Date of Graduation

2008

Document Type

Dissertation/Thesis

Abstract

West Virginia is one of the nation’s most rural states and historically its economy has been more unstable than that of most states. Over the years, West Virginia has devoted efforts through national and local policy programs to induce economic prosperity, curtail out-migration, and mitigate poverty, yet many of its counties remain economically depressed with high unemployment, deeply rooted poverty, low human capital formation, out-migration, and a shrinking economic base. This means, that the state policy makers need to shift or broaden their policy focus to incorporate small businesses and entrepreneurship approach to development. Studies have shown that small businesses and entrepreneurship contribute tremendously to the social and economic growth of communities, regions and countries. However, despite their paramount importance to the economy, “entrepreneurial firms and small businesses have not been well-supported by West Virginia’s existing economic development strategies,” WV Chambers of Commerce – WVCOC (2007). The main objective of this study is to evaluate the potential for enhancing small businesses and entrepreneurship as an effective rural economic development strategy for West Virginia. More specifically the objectives are to: (1) Determine the factors that encourage the start-up of small business enterprises in West Virginia counties in three specific areas; (2) Determine the linkages between small business/entrepreneurship and rural economic growth in terms of employment opportunities and gross county product growth; (3) Develop a small business/entrepreneurship profile in the counties in the three study areas and to evaluate the factors that determine the business success and expansion plans; and (4) Evaluate alternative policy implications from the research findings for a small business and entrepreneurship-centered development strategy for rural communities. Some of the major findings regarding objective one are that from the demand-side, population density has a positive and statistical significant relationship to the small business start-up growth rate; from the supply-side, educational attainment has a negative impact, while the proportion of owners’ occupied housing and the number of offices of saving institution within a county are positively related to the small business start-up growth rate. Government expenditure per capita on public services (education, public safety, highways, utilities and recreation) is positive and statistically significant to the small business start-up growth rate. Regarding objective two, small business start-up growth rate has a positive impact to the economic growth when measured in terms of employment growth and gross county product growth rates. The survey data analysis (objective three) shows that there isn’t any particular difference between the three study areas in terms of industry type, business age and business acquisition patterns. There is a large predominance of service and retail industry in all three study areas. Most businesses are over 15 years old and the majority of the owners are older people with ages ranging from 51 to above 61. Most predominant constraints faced by the owners are ‘financial,’ ‘financial and a combination,’ ‘marketing,’ ‘suitable labor,’ and ‘getting customers.’ In the business expansion plan model, business owners in the manufacturing industries and finance, insurance and real estates industries are the ones more likely to expand their business in the future, and work experience is more relevant to the intentions to expand the business than formal education, as well as accessibility in terms of road density. In the business success model, work experience, initial source of working capital, and social capital (unilateral business support of the community and unilateral community support of the business) are important determinants of business success based on the business owner’s subjective sense of success. Regarding the policy interventions, the government and the policy makers need to design economic development strategies that are more entrepreneurship/small businesses focused. The strategy should include policies that would create a balance on the incentives that could attract a good and balanced mix of industries in retail and service sectors as well as high-tech, science-based and capital intensive industries to invest in the state and counties. Moreover, the strategy should include policies that continue to encourage the retention and expansion of the existing businesses.

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