Abstract

We examine the relationship between `primary employment` and `business friendliness` of U.S. states. Do states with a low score in `business friendliness` worry small business owners too much and hence force them to run their business as their primary job? We look at several main components of `business friendliness` including `Ease of start`, `Ease of hire`, `Overall regulations`, and `Training and networking`. We also look at subcomponents including the different types of regulations and technology use. How does each of these factors affect a business owner’s decision to focus mainly on his/her business? We use the `United States Small Business Friendliness Survey` done by Kauffman Foundation and Thumptack.com in 2013 and converted the letter scores ranging from A+ to F in the survey to numerical scores ranging from 12 to 1 (i.e. 1 being the lowest score which corresponds to F). Therefore, after the conversion, each state has a numerical score on each business-friendliness category. The survey also asks business owners if they use the internet when starting a business, when paying their taxes, or when licensing. For each state, we compute the percentage of owners in each state using the internet when starting a business, when paying their taxes, or when licensing. We call these three percentage numbers for each state their `Internetstart`, `Internettax`, and `Internetlicensing` scores. Then, using the mean score for all states for each type of regulation or internet score, we divide the states into two groups: the `high-score states` and the `low-score states`. In our analysis, we use non-parametric tests to compare the `high-score states` to the `low-score states`. Our non-parametric tests show that although none of the main components (i.e. `Ease of start`, `Ease of hire`, `Overall regulations`, and `Training and networking`) seem to affect `primary employment`, the overall business friendliness score of a state significantly affects `primary employment`. When we examine the different types of regulations, we find that `Health and safety regulations`, `Licensing regulations`, and `Zoning regulations` affect `primary employment`. `Employment regulations`, `Tax code`, or `Environmental regulations` does not have a significant impact. These findings may indicate that business owners are more worried with regard to Health and safety regulations, Licensing regulations, and Zoning regulations, therefore more of them choose to take matters into their own hands. Another possible explanation may be the relative complexity of the tasks associated with these regulations. Finally, our results show that technology use in the entrepreneurial process does not affect `Primary employment`.

Keywords: regulation, small firm, small business, entrepreneur, primary employment.

JEL Classification: G38, L22, L26.

Cite as: Kaya, H.D. (2021). The Determinants Of Primary Employment In U.S. States. SocioEconomic Challenges, 5(3), 5-14. https://doi.org/10.21272/sec.5(3).5-14.2021

This work is licensed under a Creative Commons Attribution 4.0 International License

References

1. Anwar, Naveed, and Elizabeth Daniel (2016). The Role of Entrepreneur-Venture Fit in Online Home-based Entrepreneurship: A Systematic Literature Review. Journal of Enterprising Culture, 24(4), p. 419. [Google Scholar], [CrossRef], [Link].
2. Block, Jörn H., and Andreas Landgraf (2016). Transition from part-time entrepreneurship to full-time entrepreneurship: the role of financial and non-financial motives. International Entrepreneurship and Management Journal, 12(1), 259-282. [CrossRef], [Link].
3. Cagetti, Marco, and Mariacristina De Nardi (2006). Entrepreneurship, frictions, and wealth. Journal of political Economy, 114(5), 835-870. [CrossRef], [Link].
4. Folta, Timothy B., Frédéric Delmar, and Karl Wennberg (2010). Hybrid entrepreneurship. Management Science, 56(2), 253-269. Available at: [Link].
5. Giacomin, Olivier, Frank Janssen, Jean-luc Guyot, and Olivier Lohest (2011). Opportunity and/or necessity entrepreneurship? The impact of the socio-economic characteristics of entrepreneurs. [Google Scholar].
6. Heimonen, Tomi (2013). Entrepreneurship in Golden Years-Creative Opportunity or Not? China-USA Business Review, 12(1). [Google Scholar].
7. Kerr, William, and Ramana Nanda (2009). Financing constraints and entrepreneurship. No. w15498. National Bureau of Economic Research. [CrossRef].
8. Kourilsky, Marilyn L., and William B. Walstad (2002). The early environment and schooling experiences of high-technology entrepreneurs: Insights for entrepreneurship education. International Journal of Entrepreneurship Education, 1(1), 1-20. [Google Scholar].
9. Okpara, Friday O. (2007). The value of creativity and innovation in entrepreneurship. Journal of Asia Entrepreneurship and Sustainability, 3(2), 1. Available at: [Link].
10. Rangarajan, R., and R. Lakshmi (2013). Creativity and Innovation in Entrepreneurship-A Brief Assessment. Sumedha Journal of Management, 2(4), 55. [CrossRef].
11. Rantamaki-Lahtinen, L., and Hilkka Vihinen (2004). The role of equine industries in Finnish rural development – rural entrepreneurship and policy perspectives. Nordic Association of Agricultural Scientists: Horse Management — Premises and Landscape (Seminar 367). [CrossRef].
12. Shah, Sonali K., and Mary Tripsas (2007). The accidental entrepreneur: The emergent and collective process of user entrepreneurship. Strategic Entrepreneurship Journal, 1(1‐2), 123-140. Available at: [Link].
13. Tambunan, Tulus (2009). Women entrepreneurship in Asian developing countries: Their development and main constraints. Journal of Development and Agricultural Economics, 1(2), 027-040. Available at: [Link].
14. Warnick, Benjamin J. (2016). Passion for product, process, or both? Expanding our conception of passion in entrepreneurship. Diss. Indiana University. Avaailable at: [Link].
15. Williams, Colin C. (2007). The nature of entrepreneurship in the informal sector: evidence from England. Journal of Developmental Entrepreneurship, 12(02), 239-254[Google Scholar], [Crossref].
16. Williams, Colin C., and Sara J. Nadin (2012). Tackling entrepreneurship in the informal economy: evaluating the policy options. Journal of Entrepreneurship and Public Policy, 1(2), 111-124. [Google Scholar], [CrossRef].
17. Williams, Colin C., and John Round (2007). Entrepreneurship and the informal economy: a study of Ukraine’s hidden enterprise culture. Journal of Developmental Entrepreneurship, 12(01), 119-136. [Google Scholar], [CrossRef], [Link].