This is the first chapter of the new 2010 Guide to Kansas Small Business Issues.  This is the 8th year that the Guide has been published by Kansas small business groups.  The entire guide can be downloaded on the main page of KsSmallBiz.com. 

“Entrepreneurs rightly command enormous respect, and their contributions to the U.S. economy are followed by academics and policymakers alike.  Economic development officials must decide whether to focus their resources on attracting large firms or to devote their energies toward growing the small businesses they already have.”  -- Chad Moutray, SBA Chief Economist & Director of Research in “The Small Business Economy – A Report to the President”, December 2006.

Sources of Kansas Job Growth

A study on job growth by Dr. Art Hall of the K.U. Center for Applied Economics sheds a very interesting light on whether it is better to focus economic development resources on attracting large firms versus nurturing startups and growth of existing businesses. 

• For the 15-year period from 1990 through 2004, only 3.2% of new jobs created in Kansas were created by companies moving into Kansas from outside the state.
• Expansions of existing Kansas businesses accounted for 39.8% of the new jobs, while new start-up businesses accounted for 57.0%.  

Looking at jobs gained versus jobs lost in each of the three categories, an equally interesting picture emerges:

• Move-ins minus move-outs accounted for 20,989 or 19.15% of the 109,591 net jobs gained over the 15 years.
• Expansions minus contractions of existing firms accounted for a gain of 52,799 or 48.18% of net gains.
• Firm births minus firm deaths accounted for 35,803 or 32.67% of net gains.

“The Entrepreneurial Imperative”

Carl J. Schramm, President of the Kauffman Foundation, published the book “The Entrepreneurial Imperative” in the fall of 2006 . It studiously lays out the importance of small business and entrepreneurship to the U.S.  Some quotes from the book concerning competing in the world economy:

• “Technology isn’t the answer, since everyone now either has the same technology or can easily obtain it.”

• “Education will not keep us out in front.  Many parts of the world surpass the U.S. in teaching skills needed for the future.” 

• “…we have largely given up when it comes to basic manufacturing because we simply can’t compete globally on price…when it comes to manufacturing, we must become entrepreneurial.”

• “It is true we have possessed a substantial edge in finance, but the fact is that all capital markets are now global…”

• “The message of this book is simple:  Entrepreneurship is America’s comparative advantage, and we need to exploit it fully both at home and abroad.”

• “Encouraging, managing, and supporting an entrepreneurial economy is central to our place in the world going forward.”

• “Entrepreneurship is not only an integral part of our genius but also the only uniquely American resource at our disposal and we must exploit it fully.”

Schramm’s definition of an entrepreneur is “one who undertakes personal economic risk to create a new organization that will exploit a new technology or innovative process that generates value to others.” 

Others would keep it simpler, describing an entrepreneur as “one who undertakes personal economic risk to create a new business.” To them, the man or woman who buys a garbage truck to serve an area that was previously underserved is a classic entrepreneur.  No new technology or innovative processes are needed.  Generating value to others is all that is required.  The genius is in the recognition that a need exists.

Colleges Focusing On Entrepreneurship

In 1986, only 586 colleges offered courses in small business management or entrepreneurship.  By 1992, the number had nearly tripled.  Today, the number has increased to approximately 1600 two- and four-year colleges . 

Rural High Growth Entrepreneurs

A North Carolina study  of 1000 rural entrepreneurs whose firms have doubled either their sales or their employment in three years shows the following:

• They tend to have more education than the general population.
• They tend to be “bootstrappers”, building their businesses themselves.
• They are very optimistic about their businesses.
• They have been in business an average of 15 years.
• They focus strongly on specific business goals and measurements.