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Report: Women Business Owners Face Gap in Lending, Federal Contracts

August 15, 2014 Comments off

Report: Women Business Owners Face Gap in Lending, Federal Contracts
Source: U.S. Senate Committee on Small Business and Entrepreneurship

Women-owned businesses are a $3 trillion economic force and support 23 million jobs but still face significant barriers compared to their male-owned counterparts when it comes to obtaining loans and growing their businesses, according to a report released today by U.S. Senator Maria Cantwell (D-WA), Chairwoman of the Senate Committee on Small Business and Entrepreneurship.

Women entrepreneurs account for just $1 out of every $23 in small business lending, despite representing 30 percent of all small companies. Women also are more likely to be turned down for loans or receive less favorable terms than men, according to the report.

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Seeking the Roots of Entrepreneurship: Insights from Behavioral Economics

August 14, 2014 Comments off

Seeking the Roots of Entrepreneurship: Insights from Behavioral Economics (PDF)
Source: Journal of Economic Perspectives

There is a growing body of evidence that many entrepreneurs seem to enter and persist in entrepreneurship despite earning low risk-adjusted returns. This has lead to attempts to provide explanations-using both standard economic theory and behavioral economics-for why certain individuals may be attracted to such an apparently unprofitable activity. Drawing on research in behavioral economics, in the sections that follow, we review three sets of possible interpretations for understanding the empirical facts related to the entry into, and persistence in, entrepreneurship. Differences in risk aversion provide a plausible and intuitive interpretation of entrepreneurial activity. In addition, a growing literature has begun to highlight the potential importance of overconfidence in driving entrepreneurial outcomes. Such a mechanism may appear at face value to work like a lower level of risk aversion, but there are clear conceptual differences-in particular, overconfidence likely arises from behavioral biases and misperceptions of probability distributions. Finally, nonpecuniary taste-based factors may be important in motivating both the decisions to enter into and to persist in entrepreneurship.

Report: Women Business Owners Face Gap in Lending, Federal Contracts

August 11, 2014 Comments off

Report: Women Business Owners Face Gap in Lending, Federal Contracts
Source: U.S. Senate Committee on Small Business and Entrepreneurship

Women-owned businesses are a $3 trillion economic force and support 23 million jobs but still face significant barriers compared to their male-owned counterparts when it comes to obtaining loans and growing their businesses, according to a report released today by U.S. Senator Maria Cantwell (D-WA), Chairwoman of the Senate Committee on Small Business and Entrepreneurship.

Women entrepreneurs account for just $1 out of every $23 in small business lending, despite representing 30 percent of all small companies. Women also are more likely to be turned down for loans or receive less favorable terms than men, according to the report.

Creating growth clusters: What role for local government?

August 6, 2014 Comments off

Creating growth clusters: What role for local government?
Source: McKinsey & Company

Many governments in industrialized countries aim to encourage entrepreneurship and start-up activity to spur job creation and economic growth. To what extent governments are capable of doing so is uncertain. Nonetheless, policy makers at the regional and municipal levels are closer to the sources of innovation than those at the national level. For example, innovation in the form of start-up activity tends to occur in large metropolitan areas, initially without the involvement of policy makers. Take Berlin, where a vibrant ecosystem developed in the past several years without systematic government intervention.

While an enabling policy context might not be a precondition for seeding entrepreneurial activity, it may become more critical when taking a cluster to scale. To flourish, entrepreneurial activity requires a concentration of talent, infrastructure, capital, and networks—key success factors of a start-up ecosystem, as epitomized by Silicon Valley. Not all economic-policy instruments aimed at nurturing start-ups are at the city level. Still, local policy makers should think systematically about what it takes to support a start-up ecosystem. When doing so, their focus could be on tackling the bottlenecks and constraints that might otherwise inhibit a vibrant start-up ecosystem rather than picking winners by supporting investment in particular sectors or business models.

The State of Small Business Lending: Credit Access during the Recovery and How Technology May Change the Game

August 5, 2014 Comments off

The State of Small Business Lending: Credit Access during the Recovery and How Technology May Change the Game (PDF)
Source: Harvard Business School Working Papers
From Harvard Working Knowledge op/ed:

During the 2008 financial crisis, small businesses were hampered in securing bank credit because of a perfect storm of their falling sales and weakened collateral, and growing risk aversion among lenders. Those days are not over. While lingering cyclical factors from the crisis may still be constraining access to bank credit, there are also structural barriers that seem to be preventing banks, both large and small, from ever fully returning to the small business market.

Enterprising States 2014: Re-Creating Equality and Opportunity

July 23, 2014 Comments off

Enterprising States 2014: Re-Creating Equality and Opportunity
Source: U.S. Chamber of Commerce

The U.S. Chamber of Commerce Foundation has released its annual Enterprising States study, offering an in-depth look at the free enterprise policies being implemented to promote economic growth at the state and local levels.

Now in its fifth edition, the Enterprising States study measures state performance overall and across five policy areas important for job growth and economic prosperity. Those five areas include:

  • Talent Pipeline
  • Exports and International Trade
  • Technology and Entrepreneurship
  • Business Climate
  • Infrastructure

The 2014 report relates these policies and practices to the need for collaboration between education, workforce development, and economic development to positively combat the nation’s growing skills gap.

Entrepreneurs Have the Potential to Create 10 Million Youth Jobs in G20 Countries, New Accenture Research Finds

July 18, 2014 Comments off

Entrepreneurs Have the Potential to Create 10 Million Youth Jobs in G20 Countries, New Accenture Research Finds
Source: Accenture

Entrepreneurs can help drive the creation of 10 million youth jobs across the G20 countries if existing barriers to entrepreneurship were lifted, according to new research from Accenture (NYSE: ACN). The study also indicates that while 74 percent of entrepreneurs surveyed by Accenture say they plan to recruit young talent in 2014, many believe that a shortage of people with relevant skills is hindering job creation and growth.

The Accenture study, “The promise of digital entrepreneurs: creating 10 million youth jobs in the G20 countries,” analyzes the views of more than 1,000 entrepreneurs and highlights the barriers that are limiting the potential of entrepreneurs to create jobs and grow the economy. The report illustrates that while 85 percent believe they have a critical role to play in the creation of jobs for young people, they face a number of challenges including securing funding, scaling and sustaining innovation, growing internationally and accessing the right skills. The study was developed ahead of the G20 Young Entrepreneurs’ Alliance Summit in Sydney.

The report indicates that many entrepreneurs believe more could be done to foster an environment of youth job creation in their country. Only one quarter (26 percent) consider the actions taken by their government to support youth job creation as relevant and efficient. Additionally, more than half (54 percent) cite a lack of incentives as a barrier to taking on more young people.

Incubators, Accelerators, Venturing, and More: How Leading Companies Search for Their Next Big Thing

July 11, 2014 Comments off

Incubators, Accelerators, Venturing, and More: How Leading Companies Search for Their Next Big Thing
Source: Boston Consulting Group

Most corporate-executive suites are packed with all manner of state-of-the-art technology. But one low-tech instrument is in demand in nearly all of them: a periscope. Not a literal one, perhaps, but CEOs would no doubt welcome the ability to see around corners and spot the approaching forces that could disrupt their businesses or give them an innovation advantage over their peers. In this report, The Boston Consulting Group takes a close look at tools already in use at some of the corporate world’s innovation leaders to identify and explore new pathways to growth, including business incubators and accelerators, corporate venture investing, and strategic partnerships. Drawing on our extensive experience in the field, we offer insights into their most effective applications and describe how they can best be used in concert for maximum strategic advantage.

The Effect of Patent Litigation and Patent Assertion Entities on Entrepreneurial Activity

June 27, 2014 Comments off

The Effect of Patent Litigation and Patent Assertion Entities on Entrepreneurial Activity
Source: Social Science Research Network

This paper empirically investigates the statistical relation between levels of patent litigation and venture capital (“VC”) investment in the U.S. We find that VC investment, a major funding source for entrepreneurial activity, initially increases with the number of litigated patents, but that there is a “tipping point” where further increases in the number of patents litigated are associated with decreased VC investment, which suggests an inverted U-shaped relation between patent litigation and VC investment. This appears strongest for technology patents, and negligible for products such as pharmaceuticals. There is some evidence of a similar inverted U-shaped relation between patent litigation and the creation of new small firms. Strikingly, we find evidence that litigation by frequent patent litigators, a proxy for PAE litigation, is directly associated with decreased VC investment with no positive effects initially.

Hat tip: ResearchBuzz.

EU — Social entrepreneurship: new standard to measure social impact

June 27, 2014 Comments off

Social entrepreneurship: new standard to measure social impact
Source: European Commission

A new standard to allow social enterprises of all sizes to better measure and demonstrate their social impact and so help them in their discussions with partners, investors, and public sector funders has been published by the European Commission. The standard, featured in a report on social impact measurement, will help European social enterprises to benefit from funding via the European Social Entrepreneurship Funds (EuSEF) and the new Employment and Social Innovation programme (EaSI). The report has been endorsed by an expert group on social entrepreneurship (GECES) set up by the Commission.

The report found that it was not possible to devise a rigid set of indicators in a top-down way to measure social impact in all cases. Instead, it proposes a standard for social impact measurement in five stages, which is flexible enough to be adapted to the needs of very different social enterprises.

The necessity for a standard for the measurement of social impact is important in terms of funding: the EaSI programme stipulates that social enterprises must demonstrate that they are focused on achieving measurable, positive social or societal impacts in order to benefit from support. The new EuSEFs (European Social Entrepreneurship Funds) also require social businesses seeking financing to measure their social impact.

The development of a standard should help to avoid the current duplication of costs due to the fact that there are different approaches, as well as encouraging best practice in the rapidly evolving field of social impact measurement.

Incubators, Accelerators, Venturing, and More: How Leading Companies Search for Their Next Big Thing

June 26, 2014 Comments off

Incubators, Accelerators, Venturing, and More: How Leading Companies Search for Their Next Big Thing
Source: Boston Consulting Group

Most corporate-executive suites are packed with all manner of state-of-the-art technology. But one low-tech instrument is in demand in nearly all of them: a periscope. Not a literal one, perhaps, but CEOs would no doubt welcome the ability to see around corners and spot the approaching forces that could disrupt their businesses or give them an innovation advantage over their peers. In this report, The Boston Consulting Group takes a close look at tools already in use at some of the corporate world’s innovation leaders to identify and explore new pathways to growth, including business incubators and accelerators, corporate venture investing, and strategic partnerships. Drawing on our extensive experience in the field, we offer insights into their most effective applications and describe how they can best be used in concert for maximum strategic advantage.

Lists & Rankings — United States Small Business Friendliness

June 26, 2014 Comments off

United States Small Business Friendliness
Source: Thumbtack

Thumbtack, in partnership with the Ewing Marion Kauffman Foundation, has released the results from the third annual Thumbtack.com Small Business Friendliness Survey. The study, drawing upon data from over 12,000 small business owners, provides new insights into state and local business environments across the nation.

Some of the survey’s key findings include:

  • Utah, Idaho, Texas, Virginia and Louisiana gave their states the highest rating for friendliness to small business. Small businesses in Colorado Springs, Boise and Houston gave their cities the highest ratings.
  • In contrast, small business owners gave California, Rhode Island and Illinois an “F,” while Connecticut and New Jersey both earned a “D” grade. Sacramento, Providence and Buffalo were the survey’s worst-performing cities as rated by their small business owners.
  • Small businesses in Texas, Utah and Idaho have rated their states in the top five every year this survey has run, while California and Rhode Island have been rated in the bottom five every year.
  • The friendliness of professional licensing requirements was the most important regulatory issue in determining a state’s overall friendliness to small businesses. Closely following licensing requirements was the ease of filing taxes.
  • Once again, tax rates was a less important factor than the ease of regulatory compliance in determining the overall friendliness score of a jurisdiction. Two-thirds of respondents said they paid their “fair share” of taxes – that is, they felt like they were neither under-paying nor over-paying.
  • Small business owners who were aware of training programs offered by their government were significantly more likely to say their government was friendly to small business than those who weren’t. Awareness of training programs raised overall scores by 10 percent, while 76 percent of those who said they were aware of government-sponsored training programs for business owners ranked their local government as “somewhat” or “very supportive,” and only 8 percent of these said local government was unsupportive.

Entrepreneurship’s Role in Economic Development

June 26, 2014 Comments off

Entrepreneurship’s Role in Economic Development
Source: Ewing Marion Kauffman Foundation

For decades, one of the principal state and local economic development tools has been tax incentives. Every state offers incentives in one form or another to retain business and attract businesses from other states. According to one survey, 95 percent of U.S. municipalities also use such incentives.

Some policymakers have expressed a desire to end this practice but feel stuck in an arms race. They fear they cannot unilaterally forgo incentives because others use them, so they create ever-increasing incentive packages in an effort to compete.

Although some incentives may be economically justified in terms of jobs and productivity, in the midst of an arms race it’s difficult to tell what is and is not effective in creating jobs.

One thing that is known is that this practice costs taxpayers billions of dollars each year. Estimates put the annual cost near $70 billion. Moreover, incentives targeting existing companies miss the economy’s real engine of job creation: new and young businesses, which create nearly all net new jobs in the United States, a fact that also holds true at the state and city level.

New Kauffman Policy Digest Offers States Policy Alternatives that Spur Entrepreneurial Growth

June 12, 2014 Comments off

New Kauffman Policy Digest Offers States Policy Alternatives that Spur Entrepreneurial Growth
Source: Ewing Marion Kauffman Foundation

State tax incentives – often used to attract or retain existing businesses – aren’t always the best way to stimulate economic growth.

According to a new Entrepreneurship Policy Digest released today by the Kauffman Foundation, these programs, while sometimes economically justified, often overlook the businesses that create most new jobs – namely, new companies.

The Policy Digest offers alternative strategies for states to either improve their existing incentive programs or boost job creation by fostering firm formation.

“States spend tens of billions of dollars each year trying to entice businesses to locate within their borders, but these policies often miss the real job creators: new and young businesses,” said Jason Wiens, policy engagement manager at the Kauffman Foundation. “Alternative economic development strategies exist that focus on entrepreneurial growth without incurring costly tax incentives.”

New From the GAO

June 6, 2014 Comments off

New GAO Reports
Source: Government Accountability Office

1. Human Capital: Strategies to Help Agencies Meet Their Missions in an Era of Highly Constrained Resources. GAO-14-168, May 7.
http://www.gao.gov/products/GAO-14-168
Highlights – http://www.gao.gov/assets/670/663043.pdf

2. Small Business Research Programs: More Guidance and Oversight Needed to Comply with Spending and Reporting Requirements. GAO-14-431, June 6.
http://www.gao.gov/products/GAO-14-431
Highlights – http://www.gao.gov/assets/670/663910.pdf

3. Community Development Capital Initiative: Status of the Program and Financial Health of Remaining Participants. GAO-14-579, June 6.
http://www.gao.gov/products/GAO-14-579
Highlights – http://www.gao.gov/assets/670/663891.pdf

Kauffman Index of Entrepreneurial Activity

May 21, 2014 Comments off

Kauffman Index of Entrepreneurial Activity
Source: Ewing Marion Kauffman Foundation

The Kauffman Index of Entrepreneurial Activity is a leading indicator of new business creation in the United States. Capturing new business owners in their first month of significant business activity, this measure provides the earliest documentation of new business development across the country. Analysis of matched monthly data from the Current Population Survey (CPS) allows for comparisons of the percentage of the adult, non-business owner population that starts a business over time. In addition to this overall rate of entrepreneurial activity, separate estimates for specific demographic groups, states, and select metropolitan statistical areas (MSAs) are presented. The Index provides the only national measure of business creation by specific demographic groups.

Bersin by Deloitte Research Shows US Leadership Development Spending Up Again; 14 Percent to More Than $15 Billion in 2013

May 16, 2014 Comments off

Bersin by Deloitte Research Shows US Leadership Development Spending Up Again; 14 Percent to More Than $15 Billion in 2013
Source: Deloitte

Bersin by Deloitte, a leading research and advisory firm empowering Human Resource (HR) organizations to drive bottom-line impact, today announced new research that shows U.S. organizations boosted leadership development spending 14 percent on average for the second consecutive year to an estimated $15.5 billion in 2013. The findings appear in Bersin by Deloitte’s new Leadership Development Factbook 2014: Benchmarks and Trends in U.S. Leadership Development, available to WhatWorks® members and for sale to non-members.

Summarized in a complimentary WhatWorks market brief, the research provides key benchmarks and guidance to help leadership development teams make valuable investment decisions. The new research shows that the biggest increase in investment came from small businesses, which on average spent 23 percent more on leadership development initiatives in 2013. Large and midsize organizations reported more modest gains during the year, at four percent and five percent respectively.

East Asia Pacific at Work : Employment, Enterprise, and Well-being

May 9, 2014 Comments off

East Asia Pacific at Work : Employment, Enterprise, and Well-being
Source: World Bank

The unprecedented progress of East Asia Pacific is a triumph of working people. Countries that were low-income a generation ago successfully integrated into the global value chain, exploiting their labor-cost advantage. In 1990, the region held about a third of the world’s labor force. Leveraging this comparative advantage, the share of global GDP of emerging economies in East Asia Pacific grew from 7 percent in 1992 to 17 percent in 2011. Yet, the region now finds itself at a critical juncture. Work and its contribution to growth and well-being can no longer be taken for granted. The challenges range from high youth inactivity and rising inequality to binding skills shortages.

A key underlying issue is economic informality, which constrains innovation and productivity, limits the tax base, and increases household vulnerability to shocks. Informality is both a consequence of stringent labor regulations and limited enforcement capacity. In several countries, de jure employment regulations are more stringent than in many parts of Europe. Even labor regulations set at reasonable levels but poorly implemented can aggravate the market failures they were designed to overcome.

This report argues that the appropriate policy responses are to ensure macroeconomic stability, and in particular, a regulatory framework that encourages small- and medium-sized enterprises where most people in the region work. Mainly agrarian countries should focus on raising agricultural productivity. In urbanizing countries, good urban planning becomes critical. Pacific island countries will need to provide youth with human capital needed to succeed abroad as migrant workers. And, across the region, it is critical to ‘formalize’ more work, to increase the coverage of essential social protection, and to sustain productivity. To this end, policies should encourage mobility of labor and human capital, and not favor some forms of employment – for instance, full-time wage employment in manufacturing – over others, either implicitly or explicitly. Policies to increase growth and well-being from employment should instead reflect and support the dynamism and diversity of work forms across the region.

Declining Business Dynamism in the United States: A Look at States and Metros

May 9, 2014 Comments off

Declining Business Dynamism in the United States: A Look at States and Metros
Source: Brookings Institution

Business dynamism is the process by which firms continually are born, fail, expand, and contract, as some jobs are created, others are destroyed, and others still are turned over. Research has firmly established that this dynamic process is vital to productivity and sustained economic growth. Entrepreneurs play a critical role in this process, and in net job creation.

But recent research shows that dynamism is slowing down. Business churning and new firm formations have been on a persistent decline during the last few decades, and the pace of net job creation has been subdued. This decline has been documented across a broad range of sectors in the U.S. economy, even in high-tech.

Here, the geographic aspects of business dynamism are analyzed. In particular, we look at how these trends have applied to the states and metropolitan areas throughout the United States. In short, we confirm that the previously documented declines in business dynamism in the U.S. overall are a pervasive force throughout the country geographically.

In fact, we show that dynamism has declined in all fifty states and in all but a handful of the more than three hundred and sixty U.S. metropolitan areas during the last three decades. Moreover, the performance of business dynamism across the states and metros has become increasingly similar over time. In other words, the national decline in business dynamism has been a widely shared experience.

While the reasons explaining this decline are still unknown, if it persists, it implies a continuation of slow growth for the indefinite future, unless for equally unknown reasons or by virtue of entrepreneurshipenhancing policies (such as liberalized entry of high-skilled immigrants), these trends are reversed.

Entrepreneurship Education and Training Programs around the World : Dimensions for Success

May 6, 2014 Comments off

Entrepreneurship Education and Training Programs around the World : Dimensions for Success
Source: World Bank

Entrepreneurship has attracted global interest for its potential to catalyze economic and social development. Research suggesting that certain entrepreneurial mindsets and skills can be learned has given rise to the field of entrepreneurship education and training (EET). Despite the growth of EET, global knowledge about these programs and their impact remains thin. In response, this study surveys the available literature and program evaluations to propose a Conceptual Framework for understanding the EET program landscape.

The study finds that EET today consists of a heterogeneous mix of programs that can be broken into two groups: entrepreneurship education and entrepreneurship training. These programs target a range of participants: secondary and post-secondary education students, as well as potential and practicing entrepreneurs. The outcomes measured by program evaluations are equally diverse but generally fall under the domains of entrepreneurial mindsets and capabilities, entrepreneurial status, and entrepreneurial performance. The dimensions of EET programs vary according the particular target group. Programs targeting secondary education students focus on the development of foundational skills linked to entrepreneurship, while post-secondary education programs emphasize skills related to strategic business planning. Programs targeting potential entrepreneurs generally are embedded within broader support programs and tend to target vulnerable populations for whom employment alternatives may be limited. While programs serving practicing entrepreneurs focus on strengthening entrepreneurs’ knowledge, skills and business practices, which while unlikely to transform an enterprise in the near term, may accrue benefits to entrepreneurs over time.

The study also offers implications for policy and program implementation, emphasizing the importance of clarity about target groups and desired outcomes when making program choices, and sound understanding of extent to which publicly-supported programs offer a broader public good, and compare favorably to policy alternatives for supporting the targeted individuals as well as the overall economic and social objectives.

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