An examination of the burdens faced by entrepreneurs at start-up and five years later
| Published date | 17 August 2015 |
| DOI | https://doi.org/10.1108/JEPP-07-2014-0028 |
| Pages | 152-170 |
| Date | 17 August 2015 |
| Author | Jason L. Jensen |
| Subject Matter | Strategy,Entrepreneurship,Business climate/policy |
An examination of the burdens
faced by entrepreneurs at
start-up and five years later
Jason L. Jensen
Department of Political Science and Public Administration,
University of North Dakota, Grand Forks, North Dakota, USA
Abstract
Purpose –The purpose of this paper is to consider the burdens faced by small business entrepreneurs
in North Dakota.
Design/methodology/approach –Two surveys of entrepreneurs are reported on, assessing
burdens at start-up and five years later. Burdens are compared within each time period, across
time periods, and are linked to industry type and business size. The study also compares survivors and
non-survivors, and considers whether survivorship is linked to initial burdens.
Findings –Regulatoryfactors and taxes were not as burdensomein the initial time period, comparedto
workforce and financing factors. In the follow-up survey property taxes were the largest burden,
particularlyamong larger businesses. Among survivors,availability of capital was moreburdensome at
start-up and permitting and licensingcomplexity at follow-up. Survivorshad more employees and rated
permit/license complexity as more of a burden compared to non-survivors. Cross-industry burden
differences were noted. Finally, businesses with more labor availability struggles at start-up were less
likely to survive, and labor market burdens increased for businesses closer to the oil boom area.
Research limitations/implications –Limitations mainly relate to the sample businesses, which are
all from a single state. This potential issue is elaborated on in the manuscript.
Originality/value –The contribution of this research primarily relates to the innovative design of
using pre/post surveys to directly assess the opinions of entrepreneurs, allowing the study of burdens
across time, survivorship, and industry effects.
Keywords Entrepreneurs, Start-ups, Policy
Paper type Research paper
Small businesses form the backbone of both national and regional economies.
Entrepreneurial activity, which most often reflects small business start-ups, has been
linked to economic growth (e.g. Acs and Armington, 2004; Camp, 2005; Karadeniz, 2006;
Hafer, 2013). Entrepreneurs and the businesses they start not only benefit the economy
directly by supplying goods and services to communities, they provide employment
opportunities, increase incomes and wealth, and they are a powerful engine of job creation
(Henderson, 2002). In fact, a majority of new jobs result from new start-ups (Armstrong
and Taylor, 2000). Further benefits of entrepreneurs include facilitating innovation and
contributing directly to governments by providing tax revenue (Kreft and Sobel, 2005).
Nurturing business development is usually a primary policy objective of state and
local governments, leading to the spread of programs to foster entrepreneurs across the
USA (Bartik, 1991; Leicht and Jenkins, 1994). States have realized, and their policies
now reflect, that fostering small business is a better tool of job creation than focussin g
on attracting existing businesses to locate branch plants (Henderson, 2002).
Journal of Entrepreneurship and
Public Policy
Vol. 4 No. 2, 2015
pp. 152-170
©Emerald Group Publishing Limited
2045-2101
DOI 10.1108/JEPP-07-2014-0028
Received 14 August 2013
Revised 25 September 2013
25 July 2014
Accepted 25 July 2014
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/2045-2101.htm
This research was funded by a grant from the North Dakota Small Business Development Center
and by the University of North Dakota Master of Public Administration program.
152
JEPP
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Entrepreneurs could conceivably view their interactions with government positively
and negatively. The positive perspective assumes a proactive and supportive policy role
for government, such as jurisdictions funding venture capital programs (Lerner, 2002).
In the USA, there is a widespread assumption –including among politicians –that
proactive policycan develop economies, and that there are marketimpediments that can
be confronted by government (Blanchflower and Oswald, 1998). This assumption,which
essentially predicts a positive relationship between entrepreneurship and economic
development, not only has empirical support (e.g. Rocha, 2004), but also has led to the
emergence of economic development agencies at all levels of government.
Government, of course, is not always viewed in a positive light by entrepreneurs,
particularly relatedto taxation and regulation. This perspective assumes less involvement
by government is better and a regulatory presence is vi ewed as onerous. Ironically, the
above perspectives have opposing directives for the role of governm ent in economic
development. This raises some important questions for economi c development related to
the role of government in encouraging entrepreneurs. What policy interventions do
entrepreneurs view as most helpful, and conversely, what governing factors do they view
as most burdensome? The latter question is explored in the current study.
Certainly, entrepreneurs face a variety of burdens and challenges at the start-u p
phase. These challenges carry with them significant risk, resulting in failure rates of
over 50 percent in the first few years (Malecki, 1988). The challenge for policy makers is
to identify burdens and then to consider potential interventions related to the burdens
that can be directly, or even indirectly, impacted. This assumes a methodology that
involves asking entrepreneurs directly about burdens, something that is rare. When
Chatman et al. (2008) surveyed entrepreneurs, they surprisingly found that local
government support was not significantly linked to their dependent variables,
entrepreneurial climate. This counterintuitive result highlights the importance of
surveying entrepreneurs about their experiences, and calls for more research.
Thecurrentstudyaimstoincreaseunderstanding of the factors that create a burden
for entrepreneurs during the start-up and initial operation phases. This question is
examined with two surveys of entrepreneurs in North Dakota, one shortly after start-up
and a follow-up five years later. The method is innovative in several respects.
First, entrepreneurs are studied directly, which provides first-hand knowledge of their
experiences with burdens. Second, burdens are empirically compared to gain an
understanding of relative importance. Third, because of the longitudinal nature o f the
study, business survival/demise can be ascertained and linked to factors (burdens) faced at
start-up. These burdens, of course, would be most important for policy makers to identify.
Finally, cross-industry differences related to burdens are considered, as well as the impact
of the oil boom in North Dakota on new businesses (which tracks the distribution of the
surveys). The study will first be framed by briefly examining factors that can be directly
controlled by government jurisdictions: service provision, taxes, and regulations.
Policy environment and entrepreneurship
Government policies ca n take many forms, some o f which could have an i mpact on the
activitiesof potential entrepreneurs. Impactscan be viewed as incentives or disincentives
from the perspectiveof an entrepreneur, since some policies and programs stimulate new
business development, while others could do the opposite.
There are many factors that have been linked to business start-ups. For instance,
Storey’s (1994) study on new firm creation categorizes determinants into eight general
influences: population characteristics, industrial structure, wealth/income, owner occupied
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Burdens
faced by
entrepreneurs
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