savatsky, P. D., and Kaufman, J. D."Cultural Assessment of Rur Resource Impacts:An Addendum." Differential Social 11 !pacts of RuralResource Development, ed. P. D. Elkind-Savatsky.Boulder, CO: Westvicw Press, 1986, pp. 283-288.

[ll] "Enterprise Zone Programs Prosper andIncrease Across the Nation." Plants, Sites andParks, (May/June 1987), 1-5.

[12] Flora, C. B., and Darling, D. L. "CommunityCapacity Building to Take Advantage of

Sc


Opportunities for Agricultural and RuralDevelopment." Interdependences of Agriculture andRural Communities in the Twenty-First Century: TheNorth Central Region, eds. P. F. Korsching and J.Gildner. Ames, IA: The North Central RegionalCenter for Rural Development, Iowa State Univer-sity, 1986, pp. 201-213.

[13] Frederick, M., and Long, Celeste A. "Entre-preneurship Theories and Their Use in RuralDevelopment." Bibliographies and Literature ofAgriculture. No. 74. Washington, DC: EconomicResearch Service, U.S. Department of Agriculture,April 1989.

[14] Friedman, R. E. "The Role of Entrepreneur-ship in Rural Development." National Rural Entre-preneurship Symposium, eds. B. W. Honadle and J.N. Reid. Knoxville, TN: Southern Rural Develop-ment Center, August 1987, pp. 1-6.

[15] Hayes, E. "From Rags to Riches." AmericanCity and County, 101 (November 1986), 64, 66, 68,70, 72.

[16] Hearing before the Subcommittee on Conser-vation, Credit, and Rural Development of theCommittee on Agriculture on the Rural EnterpriseZone Development Act of 1981. H. R. 4576,November 17 1981, 97th Congress, 1st session, ser.97-JJ. Washington, DC: U.S. Government PrintingOffice, 1982.

[17] Hoy, F. "A r gram for Rural Developmentfrom Inception Implementation." Journalof Community Development Society, 14 (1983),33-49.

[18] Hoy, F. S. "Who Are the Rural Entrepre-neurs?" National Rural EntrepreneurshipSymposium, eds. B. W. Honadle and J. N. Reid.Knoxville, TN: Southern Rural DevelopmentCenter, August 1987, pp. 7-10.

[19] Irwin, W. "What Makes an Entrepreneur?"American Nurseryman, 168 (July 19R8), 67-69.

[20] Killian, M. S., and Hady, T. F. "What is thePayoff for Diversifying Rural Economies?" RuralDevelopment Perspectives, 4 (February 1988), 2-7.

[21] Kuennen, D. S., and Stapleford, J. E. "Devel-oping and Implementing Effective EntrepreneurshipPrograms." National Rural EntrepreneurshipSymposium, eds. B. W. Honadle and J. N. Reid.Knoxville, TN: Southern Rural DevelopmentCenter, August 1987, pp. 29-38.

81

[22] Malecki. E. J. New Firm Startups: Key toRural G owth." Rural Development Perspectives, 4(February 1988), 18-23.

[23] Mikesell, J. J. "Rural Banks Reflect the LocalEconomy." Rural Development Perspectives, 2(October 1985), 11; 16-17.

[24] Milkove, D. L. Are Rural Banks Different, CrJust Small ?" Rural Development Perspectives, 2(October 1985), 10-15.

[25] Miller, J. 1'. 'Rethinking Small Businesses asthe Zest Way tc Create Rural Jobs." Rural Develop-ment Perspectives, 1 (Feb: uary 1985), 9-12.

[26] "Minnesota Program Builds Young Entrepre-neurs." Rural Development News, 12 (April 1988),4-5.

[27] Natras, D. "Enterprise Zones." BusinessFacilities, 20 (May 1987), 1-4.

[28] Nejoahleb, L. A. "Rural Financial Institutions:Trends and I rospects." New Dimensions in RuralPolicy: Building Upon Our Heritage, Studies Pre-pared for the Use of th Subcommittee on Agricultureand Transportation of the Joint Economic Commit-tee, Congress of the U.S. Washington, DC:,U.S.G.P.O, 1986, pp. 422-430.

[29] Office of Program Analysis and Evaluation,Office of Assistant Secretary for CommunityPlanning and Development, U.S. Department ofHousing and Urban Development. "State-Designated Enterprise Zones: Ten Case Studies,"(August 1986), pp. i-xiv; 191-209.

[30] Olinger, G. A. "Business Continuity PlanningConcerns of the Closely-Held Business Owner."Journal of Arboriculture, 10 (March 1984), 92-94.

[31] Pulver, G. C. "Fitting Entrepreneurs intoCommunity Development Saategies." NationalRural Entrepreneurship Syr::posiuni, eds. B. W.Honadle and J. N. Reid. Knoxville, TN: SouthernRural Development Center, August 1987, pp.93-101.

[32] Rasmussen, W. D. "90 Years of Rural Devel-opment Programs." Rural Development Perspectives,2 (October 1985), 2-9.

[33] Revzan, L. "Enterprise Zones: Present Statusand Potent Impact." Governmental Finance, 12(December 1983), 31-37.

..) 0

United States Association for Small Businesses andEntreprenauship-1089

[34] Robb, C. S. "Unique Rural Economic Develo-pment Efforts in Virginia." New Dimensions inRural Policy: Building Upon Our Heritage. StudiesPrepared for the Use of the Subcommittee on Agricul-ture and Transportation of the Juiat EconomicCommittee, Congress of the U Washington, DC:U.S.G.P.O., 1986, pp. 481-43o.

[35] "Rural Economic Development in the 1980's:A Summary." Agriculture a id Rural EconomyDivision, Economic Research Service, U.S. Depart-ment of Agriculture, Agriculture Information BulletinNo. 533. N. 1.ington, DC: ERS Publications,Rural Summal. 1987. pp. 1-12.

[36] Sauer, R. J. "Agriculture and the RuralCommunity: Opportunities and Challenges forRural Development." Interdependencies of Agri-culture and Rural Communities in the Twutty-firstCentury: The North Central Region, eds. P. F.Korsching and J. Gildner. Ames, IA: NorthCentral Regional Cuter fur Rural Development,Iowa Site Universi.y, 1986, pp. 1-11.

[37] Saylor, M. "Home-Based Enterprise Develop-ment and Crafts Marketing." National RuralEntrepreneurship Symposium, eds. B. W. Honadleand J. N. Reid. Knoxville, TN: Southern RuralDevelopment Center, August 1987, pp. 5",-09.

[38] Sears, D.; Reid, N.; Rowley, T.; and Yetley, M.Discussion Paper for U.S. Department of Agricul-ture, January 17, 1989, p. 2.

[39] Sharples, D. K. "R:trai Community Colleges:Venture Team for Success." New Dimensions inRural Policy: Building Z:pon Our Heritage. StudiesPre!' .red for the Use of the Subcommittee on Agricul-ture and Transportation of the Joint EconomicCommittee, Congress of the United States.Washington, DC: U.S.G.P.O., 1986, pp. 547-551.

[40] Sloan, J., Jr. "Small Business and the Fate ofthe Rural Economy." New Dimensions in RuralPolicy: Building Upon Our Heritage. Studies Pre-pared for the Use of the Subk.ommittee on Agricultureand Transportation of the Joint Economic Con:nth.tee, Congress of the U.S. Washington, DC: U.S.G.P.O., 1986, pp. 403-405.

82

[41] Smith, S. M. "Diversifying Smalltown Econ-omies with Nonmanufacturing Industries." RuralDevelopment Perspectives, 2 (October 1985), 18-22.

[42] Spann, M. S.; Adams, M.; and Wortman, M. SJr. "Entrepreneurship: Definitions, Dimensions andDilemmas." t'roceedings of the Third AnnualConference, U.S. Association for Small Business andEntrepreneurship. Kennesaw, GA: 1988, pp.147-153.

[43] Summers, G. F. "Rural Industrialization." TheRural Sociologist, 6 (November 1986). 181-186.

[44] Vaughan, R. "Eatrepreneurship in RuralMaine." Rural Development Perspectives, 4(February 1988), 20.

[45] Watkins, D. A., and Allen, T. G. "Problems ofStudying Entrepreneurship in Rural Areas.National Rural Entrepreneurship Symposium, eds. B.W. Honadle and J. N. Reid. Knoxville, TN:Southern Rural Development Center, August 1987,pp. 15-28.

[46] Webster, S. A. "Opportunities and Constraintsin Developing Rural Incubators." National RuralEntrepreneurship Symposium, eds. B. W. Honadleand J. N. Reid. Knoxville, TN: Southern RuralDevelopment Center, August 1987, pp. 138-141.

[47] Weinberg, M. L. "Business Incubators GiveNew Firms in Rural Areas a Head Start." RuralDevelopment Perspectives, 3 (February 1987), 6-10.

[48] Witthaus, F. "Will Enterprise Zones Work?"Journal of Small Business Management, 22 (July1984), 9-17.

[49] W-Irtman, M. S., Jr. "Entrepreneurship: AnIntegrating Typology and Evaluation of theEmpirical Research in the Field." Journal ofManagement, 13 (1987), 259-279.

United States A sociation for Casa Businesses and Entrep- saship-1989

TABLE 1Research Typology ^n Entrepreneurship

I. TheoreticalA. Theories of entteprencarship

1. Corporate2. Individual

B. Frameworks1. Comprehensive2. Psychological3. Sociological4. Economic5. Political6. Social

C. Definitions of entrepreneurshipD. Models of entrepreneurship

II. HistoricalA. Corporate entrepreneurshipB. Individual entrepreneurship

III. EnvironmentalA. Macroenvrionment

1. International2. National

B. Microenvironment1. Urban2. Rural

IV. OrganizationalA. BusinessB. GovernmentC. Nonprofitr, International

V. FunctionalA. Corporate entrepreneurship

(intrar :eneurship)1. Structure

a. New venture formationb. Venture managementc. Innovationd. Technologye. Public policy

2. Behavior (total orgai,zation)B. Individual entrepreneurship

i. Structurea. New venture formationb. Operations

2. Behaviora. Careersb. Personal characteristicsc. Job characteristics

VI. Future of entrepreneurship

Adapted from: Max S. Wortman, Jr. "A Unified Framework, Research Typologies, and Research Prospectusesfor the Interface between Entrepreneurship and Sit all Business." The Art and Science of Entrepreneurship, ed:,.D. Sexton 1 R. W. Smilor. Cambridge, MA: Ballinger, 1986, pp. 278-279.

83

Unites States Association for Small Businesses and Entrepreneurship 1989

PREORGANIZATIONblEIVORLS

EARLY NATURECOMMUNITY ( itGANIZATICNORGANIZATIONFRECONOMIC - 5 YEARS) (5 - 10 YEARS)SOCIAL

RELIGIOUS

RURAL FINANCIALDISTIVMONS

RURAL CONMEITTY-RESEARCH -PARKS

1 WEAL EtiTERPRISEZONES

is AGRMISINESS IINTRAPRENEUPs3EIPI

GOVERNMENTAL A.,^1D1

QUASI-GOVER#ERT-AL ORGANIZATIONS

SPELT-IMMANENT

CENTERS

1

SMALL INDUSTRYSERVICE CENTER

RURAL INCUBATORS

RURAT, FINANCIALINSTITUTIONS

RURAL EXTENSIONOPERATIONS

IRURAL EDUCATIONPROGRAMS

RURAL CCNNUNITY-RESEARCH PARKS

RURAL ENTERPRISEZONES

GOVERNENTAL ANDQUASI-GOVERNONTAL

ORGANIZATIONS

SMALL BUSINESSDEVELOPMENT

GETTERS

RURAL FINANCIAL]INSTITUTIONS

RURAL EXTENSIONOPERATIONS

RURAL EDUCATICN IPROGRAMS

Figure 1, Current Supportive Strategies and Programs Related to Rural Entrepreneurs in Organization Stages

84


cowry 1 COUNTY 2

caw:: 3 COMFY 4

I

RURAL ECONOMICDEVELOPMENT ZONE(Iv center offo ..: to ten

county cluster)

AGRIBUSINESS SITES

RURAL ECONOMICDEVELOPMENT ZONECOORDINATOR

-RURAL DICUBATOR

SUPPORT SERVICES

FULTIBAK n TELLER

SPECIAL SERVICES UNIT

FINANCIAL SERVICESACCOUNTING SERVICESLEGE, SERVICESRUSIN:MS OID TECHNICAL

sErnmsEDUCATIONAL SERVICES

RURAL ECONOMICDEVELOPMENTZONE

Figure 2. Linked Rural Economic Development Zones to Support Rural Entrepreneurship

85


THE USE OF BUSINESS PLANS BY RAPIDLYGROWING FIRMS

Philip D. Olson, University of Idaho

ABSTRACT

This study investigates rapidly growing firms togather information about the extent of and variablesthat are associated with business plan usage. Fiftypercent of the firms reported that no plan wasdeveloped. Dependent relationships wereestablished with business plan usage and twovariables -- initial firm size and ;atrepreneur's

anagement experience.

INTRODUCTION

A business plan is a written document that describesimportant elements or components of a proposedventure. Authors of textbooks (3) (4) (7) andarticles (2) (6) (8) encorage new - business ownersand entrepreneurs to prepare a business plan fortwo reasons.

First, if a venture needs external funding, a businessplan can be a source of valuable information foroutside investors. In fact, some potential investors(venture capitalists, in particular) require that abusiness plan be available for their review.

A second reason for writing a business plan is thatit can be used as an internal planning document.The ar7ument here is that the process of preparingsuch a report -- including gathering and analyzingrelevant information--forces a person or team to belogical and critical regarding a venture's goals andplans. This exercise then should produce a morethorough venture evaluation than a quick feasibilityanalysis that usually is carried out earlier in therev'ev 'assessment process.

Given these two well known reasons for preparinga business plan, a natural question is: To whatextent dc individuals who start new venturesprepare business plans? Further, what character-istics or attributes, concerning not only entrepre-neurs but, also, their ventures, are related tobusiness plan usage?

Regarding possible relationships between venturecharacteristics and use of business plans, Ronstadt(7) suggests that high growth ventures (as compared

87

to other start-ups) require a "formal" business planbecause of the likely need for outside funding tofinance the rapid growth. Also, Hisrich and Peters(3) argue chat a business plan depth and detaildepend cn the size and scope of a venture. Underscope they include the type of organizational worktechnologythat is, manufacturing versus service.

Consi ler next the attributes of an entrepreneur thatpotentially are associated with business plan usage.Two possibilities are an entreveneur's formaleducation and experience. These attributes areproposed based on studies conducted by Collins andMoore (1), Lamont (5) and Vesper (9). Theresearch carried out by then authors focused onidentifying factors that relate to success in a newventure; hence, they did not examine business planusage specifically. But these studies suggest that anentrepreneur's education and experience might alsorelate to business plan usage.

The purpose of this study :s to investigate small,rapidly growi.ig firms in an attempt to gatherinformation about: 1) the extent of business pl,,nusage during the pre-start-up phase, and 2) possiblerelationships between business plan usage and eachof the following variables: initial venture s:ze,venture technology, entrepreneur'., formal educationand entrepreneur's prior management experience.The results of the investigation should be of interestto not only aspiring and practicing entrepreneurs,but, also, to entrepreneurship scholars/researchers.

METHOD

A sample was obtained from "The 1986 INC 500"fist of ms published in the December 1987 issueof INC., a monthly publication targeted w ownersand managers of small, growing firms. INC,publishes a list of 500 firms every December. TheMr firms represent the fastest growing (of thosefirms that apply) privately held businesses ;United States based on percentage of sales increasesover the past five-year period.

The five year period for "The ^", INC. 500" firmsis 1982-1986. Hence, 1982 is latest year thatfirms could start and still be eligible for inclusion in


the 1986 list. But a good number started muchearlier. In fact, .i2 of the firms had 1972 or earlieras their start-up date. Because remembering factsabout a firm's early years becomes more difficultthe older a firm gets, these 32 firms were omittedfrom the survey. Twenty-six other firms wereomitted because their mailing addresses could notbe identified. Thus, only 442 firms were surveyed.For each firm a questionnaire was mailed to theCEO. One hundred twenty-one usable question-naires were returned.

Questions from the survey instrument that are ofinterest for this study concerned business planusage, firm size, type of organizational technology,:ounding CEO's formal education and foundingCEO's prior management experience. Business planusage was measured by asking if a pre-start-up,formal, busily:a., plan was developed. A bnsinessplan was defined as a written documentsummarizing start-up information about a ventureidea including an industry analysis, a mark. ..ngplan, financial needs, key personnel, etc. The listedpossible answers were: 1) no formal plan wasdeveloped, 2) a Partial plan was created, and 3) acomplete plan was developed.

The measure used for a firm's size was the numberof employees (full-time) during the first year. Theresponses were categorized into two classes: at mostfour employee- and five or more employees. Typeof organizatkx. ,, technology was measured byasking CEOs to place their firms into either the"mainly manufacturing" class or the "mainly service"class. Information about a firm's founding CEO sformal education was obtained by categorizingresponses into three classes: no college/universitydegree (included in this class are a trade schooldegree, some trade school or some college); collegebachelor degree or higher with at least one degreein a business discipline; and college degree orhigher with no degree(s) in a business discipline.Finally, a firm's founding CEO's managementexperience was measured by asking CEOs whetheror not they had a prior, full-time, managementposition.

RESULTS

Response frequencies and percentages for thebusiness plan usage questic n are presented in Table1. As evident, 50% of the firms reported that noplan was developed during the pre-start-up phase,32.5% stated that a partial plan was created and17.5% said that a complete plan was developed.This sample information was not used to test ahypothesis about business plan usage because usage

8°0

expectations or norms, from which to mixcomparisons, are not -,vell established for eitherrapidly growing or other types of firms.

Tables 2 - 5 contain information (contingency tableresults) for the relationships between business planusage and each of the variables being, investigated inthe study (size, technology, education andexperience). To test for a dependent relationshipin each case, the Chi-square test of independencewas employed.

As shown in Table 2, the hypothesis that firm size(measured by number of full-time, first-yearemployees) is independent of business plan usagefor rapidly growing firms is rejected (x2 = 11.92; p= .0026). The nature of the relationship, assuggested by the cell results in the table, is thatthere is a greater tendency for business plans to bedeveloped by larger firms kthose with five or moreemployees) than smaller ones.

The hypothesis that organizational technology isindependent of business plan usage for rapidlygrowing firms (see Table 3) is not rejected (x2 =1.63; p = .4426). Although some people hold theposition, as Hisrich and Peters (3) suggest, thatmanufacturing firms are more likely to develop aformal business plan than service firms, the sampleinformation does not support the belief.

'fable 4 contains information on the relationshipbetween a CEO's formal education and businessplan usage. The hypothesis of independencebetween the CEO's education and business planusage is not rejected (x2 = 6.70; p = .1526). Thus,even though the opinion seems plausible thattntrepreneurs who are college graduates in businessare more likely to develop business plans than thosewith other educational backgrounds (i.e., adependency exists), the data does not upho.d theposition.

Information on the relationship between a CEO'sprior management experience and business planusage for rapidly growing firms is presented inTable 5. The :iypothesis of independence betweenthese two variables is rejected (X2 = 6.82; p =.0330). The cell results in the table indicate thatentrepreneurs with management experience have agreater tendency to develop business plans thanthose who do not have management experience.

CONCLUSION

What are the implications of this study for aspiringentrepreneurs of rapidly growing firms? First, the

United States Association for Small Businesses and Entreprene ,ship-1989

study helm cblablish norms for business plan usage.The results of the surveyed firms were that 50% didnot develop a plan during their pre-start-up phase,32.5% created a partiz.1 plan and 17.5% developeda complete plan. A second implication concernsvariables that were related to business plan usage.Dependent relationships were found to exist withtwo of the four variables that were examined (theinitial size of the venture and the founding CEO'smanagement experience). The apparent nature ofthe dependency between size and business planusage is: as the number of first-year employeesincreases, there is a greater chance that a formalplan will be developed. Also, entrepreneurs withmanagement experience prior to starting their firmsare 'lore likely to use business plans than thosewithout management experience.

Turr_ing to implications of this study forentrepreneurship researchers, the result that 50% ofthe rapidly growing firms did not develop a plan wasprobably an initial surprise to many of theseindividuals. This result was unexpected becauseplanning and business plan preparation are oftenviewed, in a normative or ideal sense, as importantp'e-start-up activities to help reduce the chance ofbvs:ness failure, especially for rapidly growingventur es. However, when considering thedependent relationships that were establishedbetween business plan usage and both a venture'sinitial size and a CEO's management experience,the observed usage percentages make more sense.

Recommerded areas of future research includereplications of this study to validate the results.Future studies might also extend this investigationand examine not just business plar usage during afirm's pre-start-up phase b in addition, during thestart-up and growth phases. Furthermore, thesestudies might examine whether it is externalreasons, internal reasons or a combination of boththat explain why firms develop a business plan.

89

Finally, for comparison purposes with rapidlygrowing firms, it would be useful to Audy businessplan usage rates and variables related to usage inother types of new ventures (e.g., smaller,profit-oriented businesses).

REFERENCES

[1] Collins, Orvis, and Moore, David G. TheOrganization Makers. New York: Appleton -Century- Crafts, 1970.

[2] Fry, Fred L., and Stoner, Charles R. "BusinessPlans: Two Major Types." Journal of SmallBusiness Management, 23, No. 1 (January 1985), 1-6.

[3] Hisrich, Robert D., and Peters, Michael P.Entrepreneurship. Homewood, IL: BPI Irwin, 1989.

[4] Kuratko, Donald F., and Hodgetts, Richard M.Entrepreneurship: A Contemporary Approach.Chicago: Dryden Press, 1989.

[5] Lamont, Lawrence M. "What EntrepreneursLearn from Experience." Journal of Small BusinessManagement, 10, No. 3 (Summer 1972), 36-41.

[6] Rich, Stanley R., and Gumpert David E. "Howto Write a Winniiig Business Plan." HarvardBusiness Review, 63, No. 3 (May June 1985),156-166.

[7] Ronstadt, Robert C. Entrepreneurship: Text,Cases and Notes. Dover, MA: Lord Publishing,1984.

[8] Timmons, Jeffry A. "A Business Plan is Morethan a Financing Device." Harvard Business Review,58, No. 2 (March April 1980), 28-34.

[9] Vesp, Ka-t H. New Venture Strategies.Englewood C"';s, NJ: Prentice-Hall, 1980.

nJU


TABLE 1Survey Result. for Business Plan Usage:

Frequencies 'Ind Percentages

Response Frequencies Percentages1. No formal business plan

was developed60 50.0

2. A partial plan was created 39 32.53. A complete plan was developed 21 17.S

TOTAL 20 100.0

Note: Of the 121 surveyed firms, 12" -esponded to the business plan usage question.

TABLE 2Survey esults Classified by Firm Size and Business Plan

Usage: Frequencies, Expected Frequencies and : Test

Finn Size Business Plan Usage(Employees) No Plan Partial Plan Complete Plan TotalFour or less 42 (37) 26 24) 6 (13) 74

Five or ma - 18 (23) 13 (15) 15 (8) 46TOTAL 60 39 21 120

a2= 11.91 (p = .0026)

Note: 1 Firm size is measured by the number of full -time, first-year employees.2 Of the 121 surveyed firms, 120 responded to both the firm size and the business plan usage questions.3 Numbers is parentheses arc the expected cell frequencies computed under the hypothesis ofindependence.

TABLE 3Survey Results Classified by Organizational Technology and Business

Plan Usage: Frequencies, Expected Frequencies and : TEST

Organizational Business Plan UsageTechnology No Plan Partial Plan Complete Plan Total

Mainly Manufacturing 15 (18.2) 14 (12.2) 8 (6.6) 37

Mainly Service 43 (39.8) 25 (26.8) 13 (14.4) 81

TOTAL 58 39 21 118

= 1.63 (p = .4426)

Note: 1) Of the 121 surveyed firms, 118 responded to both the organLatiinal technology and the business planusage -nestions.

2) Nur.thers in parentheses are the expected cell frequencies computed under the hypothesis ofindependence.

90

01

United States Association for Small Businesse and Entrepreneurship - -1989

TABLE 4Survey Results Classified by CEO's F rmal Education

and Business Plan Usage: Frequencies,Expected Frequencies a id ,,2 Test

CEO's FormalEducation

No College/University degree

College bachelor degree or higherwith at least ore degree in business

College bachelor degree.or higherwith no degree(s) in business

TOTAL

No Plan

20 (16.5)

20 (23.0)

19 (19.5)

59

Business Plan UsagePartial Plan Complete Plan

12 (10.9) 1 (5.6)

15 (15.2) 11 (7.8)

12 (12.9) 8 (6.6)

39 20

Total

33

46

39

118

.Y= 6.70 (p = .1526)

Note: 1) Of the 121 surveyed firms, 118 responded to both the formal education and the business plan usagequestions.

.) Niumbers in parentheses are the expected cell frequencies computed under the hypothesis ofindependence.

TABLE 5Survey Results Classified by CEO's Prior Management Experience

and Business Plan Usage: Frequencies, ExpectedFrequencies and 2 Test

CEO's Prior Mgt. Business Plan UsageExperience No Plan Partial Plan Complete Plan Total

No Experience 24 (17.5) 7 (11.4) 4 (6.1) 35

Experience 36 (42.5) 32 (27.6) 17 (14.9) 85

c3TAL 60 39 21 120

x2 = 6..2 (p = .0330)

Note: 1) Of the 121 surveyed firms, 120 responded to both the management experience and the business planusage questions.

2) Numbers in parentheses are the expected cell frequencies computed undet the hypothesis ofindependence.

91


WOMEN ENTREPRENEURS: AN EXAMNATION OFDIFFERENT AGE GROUPS

Donald F. Kuratko, Ball State UniversityIrmtraud Streker Seeborg, Ball State University

ABSTRACT

The purpose of this paper is to examine theemerging trend in female entrepreneurship bystudying different age groups. Two groups offemale entrepreneurs, one age 28 to 40, the other44 to 59, were compared on educational and familybackground and work related variables. Incomparing data from two distinct groups ofself-employed women various characteristics arerelated to previous studies that have revealeddifferences in female mtrepreneurs.

INTRODUCTION

A remarkable growth in entrepreneurship has takenplace in the United States over the last decade.Women entrepreneurs are a large portion of thatgrowth as they increasingly venture out on their ownand, against tremendot.s odds, succeed. Theprogress of women in business can be measured ina variety of ways. Women's share of businessownershir in the USA continues to grow.Aggregate statistics reveal that from 1977 to 1983,the number of women-owned businesses increasedannually by 9.4 percent while the increase inmen-owned businesses was only 4.3 percent. Inaddition, from 1980 to 1986, sole proprietorshipsowned women rose from 2.5 million to 4.1million--a 62.5 percent jump during a period whenthe number of male-owned businesses increased33.4 percent. Also during that period,women-owned businesses' receipts nearly doubled,from 1;36 billion to $71.5 billion. Add the 433,000sole proprietorships that are jointly owned byhusbands and wives and the yet-unknown numbersof women-owned partnerships and corporations, andthe figures on women-owned companies would bemt. higher.

Ti i; number of self-employed women has more thanJubled over the last 15 years, and there is a

gi owing trend in research in recent years to examinethe reasons for this dramatic increase in femaleentrepreneurship.

Who are the women who select Fe If-employment?The research on entrepreneurial characteristics in

93

the past has concentrated on male entrepreneurs- -probably because the majority of entrepreneurs,were men. However, with the increasing number offemale entrepreneurs, women are being studied forsuccess and failure traits which might be useful infuture venture opportunities. Examples of suchstudies include Schwartz, 1979; Humphreys andMcClung, 1981; De Carlo and Lyons, 1979; Sextonand Kent, 1981; Mescon and Stevens, 1982; Hisrichand Brush, 1983; Bowen and Hisrich, 1986;Chaganti, 1986; Scott, 1986; and Birley, 1989.

These studies concentrated on women entrepreneursin order to establish the demographics and majormotivations for starting a business. The resultswere remarkably similar to those of the studies ofmale entrepreneurs--the need for achievement anda desire for independence were predominant. Someof the demographic characteristics of femaleentrepreneurs found in these and other studiesfollow.

CHARACTERISTICS OF FEMALEENTREPRENEURS

Many of the women who start their own businessare older; the average female entrepreneur in 1977was 52 years old (Bowen and Hisrich, 1986; Scott,1986) found 55 percent of a sample of Georgefemale entrepreneurs were over 40 years old.

While most studies show a large percentage (up to90 percent) of male entrepreneurs are married, amuch smaller proportion of female entrepreneurs ismarried. with findings varying from 27 to 70 percent(Bowen and Hisrich, 1986; Stevenson, 1986).

Women entrepreneurs generally have moreeducation than the average adult female. Severalstudies found that between 50 aid 70 percent offemale entrepreneurs haw:, gradu ited from college(Humphreys and (.lung, 1981; Mescon and Stevens,1982; Hisrich and Brush, 1983).

There have been significant changes in the subjectarea in which these women have been educated.Hisrich and Brush (1985) report that 25 years agowomen had predominantly liberal a ts education

93

United States Association for Small Businesses and .itrepreneu ship--1989

while today more women are studying business,engineering, and science. In fact, between 1971 and1981 the number of women in MBA (Master ofBusiness Administration) programs increased from3.5 percent of total enrollment to more than 25percent. Thus, the educational concentration forwomen has definitely shifted (Elgart, 1983).

It has been suggested that previous work experienceinteracting with ether experiences may enhance orretard the decision to venture into one's ownbusiness (Cooper, 1981). The overall research onfemale entrepreneurs prior work experience is stillinconclusive. Hisrich and Brush (1983) found that67 percent of a nationwide sample of femaleentrepreneurs had previous work experience in theirfield. C 1 the other hand, Watkins and Watkins(1983) found only 40 percent of a group of femaleBritish entrepreneurs had prior experience in theirfield, and 50 percent hac.7 neither prior managerialexperience nor experience in their field. In a seriesof detailed case studies, Chaganti (1986) found thathalf of the women entrepr 'rieurs considered had noprior experience in the field of their business.Hisrich and Brush (1984) found that womenentrepreneurs felt that their finance c'.ills -- securingcapital, forecasting, im dgeting--were weak (47percent appraised themselves as "poor" or "fair").

0- other hand, in studies involvingentr. irs in general or exclusively maleentre' rs, we often find more relevant skillsand ext -.nee. Hisrich (1986) summarizes a seriesof findings as follows:

".. . for men, the transition from a past occupationto the new venture is often facilitated because it isan outgrowth of a present job, sideline, or hobby.Women, on the other hand, often leave anoccupation with only high level of job frustrationand enthusiasm for the new venture rather thanexperience, making the transition more difficult"(p. 69).

PROBLEM AREAS

All entrepreneurs face numerous problems in thestarting and managing o: their vcnture. Hisrich andBrush surveyed the start up problems th ...t womenentrepreneurs encountered most. They found thatlack of business training, obtaining lines of credit,and lack of financial planning experience headed thelist with more than 25 percent of the women listingeach of these.

Indeed, Buttner and Rosen (1988) found that bankloan officers perceive that characteristics for

94

entrepreneurial success are more commonlyascribed to men rather than women. Their results,based upon 106 lx..nk loan officers, are consistentwith the evidence that female entrepreneurs havedifficulties in obtaining capital. Likewise, lack ofexperience in financial planning is listed as the mostfrequently encountered problem in currentoperations (Hisrich and Brush, 1984). Thus, thefinancial areas are repeatedly the largest problemfor women. Two key reasons for this may be 1) alack in business training which leads to a deficiencyin understanding the financial Side of busines, and2) not enough experience in th -nancial area.

Motivation of Female Entrepreneurs

Hisrich (1986) compares the reasons of male andfemale entrepreneurs to start their own business.He finds that the departure point for males isdissatisfaction with the present job, a sideline incollege, sideline to the present job or an outgrowthof the nresent job, discharge or layoff, oropportunity for acquisition. For women, thedeparture point is job frustration, interest in andrecognition of opportunity in the area, and changein personal circumstances (p. 70).

Thus, there are differences. Personal circumstancesoften make self-employment an attractive choice forwomen because it allows them to work out of thehome or schedule working hours to coincide withavailable child care. Linda L. Neider, for example,conducted a small survey of 52 women businessowners in Florida and found that 69 percent of hersample of business women had been divorced.These same. circumstances often make a service orretail business the most attractive because it can bestarted with less initial capital and does not requirea large amount of training in an area the woman isnot already familiar with. For example, 92 percentof Neider's women were in the service sector(Kleiman, log6).

COMPARING TWO GENERATIONSOF FEMALE ENTREPRENEURS

Much of the research on self employed women. . presents the "Typical" `.Hale entrepreneur,

therefore missing the diverse nature of femaleentrepreneurship, and -zinforcing stereotypes"(Ste-enson, 1986). Birley (1989) contends that all ofthe bz-kground data on women enti 4reneursignores tne more subtle factors of differences incultural conditioning and experiences.

The women who make the decision to open theirown business today are a very diverse group because

United States Association for Small Businesses and Entrepreneurthip1989

the social, economic and cultural environment haschang.td dramatically over the last 25 years, and themotivating factors may differ depending oneducational background and values assimilatedduring the formative years. His ch (1986) pointsout some of the differences. Twenty-five years agowomen had liberal arts education; were expected tomarry, have children c.nd take care of their familiesand support their husbands; occupationalstereotypes were common--president = male,secretary = female, etc.; the ec:momy wasmanufacturing oriented with ar emphasis on theproducers of goods rather than services.

Today more women are studying business,engineering, and science. Marriage and children areoften postponed, divorce rates have increased, andthere are more single parent families. Marriagesare more likely to be considered a partnershipwhere family responsibilities are shared. Womenhave entered more fields, and legislative changeshave opened more careers for women. Finally, theeconomy is more service oriented than 25 years ago(Hisrich, 1986, p. 70-71).

With this change in the environment, one modelcannot be expected to explain the trend towardentrepreneurship for all women. Therefore, a sericsof models may be necessary to explain the diversityof findings cr :erning female entrepreneurs.Women who g _ v up before or during World WarII may seek to be self employed for a different setof reasons than women who finished their educationand entered the labor force in the 1970s; they mayenter different types of industries, and they mayspend more time to make their business succeed.

The purpose of this study was to compare twogroups of women--one 45 to 59 years old in 1982,the other 28 to 39 years old in 1982. In order toexamine differences in generations of womenentrepreneurs, all of the women owned businesses;some had incorporated the business, others had not.If the environmer. during the formative yearsaffects women's decisions to become self employed,each grow of women should have more in commonwith the women in the same age group who are notself employed than with the self employed womenin the other age group. If there are enduring traitswhich make a woman seek to own a business, then

both groups of self employed women should besimilar to each other, but different from the womenin their age group.

95

SOURCE OF DATA

The data for this paper are taken from the NationalLongitudinal Surveys of Labor Market Experience(NLS) tapes. The sample -s were "designed torepresent the civilian noninstitutional population ofthe United States at the time of the initial survey"(NLS Handbook, 1987, p. 5). The cohorts usedwere the Mature Women (age 30 to 44 in 1967) andthe Young Women (age 14 to 24 it 1968).

From these tapes, those women who, in 1982,owned a nonfarm business (incorporated) or a farmor nonfarm business (not incorporated) wereselected as the entrepreneurial samples. All otherwomen in each cohort formed the comparisongroup. The year 1982 was selected because it wasthe most recent year in which both groups weresurveyed.

While previous studies have started with a group ofwomen entrepreneurs, usually in one location, andattempted to find common traits which set themapart from other women at that time, this studytakes a different approach. The women are part ofa carefully selected nationwide sample, "representingevery state ar' the District of Columbia" (NLSHandbook, 1987). The full sample was selectedbefore women made the deri,;on to become seremployed, in most cases. .ince surveys wereconducted with the same grouts repeatedly (everyone to two years), it is possible, to sec changes incircumstances and their impact on the decision toown a business.

The following section contains results of this studywhich focus on women who owned a business in1982. While the richness of the data base is notfully i tilized at this time, the analysis of this subsetof the data provides some interesting results.

RESULTS

The two cohorts were comp. -ed on four sets ofcharacteristics: educational background, familysituation, attitudes, and work related variables. Theresults will be reported in that order.

Table 1 shows the educational attainment of bothcohorts, broken down by those who own a business(entrepreneurs) and those who do not (others).Analysis shows that both groups of entrepreneurshave a significantly higher education than thecomparison groups (p < .01, contingency tableanalysis). This is consistent with findings from otherstudies listed earlier.


However, we also see a difference between theyounger and older cohort of entrepreneurs. Theaverage education is 13.5 years for the youngergroup, 12.1 years for the mature group (p < .01).Whereas 30 percent of the younger entrepreneurshave a least a 4-year degree, only 14 percent of themature women entrepreneurs have graduated fromcollege. Thus, we do see it trend toward highereducation in the younger group, as expected.

Field of study would be another interesting variableto compare. However, there are apparently morewomen who gave a field of study than actuallyattended college so that these data have to beconsidered with caution. From the available data itappears that 49 percent of the young entrepreneursmajored in either education or fine and applied arts(two most comma), fields). For the matureentrepreneurs, the two most common fields- -accounting for 42 percent of the grou, --are businessand management and fine and applied arts. Withthis particular sample, the predicted shift to moretechnical fields has not occur red. The total youngwomen-sample is very traditional in its choice ofmajors--39 percent majored in education. The olderwomen have more diverse majors: 21 ercentbusiness and management, 22 percent education, 11percent health professions. These results wouldmost likely be different if a sample of femaleentrepreneurs were consider 'd who attended collegein the 1980s instead of the /970s.

In addition to schooling, on-the-job training mayprovide the needed skills to open a business. Veryfew of the women did participate in on-tile-jobtraining program. The entrepreneurs of bothcohorts do so to the same extent as their entire agegroup. However, there is a significant differencebetween the younger and older cohort: 32 percentof the younger entt epreneurial group participated inon-the-job training programs in the 3 years tsforethe 1982 survey e compared to only 12 percent ofthe mature women. Thus, overall the preparationwith training and formal education is better for theyc Jger entrepreneurial cohort, and both groups ofentrepreneurial women are better educated thantheir age group.

While other studies found that fewer femaleentrepreneurs are married, the date in the NLSsurvey do not confirm this. Table 2 shows maritalstatus for the young and mature women, brokendown into entrepreneurs and others. A significantlyhigher number of entrepreneurs are married than ofnonentrepreneurial women. Not surprisingly, alarge percent of e younger age group have nevermarried; however, that does not hold true for the

96

entrepreneurial group. On the other hand, themature group has a larger percentage of widowsthan the younger group, which cerld be expectedalso.

In 1982, the young entrepreneurs were betwer 28and 40 years old. Many can be expected to :laveschool age or even preschool children in the home.The mature women were between 45 and 59 yearsold. Although some coult: still have school-agechildren, we would expect a smaller number ofdependents in that age group.

ne data confirm they. expectations. In theyounger group, 45 percent have no dependents, andthe others has an average of 2.4 dependents. Inthe older group, 52 percent have no dependents,and the others have an average of 1.8 dependents.Thus, responsibility for childcare may be more of amotivator for younger women to seek selfemployment than for alder women.

Changes in attitudes toward provision of childcarecan be seen in the two groups: 55 percent of theyounger entrepreneurs share childcare respi(higher than in the remaining cohort, 41.5 ).In the mature grc-,ip, only 13 percent share childcareresponsibility, both for entrepreneurs and others.Thus, the younger women may be able to investtime in a business because they are no longer solelyresponsible for childcare. In the older group, thisissue is, of course, much less salient due to thesmaller incidence of small children in "he household.Another variable which may affect the choice of selfemployment for the mature women is the health oftheir husband. Since most of them are married,they may have expected to be provided for, but maysuddenly find that is no longer the case as thehusband's earnings capacity decreases. In the NLSsample, 30 percent of the mature entrepreneurialgroup have husbands whose health limits theamount and kilt of work they can do. 'his is morethan in the rest of the mature sample (27 percent).Only 2 women in the younger entrepreneurial grouphave a husband with health restrictions. Thus, thisfamily circumstance may affect the mature womento a larger extent and be oue of the motivatingfactors that makes them seek self employment.

Another question to be explored is whether youngerwomen make different choice with respect toindustry, time spent in the busine.s, occupation, andwhether the outcomes - -ac measured by income fromthe business--differ.

The data show that the more mature women spendsignificantly (p < .01) mere time in their business


than the younger women (36 vs. 31 hours). Thismight indicate that the younger women--who arepredominantly married and have children--see thebusiness as a parttime venture; it might also indicatea different type of business or more efficient workmethods.

Table 3 shows the type of industry for the youngerand mature entrepreneurial groups. Thedistributions are significantly different (chi square26.44, p < .01). In the industries with a fairly largenumber of respondents, mature women areoverrepresented in wholesale/retail trade, youngerwomen are overrepresented in professional andrelated services and business and repair services.This is consistent with expectations: wholesale/retail trade requires less education and training thanprofessional services, and the younger women arebetter educated, as we have shown earlier. Thismay also explain the fact that the mature womenspend more time in their business--professionalshave more control over their time, whereas traderequires adherence to certain hours to becompetitive.

Finally, the younger group of entreprea, _ s is alsofinancially more successful than the mature group.The average income of the younger group($4721.70) is significantly higher than that of themature group ($2702.85). These figures aredeceptive because they include businesses who onlybroke even or lost money in their venture. Forthose who made money, the average income for theyoung women entrepreneurs is $6643.26 and for themature women $5944.83. Four women in theyounger cohort have an income of $50,000 or above;none of the women in the mature cohort have anincome exceeding $40,000. Thus, the youngerwomen as a group do appear to do better than themature women.

SUMMARY

For this paper, we have compared two groups ofwomen who owned a business in 1982 for thepurpose of examining differences or trends: 219women 28 to 40 years of age, and 193 women 44 to59 years of age. In two respects, both groups ofentrepreneurs differ from the other women in theirage group: a larrr percentage is married, and theyhave achieved a nigher degree of education, bothmeasured in average years completed and percentof women with college degrees and graduate studies.

In other respects, the younger entrepreneurs differfrom the mature women: they are better educated(average education includes at least some college,

97

and 30 percent hold a four-year degree); they arepredominantly married (over 85 percent), more thanhalf have children in the household; they havesought out on-the-job training to a larger extent.The more nroire group has, to a larger extent, seena change in circumstances with husbands whoseearning power is diminished through healthproblems. Due, possibly, to differences in training,the younger women have, on the average, a higherincome and spend less time at .heir jobs.

To understand better what triggers the decision tobecome self employed, it will be necessary to lookat longitudinal data and see whether changes inhealth, marital status, or number of dependents mayprecede a change in employment status. This willbe the next step on our research agenda.

REFERENCES

[1] Birley, Sue. "Female Entrepreneurs: Are TheyReally Any Different?" Journal of Small BusinessManagement, (January 1989), 32-37.

[2] Bowen, Donald D., and Hisrich, Robert D. "TheFemale Entrepreneur: A Career DevelopmentPerspective." Academy of Management Review,(1986), Vol 11, No. 2, 393-407.

[3] Buttner, E. Holly, and Rosen, Benson. "BankLoan Officers Perceptions of the Characteristics ofMen, Women, and Successful Entrepreneurs."Journal of Business Venturing, Vol. 3, (1989),249-258.

[4] Chaganti, Radha. "Management in

Women-Owned Enterprises." Journal of SmallBusiness Management, (October 1986), 18-29.

[5] Cooper, Arnold C. "Strategic Management:New Ventures and Small Business: Long RangePlanning, Vol. 14, #5, 1981, 39-45.

[6] DtCarlo, J. F., and Lyons, P. R. "A Comparisonof Selected Personal Characteristics of Minority andNon-minority Female Entrepreneurs." Proceedingsof the 39th Annual Meeting of the Academy ofManagement, (1979), 369-373.

f7) Elgart, Lloyd D. "Women on Fortune 500Boards." California Management Review, (Summer1983), 121-127.

[81 Hisrich, Robert D. "The Woman Entrepreneur:Characteristics, SI ;11s, Problems, and Prescriptionsfor Success." The Art and Science ofEntrepreneurship Research, editors. Sexton, Donald

J #


L., and Smilor, Raymond W. Cambridge,Massachusetts: 1986.

[9] Hisrich, Robert D., and Brush, Candida. "TheWoman Entrepreneur: Implications of Family,Educational, and Occupational Erperience."Frontiers of I ntrepreneurship Research, editors:Hornaday, Timmons, Vesper. Wellesley,Massachusetts: Babson College, 1983.

[10] Hisrich, Robert D., and Brush, Candida. "TheWoman Entrepreneur: Management Skills andBusiness Problems." Journal of Small BusinessManagement, (January 1984), 34.

[11] Hisrich, Robert D., and Brush, Candida. TheWoman Entrepreneur. Characteristics andPrescr;?lions for Success. Lexington, Massachusetts:Lexington Books, 1985.

[12] Humphreys, M. A., and McClung, J. "WomenEntrepreneurs in Oklahoma." Review of RegionalEconomics and Business (1981), 6(2), 13-21.

[13] Kleinman, Carol. "Women at Work." ChicagoTribune, (December 15, 1986), 22.

[14] Mescon, T., and Stevens, G. E. "Women asEntrepreneurs: A Preliminary Study of FemaleRealtors in Arizona." Arizona Business (1983),29(7), 9-13.

[15] NLS Handbook 1987 (Center for HumanResource Researc;-, The Ohio State University,Columbus, Ohio, (1987).

[161 Schwartz, Eleanor B. "Entrepreneurship: AN Female Frontier." Journal of ContemporaryBusiness, (Winter 1979), 44-76.

[17] Scott, Carole E. "Why More Women AreBecoming Entrepreneurs." Journal of SmallBusiness Management, (October 1986), 18-29.

[18] Secton, D. L, and Kent, C. A. "FemaleExecutives and Entrepreneurs: A PreliminaryComparison." Frontiers of EntrepreneurshipResearch, editor: K. Vester. Wellesley,Massachusetts, Babson College, 1981, 40-55.

[19] "Solidarity of the Sexes." Nation's Business(October 1986), 52.

[20] Stevenson, Lous A. "Against All Odds: TheEntrepreneurship of Women." Journal of SmallBusiness Management (October 1986), 30-36.

[21] Watkins, J. M., and Watkins, D. S. "TheFemale Entrepreneur: Her Background andDeterminants of Business Choice--Some BritishData." Frontiers of Entrepreneurship Research,editors: J. A. Hornaday, J. A. Timmons, and E. H.Vesper. Wellesley, Massachusetts, Babson College,1983.

TABLE 1Years of Education Completed

Years Young WomenCompleted Entrepreneurs Others

Mature WomenEntrepreneurs Others

< 12 16 (8%) 676 (19%) 45 (24%) 1300 (35%)12 86 (43%) 1713 (48%) 91 (49%) 1629 (44%)13 - 15 39 (19%) 595 (17%) 24 (13%) 430 (12%)> 15 61 (30%) 609 (17%) 27 (14%) 341 (9%)

98

Status

Married

Widowed

Divorced

Separated

Never Married


TABLE 2Marital Status

Young WomenEntrepreneurs Others

187 (85%)

2 (1%)

17 (8%)

6 (3%)

7 (3%)

Industry Group

Agriculture, Forestry, Fisheries

Construction

Manufacturing

Transportation Communication,Public Utilities

Wholesale, Retail Trade

Finance, Insurance, Real Estate

Business, Repair Services

Personal Services

Entertainment, Recreation

Professional, Related Services

Public Administration

2238 (65%)

37 (1%)

447 (13%)

209 (6%)

484 (14%)

TABLE 3Industry Group of Business

Young WomenEntrepreneurs

17 (7.8%)

2 (.9%)

7 (3.2%)

1 (.5%)

54 (24.8%)

9 (4.1%)

30 (13.8%)

46 (21.1%)

8 (3.7%)

42 (193%)

2 (.9%)

99

Mature WomenEntrepreneurs Others

193 (81%)

16 (8%)

14 (7%)

3 (2%)

4 (2%)

2297 (69%)

388 (12%)

348 (10%)

169 (5%)

147 (4%)

Mature WomenEntrepreneurs

14 (7.3%)

3 (1.6%)

14 (73%)

9 (4.7%)

66 (34.4%)

5 (2.6%)

15 (7.8%)

41 (21.4%)

2 (1.0%)

23 (12.0%)

0 (0.0%)

COMPETITIVE

PAPER

ABSTRACTS

100

ENTREPRENEURSHIP EDUCATION RESEARCH: CURRENT TRENDS AND METHODS

Christine BoryckiUniversity of North Texas

This paper examines the trends and methods of entrepreneurship education

from 1984, through 1988. It analyzes the coverage of entrepreneurship

education in four blications aimed at small business and entrepreneurism:

American Journal of Small Business, Journal of Small Business Management,.

Proceedings of the Small Business Institute Directors Association, and

Frontiers of Entrepreneurship Research. Thirty one articles are categorized

by types of organization studied, sample size, research method, issues

studied, and content of the study. The issues studied are diverse, but seem

to cluster around the practical issues of curriculum and teaching styles. No

obvious trends appeared in the issues studied over the course of the five

years analyzed. Nc research methodology dominated, but survey/questionnaire

was used most often.

Much of the research reviewed for this analysis contributed little to

the advancement of practice or theory of entrepreneurship education. Good

data as opposed to convenience samples should be a basic objective of

resew. zhers. Thorough case studies of varic :s entrepreneurship courses and

curricula should be conducted and their effectiveness determined so as to

develop successful models on which to base new courses and curricula. A

comparisr.n study of entrepreneurship-specific courses versus general business

courses with some entrepreneurship should be conducted in order to determine

the more effective way of educating entrepreneurs. Effectiveness should be

measured both as a cost faactor to the school as well as the relative

contribution to tue entrepreneur's success.

103

101

AN EXAMINATION OF CORPORATE ENTREPRENEURSHIP:NEEDS AND STRATEGIES

DONALD F. KURATKOBALL STATE UNIVErSITY

ABSTRACT

All of the strategies suggested in this paper lead to a widevariety of possibilities for intrapreneurial activity to takeplace. Thus, a continuum is presented to look at the dimensionsof intrapreneurial activity.

The continuum presents ventures that may be considered corp-orate assigned projects, since they usually have a great deal ofcorporate control and commitment by the corporation, and thenprogresses through Management by Objectives Projects, StrategicTeam Projects, and Corporate R&D Projects, based upon theincrease of individual autonomy and decrease in corporatecontrol.

The degree of project control and corporate commitment willbe pulling certain projects towards greater corporate controland, tnus, assignment and supervision. The need for autonomy andfreedom to run the project will be pulling other projects towardsthe ideal intrapreneurship--completely self appointed championsof new venture development.

In between the two extremes can exist various forms ofintrapreneurial activity. Projects that seem semi-intrapre-neurial (due to freedom given to an individual project leader)are all within the scope of entrepreneurial behavior. If not,then very few companies would ever seek to try. Intrapreneurshipis a risk and it has to start somewhere--sometimes small andcorporate controlled. But if it starts, there is the likelihoodof growing up the continuum. People become more comfortable withthe idea, confidence builds, results occur, and soon the firstcorporate assigned projects evolve into more autonomous venturesthat reach farther out before being required to report intoadministrative structure. This is a realistic evaluation forcompanies and managers to be aware of.

104

r 0

HOW CONSULTANTS CONTRIBUTE TO NEW VENTUREAND SMALL BUSINESS DEVELOPMENT

James J. Chrisman, University of South CarolinaAlan L. Carsrud, University of Durham & University of Southern California

This paper investigates how a sample of 123 pre-venture and 76 established

business clients perceive the value of the strategic, administrative, and

operating assistance provided by the Small Business Development Center. It was

expected that pre-venture clients would be more inclined to seek strategic

assistance than established business clients and would find such services more

valuable. Established business clients were expected to receive more

administrative and operating assistance than pre-ventures and perceive it to be

more valuable. Chi-square tests of independence and discriminant analysis were

used to examine the hypotheses.

Pre-venture clients received significantly more strategic assistance than

established business clients. There were, however, no significant differences in

the amounts of administrative and operating assistance received by the two groups

of clients. More importantly, for both groups of clients our results indicate

that those who received strategic assistance perceived the value of outsider

consulting services to be more valuable than those who did not. Our findings

also suggest that clients benefit most when outside consultants provide them with

a synergistic balance of strategic, administrative, and operating advice.

105

- 103

ABSTRACT

Opportunity: The Neglected Concept in Entrepreneurial Management

Thomas C. Neil, 2h.D.Associate Professor

Clark Atlanta UniversityGraduate School of Business Administration

Individuals who start businesses are assumed to be very

resourceful and success oriented. In attempts to understand the

behavior of these individuals, research has focused on their risk

propensity. Their willingness to experience a loss. Only

recently, has this focus been questioned. Instead of emphasizing

risk orientation, there is a need to understand opportunity

orientation.

A preliminary study was done on sixty small business owners

in the quick prin, floral or rasidential real estate business.

These individuals were asked structured questions focusing on

their perception and response to opportunity. Almost all the

business-owners described an opportunity as an unexpected,

positive challenge very few of the business-owners had mechanisms

in place to identify potential opportunities similar to what they

had for problems. Opportunities were perceived as customer

driven and, therefore, basically beyond the control of the

business-owner. Suggestions for furthar research as well as for

ways business-owners can develop an opportunity orientation are

presented.

106

I 0(1

PATTERNS OF ORGANIZATIONAL STRESS IN THE GROWINGENTREPRENEURIAL FIRM: A TEST OF THE ORGANIZATIONAL

LIFE-CYCLE HYPOTHESIS

G. RUSSEL- MZ,EASTERN MICHIGAN UNIVERSITY

VIVIAN WATKINS,EASTERN MICHIGAN UNIVERSITY

ABSTRACT

This paper reports the results of an exploratory research studythat examined the sources and manifestations of organizationalstress within growing entrepreneurial firms. The thrust of theanalysis concerned an evaluation of the premise that all smallfirms exhibit similar patterns of stresses as they grow.Multiple item scales derived from previous research studiesprovide measures of twelve aspects of organizational environmentsoften related to growth stresses in the small businessliterature. The scales measured four major components of thefirms internal environment, 1) the organizational climate, 2) thesupervisory style, 3) work group relations, and 4) roleperceptions. Additionally, Flamholtz's (1986) "growing painsindex", attitudes toward the CEO, and various performanceindicators (employment and sales growth over five years andperceived performance improvement) were measured. The number ofitems in each scale ranged from 2 to 10 with alpha coefficientsranging from 0.58 to 0.87 and averaging 0.70. The data werecollected via personal interview questionnaire from 294 seniorlevel managers in 168 growing enterprises. The application ofMANOVA, cluster and discriminant analysis revealed five stableand significantly different groups of firms, each withdissimilar patterns of stress relationships. An evaluation ofthe various patterns indicates that while firms in some clustersshow relationships consistent with normative guidelines in termsof how growth should be managed, other cluster patterns wereclearly divergent while still exhibiting similar growthperformance characteristics.L

The results suggest thatentrepreneurial firms seem to pursue at least five differentpaths for managing growth and raising questions about theaccuracy of life-cycle models which suggest the same events andstresses for all firms. Future research in this area needs toinclude a broarder range of possible explanatory variables suchas CEO personality and leadership style, and externalenvironmental demands.

107

PERCEPTIONS OF BOARD INFLUENCE IN INC. 500 FIRMS:A FACTOR ANALYSIS

Roger H. Ford, James Madison UniversityH. Richard Priesmeyer, James Madison University

ABSTRACT

A growing body of literature asserts that privately-owned firms can benefit by having aworking board of directors with outside board members. This study examined boardmembers' and chief executive officers' perceptions of board influence in Inc. 500 firms.Surveys using Likert-type scales were designed and sent to chief executive officers andboard members of firms listed in the 1982-84 Inc. 500. Final usable surveys consisted of325 from the CEO surveys (56%) and 91 from board members (73%). The general thesistested was that boards with outside directors would have higher levels of influence thanwould boards of strictly inside directors. This thesis was designed to test the basic themeof "outside director" superiority which has appeared frequently in management literature.

Although the surveys probed several variables related to the activities of the boards, suchas strategic planning, budgeting, management succession, crisis management, etc., factoranalysis confirmed that these variables were in fact measuring several dimensions of a singlefactor which the authors termed "board influence."

The survey results were divided into four data sets: CEOs with inside boards, CEOs withoutside boards, board members of inside boards, and board members of outside boards.Factor analysis of the seven dimensions (variables) of board influence in each of these datasets resulted in extraction of a single factor with almost equal factor loadings on eachvariable.

The general thesis that boards with outside members wield higher levels of influence thando boards composed strictly of insiders could then be expressed as four alternate hypotheseswhich would be tested by comparing the index values of the data sets:

H1: CEOs with outside boards will perceive the influence of their boards as greater thanthat perceived by CEOs with inside boards.

H2: Board members on outside boards will perceive the influence of their board asgreater than that of board members on inside boards.

H3: CEOs with inside boards perceive the influence of the board no differently thanboard members of inside boards.

H4: CEOs with outside boards perceive the influence of the board IR, differently thanboard members on outside boards.

The results of the study did not support the thesis, and, in general, provides empiricalevidence for an opposing opinion regarding the value of outside boards and directors toprivately-owned firms. Several propositions for the findings are offered by the authors.

108

106

WORKSHOP

ABSTRACTS

TITLE:

PRESENTER:

BE ALL THAT YOU CAN DREAM"

Lawrence PfrognerCurriculum Supervit orLorain County Joint Vocational School15181 Route 58SOberlin, Ohio 44074

PROGRAM DESCRIPTION:

What began as a school effort to give vocational students a "iaste cfentrepreneurship," has made its creators feel like successful entrepreneursthemselves. After developing the all-day entrepreneurship simulation forsenior vocational students, we've now adjusted and/or duplicated theworkshop for over 1000 elementary, gifted, college, ethnic, and adultparticipants. Students spend five action-packed hours creating,constructing, and critiquing all aspects of their own specialty shops intheir own personally designed mall.

GOALS .

o to introduce students to the components di entrepreneurship

o to provide an opportunity for students to evaluate whether or notentrepreneurship is right for them

o to involve students in problem solving and group dyna.nics situations

o to develop insights into management decisions that will result in morepositive employee characteristics

BLACK ENTREPRENEURSHIP:UNEXPLOITED ETHNIC AND INSTITUTIONAL RESOURCES

Edward D. Bewayo, Montclair State College, Upper Montclair, NJ

Forest M. Pritchett, Seton Hall University, South Orange, NJPresident, Pritchett Industries, Morristown, NJ

Exec. Secretary, NJ United Minority Business Brain Trust Inc.

Richard M. O'Daniel, Norfolk State University, Norfolk, VA

There are over 27 million blacks (t `-lean -Ames cans) in the United States.The black population in the U.S. (bigger Dian that of most independent nations)purchases and consumes over $200 billion worth of goods and services annually(again a figure much higher than the gross national product of most independentcountries). Blacks in the U.S. mostly live in black neighborhoods. There is astrong and highly influential black church. Traditionally, blacks have faceddiscrimination practically in all sectors of the economy, if not society.

All of the above-mentioned conditions, even those which appear to benegative, can and should be used to propel an accelerated rate of growth ofblack-owned and operated businesses, in virtually all sectors of the economy.These same conditions have been instrumental in the acceleration of blackparticipation in politics.

The question, of course, is why have not these conditions brought about anacceleration of black entrepreneurship so far, and how can they be made to bringabout such an acceleration in the future? More specific questions or issuesinclude:

* What are the chances of involving the black church in economicactivities more than it is presently involved?

* Why have not other black economic institutions such as blackbanks led to a boost in black entrepreneurship?

* What about creating additional black economic-orientedinfrastructural institutions such as cooperative buying schemes,and training institutes for black entrepreneurship?

* What can we learn from other minorities who have faced similarconditions, and have used such conditions to grow economically?

Answering these questions, in and of itself, may not do much for blackentrepreneurship, but assuming that they should be asked and answered, it is aworthwhile exercise.

112

CONSULTANTS TO SMALL BUSINESS: OPPORTUNITIES AND CHALLENGES

Dale B. McMillinOhio Psych Consultants, Inc.

A consultant whose primary market is the small business or entrepreneur mustbe sensitive to the entities' challenges: e.e., rapid market shifts, lowoverhead, "multi-hats" worn by management, the external forces that impact thebusiness, barriers to entry and the "ego drive" of the owner.

This panel discu3sion will address how the consultant must behave to gainendorsement of the client, how a consultant is chosen by the small businessmanager, the need for availability by the client, and what is the difference inmarketing to a small/medium-sized entity versus a large system.

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1 0..i..A.

Panel: Consulting Issues: Pitfalls & Rewards.

Panel Chairman: Prof. Barry FarberProfessor of Business AdministrationUniversity of Maine at AugustaAugusta, Maine

Speakers:

I) 'Pricing The Consulting Job'

Anita WhiteRegional ManagerDavid M. Griffith & Associates, Ltd.Northbrook, Illinois

2) 'Marketing Do's & Don't's'

Dr. Carol MattesonDean of the College of BusinessBloomsburg UniversityBloomsburg, PennsyN3nia

3) 'What Assistance Can You Get For Free'

Joan GillmanDirector SBDCUniversity of Wisconsin-MadisonMadison, Wisconsin

4) 'Selecting and Using Boards of Directors and Quasi AdvisoryBoards as a Consulting Resource'

Dr. Alan C. FilleyPresident of USASBE

& Wisconsin Distinguished Professor of ManagementUniversity of Wisconsin-MadisonMadisol-, V/isconsin

CREATION Of A BUSINESS IMAGE:A STRATEGY FOR ENTREPRENEURS

Authors:

Gregory R. PassewitzOhio Cooperative extension ServiceThe Ohio State University7' 20 Fyffe RoP.tiColumbus, OH 43210-1010614/292-8436

Joe E. HeimlichOhio Cooperative Extension ServiceThe Ohio State University2120 Fyffe RoadColumbus, OH 43210-1010614/292-8436

Abstract:

To be successful, a business must create a distinctive, dear and consistent image. Thiscan present a challenge to even the most creative entrepreneur. A new business is at theperfect point to begin the process of building its image and once established, this imageshould permeate all products and services offered by the company. In the customers'mind, the business is placed in a niche relative to its competitors based upon perceivedimage of the business. Once it is firmly planted in the customers' mind, it is extremelydifficult to break out of this niche.

Image is a concept of someone or something that is held by the public or the characterprojected by someone or something to the public. Quality, customer service, fair price,and family oriented are a few of the many potential images a business can project. Imagehas two sides: what is being projected and what is being perceived. If a business doesnot fit the customer's self-image or does not offer to meet their needs they will goelsewhere. Image is what makes a potential customer a purchasing customer. Image ispart of a bottom line.

The process of building an image begins with the business. This creative challenge is amatter of defining the business and what and how this is to be projected to the customer.This session will feature four "levels" of image building. Participants will discover howto use sensory stimuli to transfer a desired business image, status, and state to thecustomer.

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CURRICtiLl TM DEVELOPMENT IN ENTREPRENEURSHIP

Presenters:

Dr. Charles H. DavisUniversity of Northern Iowa

Dr. Gerald E. HillsUniversity of Illinois-Chicago

Dr. D. Ray BagbyBailor University

Dr. Cathy AshmoreThe Yro State University

Di. Wayne LongUniversity of Calgary

Entrepreneurship is exploding across today's college campuses. Additionalinterest, instruction, and learning is taking place in programs at the highschool and technical training levels. However, the content of what is taughtunder the heading of "entrepreneurship" may vary significantly. For example,"free enterprise" may composes significant portion of the curriculum at ccrtaininstitutions or levels, while others may focus on the "managerial" implicationsof entrepreneurship. Still other programs may teach entrepreneurship from a"process" orientation. New text material is springing up on a variety of topicsfrom Entrepreneurial Behavior (Bird) to New Venture Strategies (Vesper).

This broad spectrum of offerings may not be unusual of newly emerging disci-plines in academe. However, it is important that as a discipline matures,general agreement or concensus emerge as to what underlying foundations exist forthe discipline and what basic curricula needs exist. This type of understandingis essential to disciplines that have relevance at a variety of educationallevels, ie: high school, technical, undergraduate, graduate.

The focus of the proposed workshop is to:

o Review the underlying conceptual foundations for entrepreneurship as anacademic discipline.

o Evaluate the theories of how the concepts of entrepreneurship can bemost effectively communicated.

o Note where commonalties exist in the curricula currently beingoffered.

o Provide insight into where leaders in the field think the field ofentrepreneurship should be headed.

From this review and discussion, hopefully a more comprehensive understand-ing of -vhere entrepreneurship is and is likely to go will be developed. Theremay even be suggestions as to likely coursework to be developed in the nearfuture, as well as P periential exercises that would aid in the ability of educa-tors to communicate entrepreneurial concepts.

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EASTERN CARIBBEAN INVESTMENT PROMOTIONSERVICE WORKSHOP

The Main Objectives of the Workshop

o To inform participants of investment opportunities in the EasternCaribbean

o To expose participants to the existence of a number of agencies andprograms in the United States which offer financial and technical supportto persons who wish to conduct business in the Eastern Caribbean

o To familiarize participants with the incentives and numerous advantagesof doing business in the Eastern Caribbean

Outline of ECIPS Workshop for

October 910:45 - 11:45 am

10:45 am Presentation of Investment Opportunities in the OECS countries:Antigua/Barbuda, Dominica, Grenada, Montserrat, St. Kitts andNevis. e,t. Lucia, St. Vincent and the Grenadines and the BritishVirgin islands

Moderator - Dr. Michelle Spain, Executive Director, MCAP, Cleveland

Panelists:

"Services ECIPS Offers to U.S. Investors and an Overview of TheEastern Caribbean Opportunities Zone"

Ms. Kathleen Tuitt, Investment Promotion Officer

"Experience of Caribbean Electronics Ltd. of Doing Business in theEastern Caribbean"

Mr. George Kimble, President, Caribbean Electronics

"Financial & Technical Assistant Services Offered by U.S.Agencies--Doing Business in the Eastern Caribbean."

Mr. Jeff Jackson, Consultant, DAC International

11:30-11:45 Question and Answers

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ENTREPRENEURSHIP EDUCATION WINNERS FROMKINDERGARTEN TO COLLEGE

Betsy Schwammberger, ChairNational Federation of Independent Business

The NFIB Foundation annually recognizes outstanding educators andprograms for their enterprise, creativity, and achievement inentrepreneurship and free enterprise education. During today's luncheonprogram, the 1989 winners from Ohio will receive their awards.Afterwards, the winners will explain their innovative programs in asession moderated by The NFIP Foundation's Manager of Education andAwards Betsy Schwammberger.

Learn more about The NFIB Foundation's Awards Program and meetthis year's winners:

Gary L. BensonPh.D.. Monu_sEntrenreneurship Chair. Youngstown StateUniversity. Youngstown. Ohio

YSU's "Secondary School Initiative" is designed to teach young peopleabout the values and benefits of the free enterprise system and therisks and rewards of entrepreneurship as a career alternative. Dr.Benson will highlight several components of this initiative: The YSUBootcamp for Teenagers, Teaching Entrepreneurship and FreeEnterprise in Secondary Schools, Young Entrepreneurs Association,and The YSU Entrepreneurs Fellows Program.

Marjorie Shapiro. Adviser. Dyke College Students in Free EnterpriseChapter. Cleveland. Ohio

Students participating in SIFE chapters bring free market economiceducation programs to others in their community. Last year, the 18members of the Dyke College SIFE team reached more than 500 gradeschool children and approximately 350 high school students. Studentteam members will explain two of their most popular programs:"Buttons for Business" stimulated grade school students to becomeentrepreneurs and "Entrepreneurship: Working for You!" wasproduced by high school students who interviewed local entrepreneurs.

Ginn y Arthurs, Chris Gidesjoanne McHenry. Therese Pflaum, and BettyWoods,Kindergarten Teachers. Greenwood Elementary School,Greensburg. Ohio

In their elementary school, 246 kindergarteners participated in asimulated business experience working in Kinder Candy Company.Economics was integrated into their daily learning experiences andinterrelated with the reading, math, language arts, social studies andscience curricula. During one week, the students produced, packaged,and distributed 4,501 packages of candy and earned a profit of$1,106.40.

Paul Theiss,Sixth Grade Teacher,___Hudson Middle achool, Huds_on, OhioEconomic concepts come to life for Mr. Theiss's sixth grade students.After an overview of micro-economic principles, his students form apizza company. They sell stock, write job descriptions, assign jobs,advertise, order materials, manufacture, sell, pay wages and taxes,declare dividends and liquidate the company. This one-week projecthas evolved from approximately $100 in sales in 1976 to nearly$10,000 in sales in 1989.

ENTREPRENEURSHIP ETHICS - A PANEL DISCUSSION

Thomas A. Ulrich, Panel Discussion ChairLoyola College in Maryland

Panelists:

W. F. (Fred) Kiesner, Loyola Marymount UniversityPeter Arlow, Youngstown State University

Thomas J. Stuhldreher, Clarion University of PennsylvaniaGeorge S. Cole, Shippensburg University

While the importance of business ethics and business social responsibilityis certainly not new, the increased public attention placed on these mattersnecessitates that all businesses, both large and small, incorporate businessethics and social responsibility into their firms' "Strategies for the 1990's."

This session will include discussions concerning the results of recentsurveys of entrepreneurs and smaller firms as well as the normative aspects ofthese issues. How do entrepreneurs and small businesses see their socialresponsibilities as compared with large organizations? What do they see as theirresponsibilities to the customer, the consumer, the community, employees, and tothe business, itself? How do entrepreneurs and small business executives viewthe recent scandals on Wall Street and those involving the Fortune 500 companies?Are entrepreneurs a new source of good business ethics? What are the strategicimplications of entrepreneurial ethics?

What is the appropriate standard by which we can judge business ethics?What is the proper place for self interest in business and other professionalpursuits? The focus on this part of the discussion is on the dichotomy betweenpublic and private morality and the implications it has on improving ethicalbehavior in general and business ethics in particular.

Business ethics should be more than a topic of casual interest toentrepreneurs. Increased understanding of business ethics provides theentrepreneur with an insight into the prospects facing growing organizations,both the entrepreneur's own firm as well as those of competitors. This part ofthe discussion will focus on the practical and strategic aspects of businessethics and demonstrate why "good ethics is good business."

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ENTREPRENEURSHIP WESTERN STYLE

Donald F. ConnellyWestern High School

William H. HamiltonPurdue University

ENTREPRENEURSHIP EDUCATION

Donald Connelly has taught entrepreneurship at Western Howard High Schoolfor three years. The presentation will detail how the courses were innovated andconducted with the aid of two grants from the Indiana Department of Education.The following objectives guided the presentation of the text and other materialsused in the course. At the conclusion of the course, the students will be ableto:

o Define the economic concepts that apply to a business venture given a unitof instruction in basic economic concepts.

o Identify economic concepts that apply to his/her proposed businessventure.

o Apply the economic concepts to his/her proposed business venture.

o Explain the economic implications of consumer demands in a modernsociety.

o Explain economic incentives which are factors that motivate and influencehuman behavior.

o Explain profit as it relates to an entrepreneur when planning a newbusiness venture.

o Demonstrate an understanding of economic principles such as supply,demand, scarcity, leverage, substitution, elasticity, time, and placeutility.

o Use economic education software to enhance economic concepts learned.

o Use integrated computer software packages with confidence including wordprocessing, spread sheets, database, and graphics programs as they applyto business plans.

o Use accounting software with confidence in his/her business plan to mabalance sheets, cash flow projections, accounts receivable, accountspayaL , income tax preparations, profit and loss statements, familyliving budgets, inventory control, employee payroll, and beginning andending inventories.

o Complete simple accounting procedures such as double entry system debitsand credits, posting entries and other procedures.

o Write a detailed business p1 a that will communicate goals to: spouse,lenders, employees, partners, customers, or stockholders.

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THE INDIVIDUAL ENTREPRENEUR: A CASE WRITING WORKSHOP

James T. ChrismanUniversity of South Carolina

William NaumesSkidmore College

This workshop is designed for experienced case writers. Cases and teachingnotes are being solicited in the following areas: Marketing, Produc-tion/Management Sciences, Finance/Accounting, and General Management. Personswith completed cases and teaching notes are encouraged to submit them for review.Cases and teaching notes will be selected according to originality, compl teness,and applicability of case to the classroom. Others are invited to attend thesessions to share comments and constructive criticisms.

This case-oriented session is intended to be an expansion and extension ofprevious efforts to develop the case methodology in the decision sciences. Theemphasis is on sharing experiences, evaluating cases, and showing the similarityin the development of case materials to field research or consulting experi-ences.

The session will emphasize round-table discussions and evaluation of casesand teaching notes. The use of cases as classroom aids and research tools willalso be stressed.

Keys to Profitability: Current Research Programs HelpingSmall Businesses Stay Viable

Helping small businesses understand the keys to profitability and successare the principles that guide the research and service activities of the panelmembers and will be the topic of discussion for this workshop. Each of the fourpanel members graduated from Oklahoma State University where they also worked asresearch assoicates in the Center for Apparel Marketing and Merchandising (CAMM).CAMM is a non-profit center established to provide assitance and expertise to thesmall business owner.

Our workshop will begin with a presentation from Dr. Linda K. Good, formerdirector of CAMM, discussing the unique concept of CAMM and how it functions toimprove the profitability of small businesses. Dr. Gond also will brieflydescribe her current research focus which is the development of a conceptualmodel measuring productivity of small firms.

In every retail organization, the purchasing of merchandise is a complex,yet fundamental daily activity. Dr. Ann E. Fairhurst will describe her researchwhich investigates the decision-making process of small firm retail buyers. Dr.Fairhurst also will discuss the results of an empirical investigation into thejob content of these small firm buyers.

In order to stay viable in todays competitive marketplace, the smallbusiness owner must understand the needs and wants of their customers. Dr.Antigone Kotsiopulos has studied and been employed in both goods and servicesmarketing orgnizations and will describe the results of her research projectsthat have lead to customer profiles for small specialty stores.

What are the marketing strategies of some successful small apparel retailfirms? How are marketing strategies related to the profitability of small firms?Which financial ratios can help small firms better understand their business?These are some of the questions that Dr. Susan S. Fiorito has investigated in herresearch program and will discuss at this workshop.

Chair and Panel Member:Dr. Susan S. FioritoAssistant ProfessorThe University of Iowa38A Macbride HallIowa City, Iowa 52242-1371(319) 335-0487/0484

Panel Members:Dr. Ann E. FairhurstAssistant ProfessorIndiana University203 Wylie HallBloomington, IN 47405(812) 335-5497/6188

Dr. Antigone KotsiopulosAssociate Professor and Merchandising Program CoordinatorColorado State UniversityFt. Collins, CO 80523(303) 491-5260

Dr. Linda K. GoodAssistant ProfessorMichigan State University204 Human EcologyEast Lansing, MI 48824-1030(517) 355-1282

Workshop Title: Michigan Business Counselor Certification Training Program

Presenter: Nancy J. GroseMichigan Small Business Development CenterAssistant Director, Program Development2727 Second AvenueDetroit, MI 48201(313) 577-4848

The major portion of the workshop will consist of an explication of both thestructure and components of the Michigan Business Counselor CertificationTraining Program. The program was designed to furnish a common base of knowledgeand skills within the Michigan Business Development Center Network, in order tofacilitate small business counseling and increase economic development in theState. The program is the first of its kind in the country.

Outline

I. Rationale for Developing the Training Program

II. Components and Implementation of the Program

A. Topics and method of presentation

1. Outlines2. Support Materials3. Video tape of counseling practice session

B. Problems encountered during pilot training

1. Adjusting for audience expertise level2. Adjusting for poorly received program content

C. Certification Project

1. Description of Certification Project2. Sample for audience review

III. Participant Evaluation of Business Counselor Training Program

IV. Questions & Answers

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MODEL ADULT AND COMMUNITY COLLEGEENTREPRENEURSHIP PROGRAMS

David Hague, ChairWisconsin Department of Voc /Tech Education

o Greenhouse - Growing New BusinessesTom BarrettClackamas Community CollegeMilwaukee, Oregon 97222

Lots of supportive listeners to hear ideas and problems of hopeful entrepre-neurs and at least two ideas that can be put to use immediately highlight eachweek of the 20 week greenhouse program. The emphasis is on useful, practical andapplicable ideas to help business owners carry out daily tasks.

The proof of the program's success is the 77 people who completed the green-house program and were still in business two years later. This program works!The business failure rate so common for new businesses seems to have beenreversed.

Business feasibility is a major ongoing theme: is there a need, is there amarket and how to communicate with that market. The sessions are tied to thethree areas for business success (records, marketing, and technical) and provideintroductory materials and worksheets for self-paced directions in the develop-ment of a business plan. Extensive use of current puolished articles that arerelevant to the local economy are used. Program completers are prepared andready for the more advanced small business management program offered by theSmall Business Development Center at Clackamas Community College.

Good networking between businesses results in thousands of dollars of busi-ness between Greenhouse participants during the 20 week program. This clientdriven program will be produced in video tape for statewide distribution. Now inits third year, the approach has been proven to such an extent, that a secondsection has been added in a rural part of the district and the original campuslocation has reached maximum enrollment.

o Small Business OperationsLynn RevoyWaukesha County Technical CollegePewaukee, Wisconsin 53072

This highly successful program .defies the conventional wisdom that says onlybrief seminars and workshops will attract entrepreneurs and small business peoplefor educational offerings. With a varied curriculum, convenient class sched-uling, experienced professional staff and thorough advance planning, WaukeshaCounty Technical College is beating the odds.

In its second year of operation, the program serves 80 individuals. Whetherplanning a business or actually operating a small business, students find practi-cal information taught by professionals working in the field. When coupled withevening and weekend schedules, the short-term (most classes are 6-18 hours)classes are designed to meet the needs of business small business people.

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A key element in the program" success is the extensive research andplanning to develop this non-credit certificate program. A series of meetingswere held throughout the district to determine interest of district residents,and a survey was mailed to former WCTC students and those who attended the meet-ings. The surveys revealed a significant need and classes were developed follow-ing extensive input from an advisory committee of small business leaders in thecommunity.

Required classes include the following:

How to Start Your Own Small Business 18 hoursMarket Research and Planning for Small Business 12 hoursTechniques in Developing a Business Plan 12 hoursTax Consequences for Small Business 6 hoursLegal Considerations for Small Business 9 hoursInsurance Considerations for Small Business 9 howPersonnel Relations for Small Business 12 hours)

and one of the following:

Bookkeepin& for Small BusinessRecordkeeping for Small BusinessMicrocomputer Applications for Small Business

36 hours36 hours36 hours

While not all individuals require tr2 ,iing in all courses, an increasingnumber of clients are graduating every semester. They are telling WCTC staffthat completing the entire program is an important personal goal for them.

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1:22

MODEL COLLEGE AND UNIVERSITY ENTREPRENEURSHIP PROGRAMS

Stuart Devlin, ChairNew Mexico State University

The USASBE Entrepreneurship Education Committee's Subcommittee on Model

College and University Entrepreneurship Programs selected two programs for

recognition in 1989;

1. The Entrepreneurship Program of the Karl Eller Center, College of

Business and Public Administration of the University of Arizona.

2. The Office for Entrepreneurship Studies, Denton Thorne Chair in

Entrepreneurship and Smaller Enterprises College of Business

Administration, University of Illinois at Chicago.

The program at the University of Arizona is privately funded. It is an

integrative effort which has enjoyed a great success and has impacted on the

entire College of Business and Public Administration. It is a yearlong 15

credit curriculum combining the strengths of the college's academic strengths

with practical experience. The high visibility and success of the program has

helped foster an entrepreneurial climate in the state of Arizona.

The University of Illinois at Chicago program is also privately funded. It

is an unusually comprehensive and innovative effort which includes a MBA

concentration in entrepreneurship, a high quality indepth program for

entrepreneurs, publishes an entrepreneurship newspaper which is distributed to

midwest campuses, reaches down to 3,000 fifth and sixth graders, and sponsors

numerous meetings d, otei to entrepreneurial issues and awareness.

Dr. Gary D. Libecap is the Director of the Karl Eller Center and Dr. Gerald

E. Hills is the Director of the Office for Entrepreneurial Studies. Dr. Hills

also is the Denton Thorne Chairholder in Entrepreneurship and Smaller

Enterprises.

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MODEL ELEMENTARY AND SECONDARYENTREPRENEURSHIP EDUCATION PROGRAMS

Doug Mahr, ChairCalifornia Department of Education

In the spring of 1989, the USASBE Entrepreneurship Education Division initi-ated a national search to identify three outstanding national models in entrepre-neurship education at the elementary and secondary levels.

This workshop will feature the program directors from each of the threeaward-winning mor3:t1s. Each will provide an overview of their creative and inno-vati entrepreneurship programs.

Carolyn Barnes, Applied Entrepreneurship Education, Carroll CountyAVEC, Carrollton, Kentucky. This national award winning program uses ashopping mall, built specifically for the entrepreneurship program, toprovide "real-life" entrepreneurial experiences.

Dr. Tom Medina, Entreprenomics, Kearny T-Yigh School, San Diego,California. This innovative program is taught in a comprehensive highschool and combines entrepreneurship and economics to meet the state'seconomics graduation requirement.

Angela Rochon, Skill Center of St. Clair County, Port Huron, Michigan.Provides entrepreneurship education to a variety of client groups usingnontraditional funding sources such as ITPA.

These programs represent the "leading edge" in innovative and creativeentrepreneurship programs for the 1990s.

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I,"

NEW STRATEGIES FOR A NEW DECADE IN ENTREPRENEURSHIP EDUCATIONby E. Edward Harris, Executive Director,

Illinois Institute for Entrepreneurship Education

The mission of the Entrepreneurship Education Division of theUnited States Association for Small Business and Entrepreneurship(USASBE) is to make entrepreneurship education a part of alleducational systems. If this.is to become a reality, there is aneed to create a national institute and policy forentrepreneurship education, which could be supportive of local,state, and regional initiatives.

The first Institute soley devoted to entrepreneurship educationis now fully operational. The Illinois Institute forEntrepreneurship Education was created by the State of IllinoisGeneral Assembly by a vote of 153 - 1 in January 1988. In 1989the state legislators appropriated $250,000 to the operation ofthe Institute for 1989-1990.

With the creation of the Illinois Institute for EntrepreneurshipEducation, the state of Illinois is the first state to create acomprehensive lifelong learning entrepreneurship educationpolicy. The Institute is a private-public entity created by theIllinois General Assembly. Its mission is to help educatecitizens in the role and contributions of entrepreneurship toeconomic development and job creation. The major purpose of theInstitute is to prepare instructional pert el and materials inthe field of entrepreneurship education.

To help the citizens understand and take advantage ofopportunities in the private enterprise system, the IllinoisInstitute for Entrepreneurship Education developed a program ofwork. The Institute will provide this program to educators andstudents at all levels to assist them to comprehend:

* The role of the entrepreneur as organizer, risk taker andcontributer to a successful quality of life;

* The need for life-long learning for those who aspire to besuccessful entrepreneurs, investors and contributingemployees:

* The ways to obtain support of entrepreneurs, businessleaders and associations, labor leaders, other educa-tional insti4-.utions and the general public for programsdesigned to Integrate practical lessons about the privateenterprise system, and entrepreneurs as important historicfigures and contributors to our quality of life.

We now need an institute for entrepreneurship education in everystate, as well as a national policy and a National Institute forEntrepreneurship Education. Hopefully, as a result, educatorswill be empowered so that entrepreneurship education can truly iotainfused throughout the total educational system.

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NURTURING THE FEMALE ENTREPRENEUR

Margaret H. SharpeUniversity of Mississippi

INDIVIDUAL ENTREPRENEURSHIP

Women are starting their own businesses at a rate of three to one over men.The proportion of all sole proprietorships operated by women, has grown fromunder 5 percent in 1972 to 26 percent in 1985. From 1980 to 1985, the number ofwomen-owned businesses increased by 47.4 percent, compared to 31 percent forbusinesses owned by men. However, as a group, they demonstrate certain tenden-cies which, in the long run, are not conductive to their long-term success.These include: starting small and staying small, clustering in labor intensive,low capitalization industries, settling for lower returns on their investmentsthan men, experiencing lower gross receipts and lower net income than businessesin general, being part-time and under-capitalized, hiring few, if any employees,and remaining almost exclusively sole proprietorships.

Between now and the year 2000, women will account for nearly 60 percent ofthe total number of people entering America's workforce. Given this numericaladvantage, it is clear that the trend of women starting their own businesses isgoing to continue to out pace that of men. Under these circumstances, nurturingwomen in visionary entrepreneurship becomes not so much a good thing to do as avital thing to do.

This workshop identifies the barriers women face as the venture into busi-ness ownership, as well as the attitudinal problems they brine with them. Itsuggests classroom and seminar/training session topics, including: OvercomingEnculturation; Conquering Math Terror; Preparing Business Plan/FinancialProjections; Thinking Big; Ambivalence About Competition; Network Isolation;Balancing Home and Work; and The Female Management Style.

Material to facilitate classroom/seminar handling of this topic will beprovided to all workshop participants. The workshop presenter is the InterimDirector of the Small Business Development Center located at the University ofMississippi. She is a small business owner, and has a total of 25 yearsexperience in business.

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L. b: , n

The OVET Program in OhioLeon Albert, State Director

This panel presentation will provide a discussion of the Ohio VeteransEntrepreneurial Training project which has been operating in Ohio since January1988. OVET is designed to provide a select group of veterans with the necessarytraining to enable them to develop new business ventures. In addition to a briefexplanation of the history of the project, the discussion will touch on thefollowing aspects of OVET:

o Ohio veteran populationo Target group served/

qualifications oo Participating organizationso Intake process/orientationo Training offered/support

services availableo Project impact/implicationso Plans for project expansion, extension

While not the first such -project of its type in the country, OVET nonethe-less has become a model project that is being replicated by states wanting toenhance their training and employment services to veterans. OVET is considered ahighly successful example of a public and private partnership formed to enhancethe economic viability of the state, as well as the individual veteran partici-pants and the communities in which they reside. Much of the project's successcan be attributed to the involvement of two-year colleges which are particularlyadept at providing short-term, focused training programs to targeted audiences.The project has focused on utilizing existing resources available for smallbusiness development and support, and has avoided duplicating services.

The OVET project had an initial goal of serving 105 Ohio veterans. Thisgoal was surpassed with a total of 123 enrolling in the program. Despite somedropouts, the program continues to enroll 85 participants from throughout thestate. Even though the training program is not completed, some program partici-pants already have started businesses, Many others are completing business plansand arranging financing for new businesses or are using their new-found knowledgeto enhance existing businesses. The outcomes anticipated from the program shouldbe extremely significant.

By featuring both the state coordinator and two of the seven campus coordi-nators, the presentation will offer statewide and local perspectives on theprogram, as well as the nuts and bolts of program operation. Veteran participa-tion on the panel will facilitate a discussion of the relevance of the trainingprogram to veterans' needs and the value of support provided each veteranthroughout his/her participation in the program. Visuals (overheads) also willbe part of the presentation.

Similar presentations have been given by the OVET State Coordinator inseveral instances. Mr. Albert has shared information about the program at aU.S. Department of Labor gathering for state employment service personnel in SanAntonio, Texas; an American Technical Education Association national conferencein Toledo, Ohio; and before 40 Ohic state legislators in a session sponsored bythe Ohio Department of Education.

Background on small business in U.S.

Project objectivesFunding for projectProject success to date

Unexpected outcomes from project

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PARTNERS IN POLICY:A First Step

Dr. R. Jerry Adams, Vice-PresidentNational Business Association, Dallas, TX

The focus of the workshop will be the development of partnerships among government,entrepreneurs, and educational systems to create a comprehensive support system forentrepreneurs and the self-employed in this country. Three computer programs will serveas examples for a model for the development of partnerships.

Life goals of government workers, entrepreneurs, and educators may be quite different fromeach other. The basic differences in purpose of life may have formed a barrier topartnerships in the past.

Government workers may view new programs for entrepreneurs in terms of how much redtape will ue necessary. They will want to know how their work loads will be increased.

Entrepreneurs may view new programs in terms of how accessing capital will be improved.They want to know how much effort will be necessary to use the program and how muchit will help the bottom line.

Educators may view new programs in terms of their models of what entrepreneurs shouldknow. They want to know that their assistance will be requested and at a time when theycan do the most good.

In addition to the differences in focus, each of the three groups may tend to view the othertwo somewhat negatively for their central focuses. Educators and entrepreneurs may notlike the government worker's focus on paperwork. Government workers and educators maynot like the entrepreneur's short term focus on the bottom line. Government workers andentrepreneurs may not like the educator's focus on concepts and models.

The NBA computer programs were developed jointly by all three groups to serve the valuesshared by all three groups. The focus of the workshop will be on development of a processof partnership at a national level.

In addition, the three programs will be shared at the workshop, using a computer screenprojector. Participants of the workshop will receive free copies of the three computerprograms: [1] First Step Review' for Business Loans (provides a quick and simpleevaluation of readiness for a loan); [2] Direct Step'' Operating Plan Forecast (provides a oneyear cash flow projection); and [3] Direct Step'' Cash Flow Analysis (analyzes cacti flow).

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A RESEARCH PERSPECTIVETM INFLUENCE & STATUS OFFEMALE ENTREPRENEURS IN THE 1990'S

Dorothy P. Moore, Chair and Coordinator

A careful analysis of the literature on entrepreneurship suggests that onlyrecently have studies of the female entrepreneur treated her needs,characteristics, and attributes separately from those of male entrepreneurs.This panel presentation will examine past weaknesses in research on the femaleentrepreneur and highlight areas which need study and suggest appropriateresearch methods. A special applied focus of the workshop will be on the impactof role modeling and decisions impacting upon startup capital.

Panelist Topics and Presentors:

Loan Officer Decisions for Start -Up Capital

E. Holly ButtnerDepartment of Management and MarketingJoseph M. Bryan School of Business and EconomicsUniversity of North Carolina at GreensboroGreensboro, NC 27412-5001

Role Model Influences on Female Entrepreneurs

Janet S. AdamsDepartment of Management and MarketingP.O. Box 444Kennesaw State CollegeMarietta, GA 30061

Research Opportunities in Female Entrepreneurship--New Approaches

Dorothy P. MooreDepartment of Business AdministrationThe CitadelCharleston, South Carolina 29409

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I L 9

STRUCTURING FOR CORPORATE VENTURING

Charles W. Hofer, Workshop ChairUniversity of Georgia

Diana L. Day, PresentorWharton School

Diana Day will discuss how firms should be structured to enhance innovation.She will define invention and innovation and develop hypotheses about theirrelationship with size, centrality, autonomy, and sponsorship. Her study using adatabase of 123 corporate ventures will be described. A question and answersession led by Chuck Hofer, will follow.

The major focus of this study is, "How can organizations become more innova-tive through either structure or process? The issue of innovation dates back toSchumpeter's (1934) arguments. Schumpeter theorized that economic development isdependent on innovation and innovation requires sufficient organization size.More recently, however, the drive to optimize innovation has spurred interest inan emerging organizational form, the new corporate venture (Fast, 1979; Fast &Pratt, 1981), as well as its underlying process called corporate entrepreneur-ship. (See Schollhammer, 1982, and MacMillan, 1985 for reviews of this subject.)Previous research on this subject has suggested hypotheses on optimal size forinnovation, optimal location for innovation (i.e., skunk works versus within thecurrent divisional structure), and optimal support for innovation. As yet,however, corporate entrepreneurship research is so new that most of this researchhas been based on small sample sizes (e.g., Burgelman, 1983) and/or the con-sulting projects of experts (e.g., Kanter, 1983; Pinchot, 1985) and most of theseresearch projects have taken place in one, or at most, a handful of firms. Whatis needed now is to move beyond these valuable developmental efforts to test someof the theoretical notions suggested from these works in a more deductive mannerusing the typical statistically-based empirica: study.

In this study, we attempt to answer the question, "How should firms bestructured to enhance innovation?" To answer this question, we: 1) define twokey terms...technological invention and innovation; 2) review the relevantliterature in organization theory on innovation and organization design todevelop hypotheses about the relationship between invention and innovation andsize, centrality, autonomy, and sponsorship; and 3) empirically test thesehypotheses generated in step two. The study will use a database of 123 corporateventures from 102 different Fortune 500 firms to test the hypotheses.

133

USASBE Cleveland Conference Outline

Valuemetrics. Inc.James P. O'Brien, Chairperson

Robert Nichols, Participant

VALUATION OF CLOSELY HELD CORPORATIONS

Wednesday, October 11, 1989

1. General Considerations

a. What is Value?

b. Value from different perspectives

c. Myths about value

2. Stakeholders who are concerned about value

a. Shareholders

b. The Banking Community

c. Governmental Agencies

3. Valuation Methodologies

a. Capitalized Earnings

b. Discounted Cash Flow

c. Public Comparables

d. Merger and Acquisition

e. Asset Liquidation

4. Distribution of Shareholder Value

a. Discount for Lack of Marketability

b. Premium for Control

c. Preferred Stock

d. Stock Options

e. Warrants

f. Voting / Nonvoting Common Stock

134

THE OHIO

VENTURES IN BUSINESS OWNERSHIP

PROJECT

Sonia PriceAssociate DirectorDivision of Vocational

and Career EducationOhio Department of Education65 S. Front StreetColumbus, Ohio 43266-0308614-466-3430

Starting your own small business is a dream that can become a reality foranyone in the United States. However, a great number of people do not know howto get past the dream.

Ventures in Business Ownership (VBO) is a program to help single parents andhomemakers become self-employed. It is sponsored by the Ohio Division ofVocational and Career Education in the belief that there are a number of peoplein this particular target group who need help in making business ownership dreamscome true. This audience is specially in need of assistance in findingemployment that can be adjusted to their home responsibilities. They are oftenamong the lowest paid workers because of their lack of career experience. Thispilot program seeks to discover whether a reasonable number of single parents andhomemakers can become more independent and financially secure by starting abusiness. And further, it is assumed that others who do not start a business maylearn more about the economy of the community and their employmentoptions.

In its third year of development, there are eight different full serviceadult centrs in Ohio offering the program. Existing materials (PAM and Beyonda Dream) developed by the Center on Education and Training for Employment, TheOhio State University, were adapted by the local women business owners chosen asinstructors at each site. The program features use of a state, and localadvisory committees that provide important partnerships with the community. TheCenter provided technical assistance to the sites.

135

-32

WOMEN IN BUSINESS: MEETING TIM CHALLENGE

Joan Gillman, DirectorSmall Business Development Center

905 University AvenueMadison, WI 53715

USASBE divisions for which this workshop is focused: Small Business, Individual Entrepreneurship.

This workshop features a video of four Wisconsin women who own and operate their own businesses:They describe their credit problems, negative stereotypes, isolation from "old boy" networks andfamily adjustments.

Successfully starting and running a business is difficult for both men and women. Society'sattitudes regarding what roles are "appropriate" for women in business add barriers that men inbusiness do not face.

The video has a companion handbook. The premise of the SBDC video, "Women in Business: Meetingthe Challenge" and the SBDC handbook "Overcoming Barriers and Building Upon Strengths" is there areeight barriers which often concern women business owners. The barriers are:

* Difficulty obtaining credit. Women business owners who participated in a U.S. Department ofCommerce survey said that the most frequent barrier they have encountered in their work has beenthe reluctance of some members of the financial community to consider women good credit risks.

* Limited exposure to math and science. Many women have been brought up to believe that beingfinancially sophisticated is unfeminine.

* Societal biases. It's hard for business women to be taken seriously. One study found thatwomen in business are widely considered to be dabblers, hobbyists or set up in business by theirhusbands to have fun.

* Not thinking big enough. After being socialized to be cautious and avoid risks and dangers,many women are apt to set their business sights too low. In addition, they're oftenundercapitalized and may not project the strongest image to lenders and investors.

* Ambivalence about being the competitive, profit-oriented deal-maker. This ambivalence can leadwomen to undervalue themselves and their services or products in the marketplace, which can havea negative impact upon marketing and sales.

* Isolation from business networks. Since most women have not been a part of the "old boy'sclub", women have to look a little harder for access to an informal information sharing system.

* Balancing hon e and work roles. Many women experience exhaustion and stress when they try tojuggle their home and work responsibilities.

* Developing a management style. As a study by Charlotte Taylor noted, given their socialization,women in particular may need to develop confidence in their leadership ability and theirmanagement skills.

136

USASBE

CONSTITUTION

AND

BYLAWS

().-i.

44,) 14

September 1911

CONSTITUTION

UNITED STATES ASSOCIATION FOR SMALL BUSINESS AND IMPSEPREKSUNSNIPiUSASell

Article I. Name of the Organization

The name of this non-profit organization shall be the "United

States Association for Small Business and entrepreneurship 1USASB11)."

an efiliate of the International Council for Small Business.

Article II, Purim*, of the Orgntzatioq

USASSI is devoted to stimulating and improving management of the

small business sector of the United States of America. Its mission is

to advance management development practices for entrepreneurs and

business meets through education, research, and conferences. USASSEis specifically dedicated to:

I. Improving management knowledge, techniques end skills of

smell business and entrepreneurship thrchighout the United

States of America.

2. Developing an understanding of small business and

entrepreneurship in order to promote a continuing method for

the free exchange of expertise.

3. Cooperating with the various governmental Institutions

dedicated to the improvement of small business and

entrepreneurship.

4. Publishing materials to add to the knowledge and expertise

of its membership and other interested persons.

S. Providing conferences wherein manners and others can join

together to teach and learn.

6. Stimulating people, institutions and private businesses to

become leaders in the development. dissemination and

implementation of sound business practices.

I 35

Article II! Membership

USASSe shall have four classes of membership: Individual,

Student, Organisation, and Contributtizg. General requirements for all

memberships and specific requirements for each of theme four classea

are specified in the bylaws.

Article /V, Organisational Structure

Section 1. Officers. The elected officers of USASSE shall be:

President: President-Elect, Immediate Past President; Vice President.

Programer Vice President, Spaeth' Programs: Vice President,

Publications: Vice President, Finance; Vice Prallident, Development:

Vice President. Membership: Vice President. Research: and six Vice

Presidents for Professional Divisions. An appointed officer of Usualshall be the Snecutive Director. Additional Vice Presidents for

Professional Divisions may be elected as new divisions are initiated.

Section 2. Board of Director'. The Board of Directors shall

regulate the operations of MASSE. The Board of Directors shall

consist of the elected offic,14.

loctton 3. Tenure at Officer,. The tenure of officers shall

coinci6e with the Annual Meeting.

k. Executive Officers. 11m President. President-Elect, am% the

Immediate Past President shall serve term of one year.

The Snacetive Director may be appointed for an indefinite

tern.

P. Function Officers. The Vice President. Programs shall serve

one-year term. The Vice Presidents of Special Procralse,

Sezawirdh, Publications, Finance. Development and Membership

shall serve two-year tern. The vrce Presidents of

Publications. Finance and Membership shall be elected in the

some year with the Vice Presidents of R h, Special

P rograms and Development being elected it the following

year.

USASSE Constitution Page 2

C. Professional Division Officers. The Vice Presidents of the

Professional Divisions shall serve one-year terms.D. Eligibility for Office. Only members in good standing shall

be eligible for office. No officer shall be eligible for

more than one election to the same office, bur after the

lapse of one year may again be naminated for the sameoffice.

E. Officer Vacancies. If an elected officer i unable to

complete his/her term in office, the Board of Directors mayappoint someone to complete the unexpired term.

Section 4. Nominating Procedure. Nominating procedures for

E xecutive officers and Function Officers are specified below.

N ominating procedures for Professional Division Officers are specifiedin the Bylaws.

A. The Nominating Committee for Executive Officers and Function

Officers shall consist of the Immediate Past President as

Chair; Presidents President-elect; and two members-at-large

from the members of USASBE.

S. The Nominating Committee shall nominate oificers as

specified in the Bylaws.

hlilsisALP"aswEt1991Section 3. Formation, of Divisions. Professional Divisions of

USASBE may be formed subject to approval of the Board of rtrectors andrequirements expressed in the Bylaws.

Sectior. In all matters pertainingto the implementation of the Constitution and Bylaws, Professional

Division Vice Presidents are responsible to the President-elect. Thisincludes all matters related to the use of USASBE's name and to majorgoals and policies of USASBE.

Article VI. Rules of Procedure

The rules contained in Robert's Rules of Ordff (Revised) shall

govern USASBE in its meetings in all cases where they are applicable

and where they are not inconsistent with the Constitution and Bylaws.

USASBE Constitution Page I

Article VII. Bylaws.

Section 1. Conduct of USASBE Business. The conduct of USASBE'sbusiness shall be governed by the Bylaws.

Section 2. Provisions of Bylaws. The provisions of the Bylawsshall not conflict with the provisions of this Constitution, fromwhich they derive their authority.

Article VIII. Constitutional Amendments

Section 1. Proposals. Amendments to this Constitution may be

proposed by either: (a) a vote of two-thirds of the Board of

Directors, or (b) a written request from 25 members in good standingthat the Board of Directors authorize a. ballot on proposedamendment(s).

Section 2. Ballot. This Constitution may be amended at any timeby a two-thirds plurality of the ballots returned. However, no

amendment shall be considered to be adopted unless fifteen percent(15%) of the members in good standing have voted. This vote shall betaken by mail ballot, under conditions that will insure the secrecyand accuracy of the vote.

Any proposals to amend this Constitution most be submitted to the

members at least forty-five (45) days before the closing date of theballot. A report of the results of the ballot most be made at thenext annual meeting of USASBE.

USASBE Constitution Page

BYLAWSuNITED STATES ASSOCIATION FOR SMALL BUSINESS AND ENTRRPRENEURSHIP

it' ni)

Article I. Nembership Requirements

Section 1. Qualifications. Any individual or organisation subscribing.

to the purposes and objectives of USASBE shall to eligible for membership.

Section 2. Classes of Membership. USASBE shall have four cl

membership: Individual, Student, Organisation and Contributing.

A. Individual. This class includes, but is pot limited to, such

persons as educators, owner-manager, entrepreneurs, government

employsea and other management assistance professionals.

B. Student. This class Includes students at U.S. institutions of

higher education.

C. Organisation. This class includes, but is not limited to,

universities, colleges, government.agencies, professional and trade

associations, chambers of ommerce, and consulting firma which

subscribe to the purposes end objectives of USASBI and wish to lend

support to USASBE. Each organization member shall be permitted to

designate no more than two members who shall be entitled to all

privileges and benefits of individual membership. Only the

designated members shall receive the regular publications of

MUMD. Contributing. This class shall include any individuals who elect

to become contributing members.

4C, Section 3. Admission to membership. Application for membership shall

be filed with the Executive Director. Admission to membership shalt be

granted to U.S. residents and U.S. organisations upon receipt of a written

application and one year's dues in advance.

uncle II. 'rtganization Structure

Section 1. Board of Directors. The membership and authority of the

Board of Directors is set forth in the Constitution.

A. peqular meetings. The President shall call regular wettings of the

Board of Directors. He /she shall set the agenda. Notice of all

USASBE BYLAWS Page 1

tegulat meetings shall be gtvcn at least thirty (10) days ...tore -

meeting is held.

E. Special Meetings. The President shall call special esatings at ti

request of any title* (3) Board members with no less than seven (7)

days notice before the meeting.

Section 2, Executive Officers. The elected executive officers of

USASBI shall be the President, President-elect, Immediate Past President,

and the appoints' executive officer shall be the Executive Director.

A. president. The president shall:

1. Chair the Board of Directors' meetings.

2. Be the chief executive officer of USASBE

3. Be responsible for the conduct of USASBE'S activities in a

manner that will assure the accomplishment of USASBE's

objectives, subject to the provisions of the Constitution and

Bylaws, and the concurrence of the Board in matters of policy.

a. Preside at all meetings of USASBE but may delegate the

responsibility to the President-elect.

S. In the absence or disability of the Vice President of Finance,

sign or endorse checks, drafts and notes.

B. Appoint an independent auditor annua);!:.

7. Present a report on the status and progress of USASBE at its

annual meeting.

E. president-elect. The President-elect sballr

1. Succeed the current President at the termination of the

President's year in office.

2. Act for the President in the case of the President's absence c

disability or when delegated the responsibility by the

President.

3. Coordinate the operations of the Professional Division Vice

Presidents.

a. Perform such duties as may be assigned by the President or by

the Bylaws.

USASBI BYLAWS Page 2

C. Imme4lete Past president. The Immediate Past President shall:1. Serve as tho Chair of the Nominating Committee.2. Serve as the Chair of the ?allow; Committee.3. Serve as the Chair of the Awards Committee.4. Perform such duties as may be assigned by the President or the

Bylaws.

D. Wiecutive Director. The 'agouties Director shall be appointed

tbe president, with the advice and consent of the Board of

Directors, every third year, so as to provide continuity in theoffice. The Executive Director shall:

1. Seep and distribute urinates of hoard of Directors' :ratings andall business meetings of MASS'.

2. Distribute ballots, tabulate returns, and notify all officersof their election.

3. Sign, with the President, all contracts and other instrumentswhen so authorised in accordance with the Constitution andBylaws of MASS'.

4. Be the custodian of all membership records.

S. Process all inquiries and applications for membership andcollect dues.

G. Maintain a current and accurate nembership roster.xr 7. Be bonded is sufficient and adequate amount for the protectionN.) of WASS'.

I. Perform such other duties as say be assigned by the President.r the Bylaws.

Section 3_, function officers. The function officers of MAWR shallbe the Vice president, Programs; Vice President, Special Programs; VicePresident, Issoasch, Vice President, finance; Vice President. Development;and Vice President. Membership.

A. Vice President, Programs. The Vice President, Programs shall:1. Act as Program Chair of the Annual Meeting.

2. Establish and conduct regirnal MASH" meetings.3. Direct and maintain the site selection committee.

by

OSUMI BYLAWSPage 3

4. Perform such other duties as may he assigned by the President

or these Bylaws.

S. Vice_llesident, Spaciel Programq. The Vice President, SpecialPrograms shall:

1. Act as Program Chair of the Annual Meeting of the Intern/mimeCouncil for Small Business when it is held is the gaited

States.

2. Direct the implementation of special programs (mamate,

symposia, etc.)

3. Maintain liaises with the Senior Vice President, Programs,International Council for BB-al Business.

4. perform such other duties as may be assigned by the Presidentor these Bylaws.

C. Vice President. Publications. The Vice President, Publicationssnail:

1. Nave responsibility for all publications of "SASE" (e.g.,

journals, monographs, affiliate newsletter, etc.)2. Maintain Liaison with Senior Vice President, Publications of

the International Council for Small Business.

3. Perform such other duties as may LA assigned by the Presidentor these Bylaws.

D. Vice President. finance. The Vice President, Vintners shall:1. Be responsible for the budget, accounting, financial analyses,

and projections of revenues and expenses.

2. Maintain liaison with Senior Vine President, finance of theInternational Council for Small Business.

3. Maintain up-to-date copies of the Constitution and Bylaws.. Perform such other fiscally related matters as may be assigned

by the President or these Bylaws.

I. Vice President, Development. The Vice President, Developmentshall:

1. Obtain foundation and corporate support for WASS'.2. Maintain liaison with the Vice President, Membership in

obtaining organisation and contributing members for DSASBI.

WASS* BYLAWS Page 4

I -.

3 Maintain liaison with Senior Vice President, Development of the

International Council for Small Business.

. Perform such other duties as may be assigned by the President

or three Bylaws.

F. Vice President. Membership. The Vice President, Membership shells

1. Develop national membership network to expand the membership

of MASSE.

2. Provide direction for mastership growth in all clap' of

membership.

3. Perform such other duties as may be assigned by the -resident

or these Bylaws.

G. Vice !resident. Research. The Vice President, Research shall*

1. Be respossible for escousaging, accepting and approving

research activity with USASIIK.

2. Perform such other duties as may be assigned by the !rapidest

or these Itylaws.

Section .__Professionsl Division Officers. Each Professional Division

shale be chaired by Vice President, who is elected by the members of

his/her division.

A. Vice President, professional Division. Each Vice President of

Professional Division shell*

1. Chair the Division's meetings.

2. Be the chief executive officer of the Division.

3. be responsible for :he operations of the Division, including

such items as membership, programs for the Annual Meeting,

Division newsletter, research, and finance.

4. Report to he President -elect for coordination of operations.

5. Provide liaison with the Function Vice Presidents.

deCtion 5. Appointments. The President, with concurrence of the Hoard

of Directors, shall appoint Director of Placement, an Historian,

NEWSLETTER Editor, and PROCEEDINGS Editor. The Director of Placement and

the Historian will report directly to the Boar" of Directors at the Annual

Meeting. The NEWSLETTER Editor will report t4 the Vice President of

Publications, and the PROCEEDINGS Editor will report to the Vice President,

Programs.

F-1

GSASBE BYLAWS Page 5

A. Terms of Office. Terms of office shall not exceed three years,

except in the case of the Historian, who may be reappointed.

B. Operations. The incumbents shall be responsible for budget,

staffing, and administration of their respective operations.

C. Selection. At least one year prior to the completion of the term

of office, the President will appoint a search committee to obtain

candidates for each of the positions. Atter the search

committeals') rep:arils), the President, with the concurrence of th

Board of Directors, will announce the associate appointments.

After one year of satisfactory service, the associates become the

primary appointees.

Jirticle III. Elections

Section 1. Nominating Committee: The Nominating Committee was

detailed in the Constitution for Executive Officers and Function Officers.

Section 2. Nominations. The Nominating Committee shall nominate

annually one or more persons for each Executive Officer and Function

Officer position. However, there shall be no nomination for the President

since that position is automatically filled by the President-elect.

Section 3, Election. Al: elections, including those for the

Professional Divisions, shall by by mail ballot. Election ballots shall t

mailed by the ftecutive Director to all members three months prior to the

e nd of the fiscal year. Ballots must be received within sixtyliOl days of

the mailing date to be counted for purposes of election. A majority vote

of those members eligible and voting stc:'1 elect.

Section 4. Professional DIVision elections. Professional Division

e lections will be held within each Division. Only members of the Division

will be eligible to vote for the officers of the Division which include, a

minimum, Vioe President-elect and Program Chair. The Vice President-

e lect will become .he Vice President of the Division the following year.

Nominating procedures for Professional Division elections should be

congruent with those for executive Officers and Function Officers.

Section 5. Nosificatimof Election Results. All nominees will be

notified of the results of the election by the Executive Director. USASBF

members will be notified at the Annual Meeting of the election results.

USASSE BYLAWS Page

Article IV. Committee Structure

Section I. Standing Committees. The President shall be assisted in

policy formulation and the operation of USAS143 by such standing committees

as arc authorised in the Bylaws. These committees perform such duties as

are specified in the Bylaws under the immediate dlrLion of a chair or by

the President. The standing committees include.

A. budget Committee. The Budget committee shall be composed of: Vice

President, Finance (Chair); President; President-elect; and

executive Director. This lommittee is charged with developing

budgetary recommendations for each new fiscal year. These

recommendations must be acted on by the Board of Directors before

the end of the Annual Meeting. The Vice President, Finance, is

bound by these budget amounts, except that, for flexibilitl during

the year, the President may vary accounts by not more than ten

percent (10%), sub, .A to subsequent review by the /Ward of

Directors. Amounts varying by more than ten percent (10%) must

have the prior approval of the board of Directors.

S. Professional Division Review Committee. The Professional Division

Review Committee shall be composed of the President-elect, one

former officer, and one representative from the general membership.

No more than one committee member can be from a division under

review in a given year.

C. Membership Caxittee. The Vice President. Membership shall appoint

the members of the Membership Committee with the concurrence of the

President.

D. Nominating Committee. See the Constitutpm.

B. Pram Committee. The Vine President, Programs shall chair the

Program Committee for the Annual Meeting.

F. Special programs Committee. The Vice President, Special Programs,

shall chair the Program Committee for the International Council for

Small Business when it is held in the United States. .

O. Site Selection committer. The previous Vice President. Programs

el 'I serve as Chair. The Other two members of the Committee are

the current Vice President, Programs and one member of the Board of

USASIOL BYLAWS Page 7

1 e'

Directors. The Committee shall 'commend sites to the Board of

Directors for the Annual Meeting.

H. Audit Committee. Three members appointed by the President with th

concurrence of the Board of trectors. The executive Director and

Vice President, Finance are not eligible to serve.

Section 2. Special Committees. The President may appoint, with the

advice of the Board of Directors, such special committees and task forces

as he/she may believe are necessary. The life of all such committees shal

expire with the completion of the specified assignment or at the end of th

current fit al year.

Section 3. President and Committees. The President shall be ex

officio a member of all committees, unless otherwise noted. The President

shall appoint members of committees unless otherwise designated in the

Constitution and Bylaws.

Article V. Professional Diiisions

Section 1. Operations. All Professional Divisions shall be subject t

set of policies which help Divisions develop their own individual

programs but which at the same time prevent one Division from conflicting

with other Divisions or with other parts of USASBL. These policies shall

be set forth in a Professional Divisions Policy Statement. Any change to

the Professional Divisions Policy Statement must be adopted by a two-third

vote of the Board of Directors.

Section 2. Coordination with Other Divillons. Professional Division

Vice Presidents report to the President-elect for purposes of coordination

and the implementation of the Constitution and Bylaws.

Section 3. Periodic Review of Divisions. each year, the President

shall appoint a committee to review the status of existing Divisions. fro

composition of the Committee, see Article /V.) The Committee will review

the activities and contributions of at least one Division each year,

selected so that every Division will be reviewed once every five years. 1

preparation for such review, the Division Vice President will submit to th

Committee a written report, including a summary of substantive activities

relative to Annual Meeting programs, Divisions membership, contributions t

the field of small business and entrepreneurship, and unique elements of

Division focus. The Committee will then recommend continuatioa, merger, c

USASIII BYLAWS Page

significant changes in practice to the Board of Diicctors at a mid-year

seating. These recommendations will be based upon the quality of Division

programa, member interest and involvement, and responsiveness of Division

officers to USASBE adc.nistrative responsibilities.

If tan percent (10%) of USASBE members sign petition requesting new

Division. the Board of Directors will consider whether such a Division

should be established. A decision will be made on the same criteria as

outlined above.

Article VI. Fellows of the U.S.A. Affiliate

The Fellows Program of USASBE is chaired by the immediate Past

President. The Program is intended to reward mashers for outstanding

contributions to the field of small business and entrepreneurship and to

USASBE.

Article VII. Archives of USASBE

The Archive. of USASBE will be established and maintained at an

appropriate setting, approved by the Board of Director.. and maintained by

the Ristorian.

Article VIII, Fiscal Year

The fiscal year of USASBE shall be set by the Board of Directors.

Article IX. Dues

The annual dues of the various classes of memberahip shall be set by

the Board of Directors. A member more than three months in arrears in

payment of dues may be dropped from USASBE membership.

Article X, Annual meeting

USASBE shall holy', at least one business booting each year. unless

prevented by national emergency. Twenty -five 125) of those members

officially registered at the Annual Meeting as present and in good standing

shall constitute quorum of all business meetings of IMAM.

Amendments of the Bylaws shall be by majority vote of ballots returned

through a mall ballot sponsored by the Board of Directors.

I'SASBE BYLAWS Page 9

USA

For more information about USASBE contact:

Joan GillmanExecutive Secretary

University of Wisconsin Madison905 University Avenue

MoJison, Wisconsin 53706608-20-9982

ED 311 297 CE 053 399 AUTHOR Ashmore, M. Catherine, Ed ...DOCUMENT RESUME. ED 311 297 CE 053 399....

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Transcript of ED 311 297 CE 053 399 AUTHOR Ashmore, M. Catherine, Ed ...DOCUMENT RESUME. ED 311 297 CE 053 399....