I have cited many statistics on the growing role of small businesses in our national economy here in the US. A newly released study from the Office of Advocacy of the U.S. Small Business Administration reports that this same entrepreneurial economic engine is evident at the state level.
The study finds that small firm establishment births are the most important factor propelling growth in gross state product, state personal income, and total state employment.
"This study confirms the importance of small startups for the economic well-being of every state," said Office of Advocacy Chief Economist, Dr. Chad Moutray. "Now more than ever, state policymakers should be aware of how
their decisions affect small business. Creating an environment that values entrepreneurship and risk-taking is sure to increase economic growth, personal income, and employment."
That means reduced regulation and lower taxes should also be on the agenda of state policy makers. Don't follow the path we see in so many states that are trying to "help" entrepreneurs with programs designed to manage the entrepreneurial economy. That may work when attracting corporate relocations, but entrepreneurs just need government to get out of the way.
The study used data covering the years 1988 to 2002 and examined a wide variety of factors influencing state economic growth. After controlling for many determinants of growth, the authors conclude that in order to
increase gross state product, state personal income, and total state employment, "the most fruitful policy option available to state governments is to establish and maintain a fertile environment for new establishment formations."
