Location Does Matter: Entrepreneurs Create Economic Growth Across State and County Lines

Entrepreneurial activity in one U.S. county or state
often reflects similar activity in neighboring jurisdictions, according to an
analysis of geographic and other patterns in new business formation across
the United States. The study, New Business Clustering in U.S. Counties, 1990-
2006, by Larry A. Plummer,( http://www.sba.gov/advo/research/rs360tot.pdf)
sheds light on business activity related to levels of education, industry,
economic growth patterns, and geography. The report uses 1990-2006
business startup and closure data from the Census Bureau’s Statistics of U.S.
Businesses.

“State and local policymakers are continually looking for ways to generate
new businesses, industries, jobs, and economic activity,” said Acting Chief
Counsel for Advocacy Susan M. Walthall. “The big question is always how and
where new businesses are most likely to grow. This research provides some
important clues to the relationships between business startups and various
underlying factors in industries and across counties and states in the United
States.”

The study offers a number of insights about new business clusters, among
them:

* As expected, populous counties—Los Angeles, Cook (Chicago), and New
York—have the highest levels of entrepreneurial activity.

* The nation’s interior and northwestern counties—especially in states like
Colorado, Utah, and Washington—tend to have the highest firm birth rates and
levels of entrepreneurial activity.

* Retail trade has the highest rate of new firm births, followed by local
market industries.

* High technology is the only industry sector specifically favored in counties
with access to an educated workforce and a local research and development
structure.

* New startup rates in high technology are tied to startup rates in business
services, an indication that business service firms may form in response to high
tech entrepreneurial activity.

* Higher unemployment is correlated with higher firm birth rates except in
the business services industries—an indication that business service firms
depend on the success of other firms.

The Office of Advocacy, the “small business watchdog” of the federal
government, examines the role and status of small business in the economy
and independently represents the views of small businesses to federal
agencies, Congress, and the President. It is the source for small business
statistics presented in user-friendly formats, and it funds research into small
business issues.

For more information and a complete copy of the report, visit the Office of
Advocacy website at http://www.sba.gov/advo.

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The Office of Advocacy of the U.S. Small Business Administration (SBA) is an
independent voice for small business within the federal government. The
presidentially appointed Chief Counsel for Advocacy advances the views,
concerns, and interests of small business before Congress, the White House,
federal agencies, federal courts, and state policymakers. For more
information, visit http://www.sba.gov/advo, or call (202) 205-6533.