Community Matters: Successful Entrepreneurship in Remote Rural U.S. Locations* By Terry L. Besser** Professor of Sociology Iowa State University 204 East Hall Ames, IA 50010 515-292-3018 tbesser@iastate.edu Nancy J. Miller Professor of Design and Merchandising Colorado State University 150 Aylesworth Hall Fort Collins, CO 80523-1574 970-491-5811 Nancy.Miller@colostate.edu *Project funded by a United States Department of Agriculture National Research Initiative Grant # 2008-55401-04482 ** Corresponding author 1 Community Matters: Successful Entrepreneurship in Remote Rural U.S. Locations Abstract Entrepreneurs in remote rural towns face unique challenges. These towns have fewer people, with less income, making fewer purchases. Businesses also have problems associated with long distances and isolation. However these general circumstances cannot explain the variation in the success among rural entrepreneurs. Due to the tendency in previous studies to aggregate data on rural businesses, the situation of entrepreneurs in remote rural U.S. communities is under studied. The purpose of this paper was to examine the correlates of successful entrepreneurs in these remote areas. Findings indicate that entrepreneurs who start businesses to provide income and flexibility for family have more perceived success than those motivated by great wealth and the desire to challenge themselves. Entrepreneurs in high bridging social capital towns were also more successful. Community bridging social capital may enhance entrepreneurs' success by helping retaining and attracting skilled labour, reducing costs, providing access to capital, and engendering resident customer loyalty. Key words: entrepreneurship, social capital, rural communities 2 Introduction Rural locations are difficult environments for entrepreneurs. The rate of business start ups is lower there than in metropolitan areas (Plummer and Headd, 2008; Renski 2009) and rural businesses are less likely to thrive compared to those in more densely populated areas (Malecki, 1988; McAdam and McConvery, 2004; National Commission on Entrepreneurship, 2002; Plummer and Headd, 2008; Renski, 2009). This is unfortunate given the bleak circumstances of many rural communities in the U.S. and in European periphery areas. These locations face a downward spiral of population loss and business closures (Bj?rn? and Aarsaether, 2010; Johnson, 2006; McGranahan and Beale, 2002; Peredo and Chrisman, 2006; Whitener and Parker, 2007). Rural areas in the U.S. share the features Copus and Skuras (2006) used to identify European periphery locations, specifically their remoteness from centres of government, finance, commerce, and population. However, businesses in rural locations in the U.S. face additional challenges. The U.S. countryside is less densely populated and distances between towns are greater than in western European countries. For example, in 2010 the three prairie states included in this study had an average population density of 37.06 people per square mile (14.30 people per sq. km.) (WorldAtlas, 2012). The U.S. as a whole had 95.66 people per sq. mile (36.92 per sq. km.) and the European Union countries had on average 298.5 people per sq. mi. (115.22 people per sq. km.) (Eurostat, 2012). Acerbating this problem is the lack of interstate roads and adequate train systems for the movement of people and goods throughout these remote, less populated areas. 3 The weak economic performance of rural regions diminishes the future prospects and current quality of life for residents of those areas and it acts as a drag on national productivity (Porter et al., 2004). Porter and his colleagues (2004) claim that many economic activities would be more efficiently carried out in rural locations than in congested urban areas that entail higher transportation, property, and labour costs. Therefore, the productivity and prosperity of national economies depends in part on the economic vitality of their rural regions. We define entrepreneurs as individuals who own and manage expanding businesses (Carland et al., 1984; Gries and Naude, 2009). We recognise that entrepreneurship is a broad term that includes social entrepreneurs, individuals who create or change organizations for the solution of social problems. However, in this paper we limit consideration to business entrepreneurs. Scholars and economic development experts maintain that promoting local business entrepreneurs is the most effective strategy for enhancing rural economic prosperity and vitality (Camp, 2005; Dabson, 2005; Flora et al., 1992; Laukkanen and Niittykangas, 2003; Peredo and Chrisman, 2006; Sharp et al., 2002). Efforts to recruit businesses to locate in rural areas are infrequently successful and consume a disproportionate share of development resources compared to their likely benefit. In contrast, Babson (2005) argues that rural regions that create an environment conducive to local entrepreneurship will have a stronger local business base, and also be more attractive to relocating businesses. Given the critical value of entrepreneurs to economic vitality, it is essential to understand the factors associated with their success in rural locations. Although several recent studies have examined the subject, Renski (2009) argues that the common practice 4 in these studies of aggregating all non metropolitan areas together masks critical differences between rural towns in remote locations and rural towns adjacent to metropolitan areas and small cities (with 20,000 to 49,999 in population). Research is especially lacking on how the social climate of the remote rural community influences entrepreneurial success (Kalantaridis, 2006; Ring et al., 2009; Shields, 2005). The purpose of this study is to provide insight into this under researched subject. This analysis contributes to the literature by examining the impact of individual entrepreneurs' characteristics and motivations for starting a business on the success of that business in the remote rural environment. Previous studies suggest that the motivation to become an entrepreneur may be different in rural and metropolitan locations, perhaps partially explaining their differential success rate (Kalantaridis and Bika, 2006; Yusuf and Schindehutte, 2000). Rural residents may be motivated to become business owners because of the lack of satisfactory local employment opportunities (Kalantaridis and Bika, 2006) and the desire to live in a rural setting (Jack and Anderson, 2002; Vik and McElwee, 2011); while entrepreneurs in general are more likely to be motivated by the desire for independence, to realise great wealth, or to challenge themselves (Benzing, Chu, and Callanan, 2005; Heilbrunn, 2010; Kuratko, Hornsby, and Naffziger, 1997). Starting a business because of limited local employment opportunities may be associated with less risk taking and less commitment to innovation and growth which in turn, may account for lower survival rates and lower levels of success in rural areas. Another contribution is assessing the association of community social capital on entrepreneurial success in remote rural locations. Unlike many previous studies of social 5 capital and entrepreneurial success, we conceptualise social capital as a feature of the community not as a resource of the individual business owner. We use the term community to mean an incorporated municipality. Community social capital may influence entrepreneurial success through its association with the quality and quantity of local infrastructure (such as transportation, health care, adult educational opportunities, fire protection, and child care services), the willingness of residents to tax themselves to improve education and quality of life amenities, the extent to which residents purchase goods and services from local businesses, and the effectiveness of local government. These features may increase business revenue, decrease costs, and lessen uncertainty. Furthermore rural towns with more social capital may encourage business network membership and cooperation between entrepreneurs and engender an environment of greater trust. This environment may increase the willingness of business owners to innovate and take risks potentially offsetting the lower levels of these characteristics typical of entrepreneurs motivated by push factors. Understanding the relative impact of social contextual factors on entrepreneurial success in remote rural communities will enhance entrepreneurship and community development theories and add to the economic development strategies available for rural community vitality. We begin by describing the difficulties entrepreneurs face in remote rural environments. This is followed with an overview of the antecedents of entrepreneurial success identified in previous studies and their likely application to remote rural communities. We develop the position that community social capital is significantly related to the success of local entrepreneurs. The inferences deduced from past studies and social capital theory are examined with data from interviews with a random sample 6 of entrepreneurs in 18 remote rural towns in three U.S. Plains and Midwestern states. The final sections contain a summary of how the study informs our understanding of successful rural entrepreneurship and the implications of the findings for rural development strategies. The Rural Challenge to Entrepreneurial Success The term rural connotes places with low population density as well as remoteness from major population centres. However as Renski (2009) points out, much of the research comparing entrepreneurship in rural and metropolitan locations in the U.S. has overestimated the business entry and growth rates for remote rural areas because researchers typically aggregate all non-metropolitan areas together. Rural towns adjacent to metropolitan areas and small cities (municipalities with 20,000 to 49,999 in population) represent a very different environment for entrepreneurs and have higher rates of entrepreneurial growth than metropolitan cities and remote rural towns. Taking this important distinction into account, we define rural towns as incorporated municipalities located in counties without a town larger than 19,999 in population that are not in or adjacent to a county included in a metropolitan statistical area (Economic Research Service, 2004). Even among this group of counties, there is great variation in economic situations and demographics. Many remote rural towns in the U.S. with natural resource amenities and mild climate have experienced an increase in population and economic prospects in the last two decades (Cromartie and Nelson, 2009; Gosnell and Abrams, 2011; Nelson et al., 2010). Missing out on what has been called the "rural renaissance" are the remote rural counties in the country's northern prairie states that are lacking in topographical variation, large bodies of water, and mild climate (McGranahan, 7 1999; McGranahan and Beale, 2002). Towns in these counties are the focus of this analysis. Like all small businesses operating in remote areas, rural entrepreneurs are often farther away from markets and suppliers than their counterparts in urban areas, increasing their transportation costs and limiting their choices. Rural communities have fewer people with generally lower income than more prosperous, densely settled metropolitan areas. Even export oriented rural businesses face the difficulties of attracting and retaining skilled labour, low economies of scale, and under resourced infrastructure (Dabson, 2005). But even more critical for entrepreneurs, rural locations can be lonely. Research on the economic benefits of industrial districts and business networks concludes that entrepreneurs who have frequent opportunities to interact with others in similar and ancillary industries realise agglomeration benefits that, in turn, help them be more profitable. When a sufficiently large number of entrepreneurs operate in close proximity to each other they are able to attract skilled workers, support services (e.g. public relations, technological, legal, accounting support), financing and financial advice, and appropriate physical and technological infrastructure (Goe, 1994; Hanson, 1994; Lincoln, 1978; Noyelle, 1983; Palmer et al., 1990). Moreover, regular interaction with business owners in the same or ancillary industries encourages the exchange of information and other resources and lessens uncertainty, thereby enhancing business success (Aldrich, Rosen, and Woodward, 1987; Bennett and Ramsden, 2007; Cossentino and Sengenberger, 1996; Gulati, Nohria, and Zaheer, 2000; Inkpen and Tsang, 2005; Malecki, 1988; Malecki and Tootle, 1996; Powell et al., 1999). 8 The general difficulties of doing business in remote rural locations mask important variations among rural communities, however. Some are more effective than others in facilitating the success of small businesses including entrepreneurs (Besser, 1999; Bj?rn? and Aarsaether, 2010; Copus and Skuras, 2006; Heilbrunn, 2010; Johannisson and Nilsson, 1989). Utilizing past research and social capital theory, we suggest a set of managerial and community factors likely to be associated with entrepreneurs' perception of success in remote rural locations. Managerial Factors and Entrepreneurial Success Individual Background Entrepreneurs' education and experience are generally recognised as key predictors of their business success (Gaskill, Van Auken, and Manning, 1993; OECD, 2001; Wadhwa et al., 2009a). Among the 549 successful company founders studied by Wadhwa et al. (2009a, 2009b), 95 percent had earned a bachelor's degree, 47 percent had completed more advanced degrees, and 96 percent attributed their success primarily to their prior work experience. Better educated and experienced entrepreneurs are more likely to be successful in rural areas also. In their study of human capital and business success in the mountainous periphery regions of four European countries, Skuras et al. (2005) concluded that in spite of variations by country, the education and work experience of owners were positively associated with the growth of their businesses. In addition to an enhanced understanding of the entrepreneurial process and the products and services of their business, better educated and more experienced rural entrepreneurs are more likely to access government financial support systems than are other entrepreneurs (Meccheri and Pelloni, 2006). Given the critical contribution of education to entrepreneurial success, the net loss of well educated 9 residents from rural regions through out-migration (Mills and Hazairka, 2001; Shields, Goetz, and Wang, 2005) represents a potentially severe disadvantage for rural economies. Motivational Factors The motivations to start a business have been grouped by Segal, Borgia, and Schoenfeld (2005) into push and pull motivational categories. The push motivations focus on external factors that prompt a person to start a business. These include the inability to find suitable employment or undesirable working conditions in a given location accompanied by the desire to remain in that location and/or the high cost associated with changing locations. Pull factors involve internal elements such as the desire for wealth, personal growth, and independence, or the drive to implement creative ideas. The pull to entrepreneurship was stronger than the push factors for the founders in Wadhwa et al.'s (2009a) study as 80 percent reported that the inability to find traditional employment was not an important factor in starting their own business. These findings are similar to prior studies on entrepreneurs' motivations (Benzing et al., 2005; Heilbrunn, 2010; Kuratko et al., 1997). However, the primacy of pull motivational factors in these studies may reflect the situation of entrepreneurs in metropolitan locations since their numbers vastly outnumber rural entrepreneurs in any study employing a regional or national random sample. Yusuf and Schindehutte (2000) argue that there are sound reasons why entrepreneurs in rural areas might differ from their metropolitan counterparts in their motivations for starting a business. Employment opportunities have decreased over the last decades and poverty rates are higher in rural regions than in metropolitan regions (Johnson, 2006; Porter et al., 2004; Stathopoulou, Psaltopoulos and Skuras, 2004; Whitener and Parker, 2007). Attachment to the community and relationship and financial 10 ties may make relocating for economic opportunities difficult. Additionally, owners who assign a high value to the quality of life offered in rural locations may give less weight to pull motivational factors in their decision to start a business. The entrepreneurs studied by Jack and Anderson (2002) were content to realise less profit than might be possible in metropolitan areas because they desired the amenities available in a rural community. Similarly, Norwegian farmers were more likely to be motivated to diversify their farming operations by the desire to continue living on the farm than by the need for additional income (Vik and McElwee, 2010). This evidence supports the contention that rural entrepreneurs may be more motivated by push factors than their counterparts located in metropolitan regions. Research on entrepreneurial motivations does not provide insight into which motivation set will be associated with greater success. However, we assume that individuals who are motivated to start a business as a survival strategy or in order to live in a rural area will be less willing to take risks and less likely to innovate. Since the linkage between innovativeness and business success is fairly well established as documented by Rauch and Frese's (2007) meta-analysis of 116 studies on the topic, it is reasonable to infer that push motivated entrepreneurs will be less successful than those who start businesses to realise great wealth, be independent, and challenge themselves. Business Networks Interaction with other business owners and managers is an especially valuable resource for small businesses and new businesses (Corolleur and Courlet, 2003; Hanna and Walsh, 2002; Pyke and Sengenberger, 1992; Szarka, 1990; Witt, 2004). Ideas and information about markets, effective processes, government policies, suppliers, and technology are exchanged among members of formal business 11 networks. In a meta-analysis of 14 years of published research on inter-organizational knowledge transfers, van Wijk, Jansen, and Lyles (2008) concluded that businesses that exchange information with other businesses have higher levels of innovation and are more successful. In addition to facilitating information exchanges, networks contribute to the success of small businesses by helping them gain access to foreign markets (Bureau of Industry Economics, 1995; Dhanaraj et al., 2004) and by reducing the cost of labour and supplies through shared training, shared office space, and pooled purchasing (Besser and Miller, 2010; Riggles, 1997). These findings are confirmed by the company founders studied by Wadhwa (2009b), 73 percent of whom indicated that professional networks were important to the success of their business. Sixty two percent reported that personal networks contributed to their success. In this paper, we focus on formal business networks, i.e. a group of businesses joined together by formal agreements (clearly articulated leadership structure and by-laws and/or contracts) and organised for the explicit purpose of promoting business success. Types of formal business networks range from structured hierarchical arrangements (alliances and joint ventures) to democratic member associations such as trade associations and chambers of commerce (Inkpen and Tsang, 2005). Given that the immediate vicinity of rural businesses is unlikely to contain a sufficient number of businesses in the same or ancillary industries with which to engage in informal information and resource exchanges, membership in regional and trade associations may be one way to offset this disadvantage and partially gain the agglomeration benefits available to metropolitan businesses. Following this reasoning, we propose that 12 successful rural entrepreneurs will be more likely to belong to formal business networks than less successful entrepreneurs. Summarizing the sections on managerial factors, we anticipate that successful rural entrepreneurs have more education and experience, are more likely to belong to business networks and belong to more networks, and are more likely to be motivated by pull factors than less successful entrepreneurs. Community Social Capital Johannisson and Nilsson (1989) in the founding issue of Entrepreneurship and Regional Development argued that some communities provide an environment more conducive to economic development and entrepreneurship than others. They credited "community entrepreneurs", individuals who championed and facilitated the success of local businesses, with the difference in community entrepreneurship levels. Other researchers attribute the difference to communities' social environment or contend that community entrepreneurs are more likely to be present and effective in towns with a certain kind of social environment. Most prominent in this perspective is the contribution of social capital researchers. Social capital refers to the extent to which residents of a community know each other, trust each other, and have widely accepted norms of reciprocity (Putnam, 1993). In this perspective, towns with higher levels of social capital are able to work together more effectively to solve common problems and provide for the public good. Refinements in social capital theory distinguish between bridging and bonding social capital (Narayan, 1999; Woolcock, 1998). Bonding social capital consists of close, strong linkages within groups and bridging social capital refers to weaker relationship links between members of 13 diverse groups. Community bridging social capital is more critical to entrepreneurial success because it promotes a culture that supports general community betterment and successful economic development (Agnitsch, Flora, and Ryan, 2006; Putnam, 1993). Entrepreneurs may gain an advantage in rural towns with bridging social capital in two ways. One relates to the effect of the local social environment on customer behavior, the cost of doing business, and the ability to create, attract, and retain skilled labour. The other proposes that high bridging social capital influences entrepreneurs' innovative and cooperative strategies and tolerance of risk. Research consistently supports the positive association of bridging social capital with community civic engagement and collective efficacy (Besser, 2009; Flora, 1998; Putnam, Feldstein and Cohen, 2003; Rice, 2001; Sharp et al., 2001). These are the mechanisms through which rural communities are able to build and maintain quality child care services, health care services and cultural, recreational, and educational amenities (Agnitsch et al., 2006; Putnam et al., 2003). Quality of life amenities are essential for attracting and retaining skilled workers and entrepreneurs (Florida, 2002a; 2002b; Whisler et al., 2008). Worker and entrepreneurial skills are enhanced through diverse professional development, adult educational, and job training opportunities more likely to be available in towns with high levels of bridging social capital (Flora, 1998; Tigges and Green, 1994). Flora's (1998) research shows also that bridging social capital increases the willingness of residents to tax themselves and create community foundations and venture capital organizations in order to promote general community betterment and support business start-ups and growth. 14 Resident engagement in civic affairs is also associated with more cost effective and higher quality government services like access to good highway systems, street maintenance, snow removal, emergency preparedness, and fire and police protection (Putnam, 1993; Rice, 2001). These translate into lower insurance rates and transportation costs for residents and businesses alike. Programmes specifically aimed at generating and supporting entrepreneurship are more effective when there is greater local involvement (North and Smallbone, 2006). Local retail and business service firms in small towns often lose customers to metropolitan areas and to big box stores (Blanchard et al., 2003). However, Miller (1998) points out that in rural towns with higher levels of social capital, residents are more likely to shop locally even when they have the access to other retail establishments. The second mechanism through which social capital may affect entrepreneurial success is by facilitating cooperation between local businesses through which risks and resources can be shared, information exchanged, and innovation encouraged (Copus and Skuras, 2006; Peredo and Chrisman, 2006; Tiepoh and Reimer 2004). The positive impact of network membership on business success was described in a previous section. Here we propose that membership in business networks will be higher in towns with more bridging social capital. Social capital may influence innovation and risk taking in another way suggested by Stathopoulou et al.'s research (2004). They conclude that in places where people trust each other, they are more willing to exchange information and take more risks, and they are more accepting of innovation. We posit that entrepreneurs are no different from other residents in being affected by these aspects of the social environment. Due to their proposed greater propensity to join business networks, engage 15 in innovative business strategies, and be more willing to take risks, entrepreneurs in rural communities with more bridging social capital will be more successful than entrepreneurs in rural communities with less bridging social capital. In this way, bridging social capital may counteract the presumed lower risk taking and innovativeness of push motivated entrepreneurs in remote rural areas. Social capital can also be detrimental to business success (Meccheri and Pelloni, 2006; Portes and Landolt, 1996; Portes and Sensenbrenner, 1993). When the prevailing norms in a community, an ethnic enclave, or group discourage exchanges and interactions with non-group members and/or when the group values are tradition bound and resistant to change, entrepreneurs embedded in those groups or communities are not likely to access new information or implement new technologies or ideas. They feel obligated to do business with others in the group (enclave or community) even when their business would benefit from outside suppliers, financiers, and employees. Therefore, social capital can limit business growth and innovation or it can facilitate and encourage entrepreneurial success. These negative consequences of social capital are usually associated with bonding social capital not the bridging variation (Agnitsch et al., 2006; Flora, 1998; Meccheri and Pelloni, 2006; Putnam, 1993). Therefore, in sum the research above leads us to predict that entrepreneurs operating in remote rural communities with more bridging social capital will belong to more networks, be more innovative and cooperative with other local businesses, and be more willing to take risks. These managerial factors in addition to the possibility of better infrastructure, more skilled labour, lower business costs, and more loyal customers in communities with higher bridging social capital will be associated with higher levels of business success. 16 Research Design Data for this analysis were gathered as part of a larger study on rural economic vitality, community amenities, and business networks in U.S. new destination towns (towns with an increase of 10 percent or more in Hispanic population since 1990). Eighteen rural towns (defined as having less than 10,000 residents and located in a nonmetropolitan county) were purposively selected to capture the variety of changes in ethnic populations occurring in remote locations across three states located in the U. S. Great Plains and Midwest. A random sample of 3,462 businesses operating in the 18 towns was purchased from American Profiles in September 2008. This firm creates lists of businesses from various sources with the name of the owner and the address and telephone number of the business, the product or service of the business, and the number of employees. Sampled businesses were sent a letter in the spring of 2009 explaining the purpose of the research, asking their participation, and informing them that a researcher would call them for an interview in the near future. Closed ended interviews that lasted approximately 20 minutes were conducted by trained CATI staff associated with the Institute for Social and Behavioral Research at Iowa State University. Many of the names on the purchased list were ineligible, had inaccurate contact information, or could not be reached. When those businesses were subtracted, the sample size was 1772. Among that group, 1213 business owners and top managers agreed to participate in the study for a cooperation rate of 68.45 percent. A subsample of business owners who met our definition of entrepreneur, i.e. they indicated they owned a business which they planned to expand in the near future was used for this analysis. The sample size of entrepreneurs was 450. 17 Operationalization of Variables We calculated an index to measure community bridging social capital using principal component factor analysis. The indexed variable measures entrepreneurs' perceptions of the generalised trust, norms of reciprocity, and commitment to overall community welfare present in the community. Questions for the index have been previously used by Besser (1999) and Sharp et al. (2002). The exact wording for the questions, their descriptive statistics, and their factor loadings are provided in Table 1. All items met the two criteria for inclusion in an index; they each have face validity for the construct being measured and loaded at or above 0.5 (Kim and Mueller, 1978). The Cronbach's alpha score for the social capital index is 0.71. Alphas above 0.5 are considered to indicate adequate index reliability (Kim and Mueller, 1978). Place Table 1 here. The push and pull motivations for starting a business were also measured with indices created with principal component factor scaling. The items included in the motivation indices were derived from Robichaud, McGraw, and Roger (2001). The relevant statistics and the wording of the component questions are shown in Table 1. The factor scale statistics and alpha reliability levels for these indices are at acceptable levels. Network membership was measured by a question which asked respondents if they currently belonged to any business or professional associations (like a trade association or professional association). If they responded affirmatively, they were asked how many associations they belong to currently. We created one variable from these two in which all those who indicated they did not belong to a network in the preceding question were coded as having "0" memberships. Innovativeness was measured with two 18 items in a series of questions which asked owners to rate the importance to their business of 18 different strategies for success. The exact wording was "On a scale of 1 which is not important at all to 5 which is extremely important, how would you rate utilizing new and advanced technology to the success of your business?" The second item asked how would you rate "incorporating new ideas?" Owners' ratings of the strategy "cooperating with other local businesses" was used to indicate whether cooperation was judged to be important to their business success. Measuring the willingness to take risks was the question "How often are you willing to take high or great risks in business related matters? Would you say it is never, seldom, sometimes, often, or very often?" The dependent variable, business success, was measured with a 10 point Likert scaled question that asked "On a scale of 1 to 10 where ten equals extreme success and 1 equals total failure, how successful is your business?" Results The descriptive statistics for the sample are shown in Tables 1 and 2. A comparison of the individual items that compose the motivational indices (in Table 1) reveals that the most important reason why these entrepreneurs started a business was to provide income for themselves and their families. Second was the pull motivation of the desire to challenge themselves. Averaging the three items in the indices shows that push motivation is rated as more important than pull motivation factors (4.17 compared to 3.40). The respondents' average age was 51.86 years and they averaged 17.41 years of experience in their business (See Table 2). Almost 75 percent of respondents were male, almost all considered themselves to be white (98.9 %), and their average educational 19 attainment was 5.32. The typical rural entrepreneur in the sample is a white male with some post secondary education but not a bachelor's degree. Approximately 75 percent belonged to at least one formal business network. The average number of memberships was 2.13. Place Table 2 here The businesses owned by the respondents averaged 30.70 years of age, but slightly more than 18 percent (18.3 percent) were ten or fewer years of age and 8.7 percent were 5 or fewer years old. These are very small businesses as indicated by the average number of full time and part time employees (average 9.31, median 3.0) and the average business revenue for FY08 ($400,000). However, 21.5 percent had revenue greater than $1 million and 21.0 percent reported revenue of $100,000 or less. The majority of respondents operated in three broad industrial groups; finance, insurance and real estate (19.5 %), retail (19.3 %), and professional, information, health, administrative, and educational services (15.7 %). Almost 13 percent were in personal services, 9.6 percent in wholesale and distribution, and 7.1 percent in agriculture. The entrepreneurs in this sample rated their businesses as fairly successful on average (7.27) which is especially remarkable given that the interviews were conducted in March to June of 2009 during the great recession which started in 2008. The sample rated incorporating new ideas (mean = 4.26) and utilizing new/advanced technology (mean = 4.16) as very important strategies for their business success. Cooperating with local businesses was judged to be a less important strategy (mean = 3.83). This is a relatively risk averse group of entrepreneurs. On average, they indicated their willingness to take risks is "sometimes" (mean = 3.18). 20 Place Table 3 here. According to the correlation statistics shown in Table 2, years of experience, number of employees, FY08 revenue, and utilizing new and advanced technologies are positively associated with success. The positive relationships between number of employees and revenue with success do not provide insight into what factors contribute to success as much as they help confirm the validity of the perceptual variable as an indicator of business success. Given that owners' years of experience was the only background variable significantly associated with success, the other owner background variables will not be considered further in the analysis. Table 3 contains the correlation statistics for success and the predictor variables. Push and pull motivations and community bridging social capital are significantly related to business success in addition to owners' experience and use of new/advanced technologies. Push and pull motivations are positively correlated with each other and the two innovation strategies are positively related. Apparently some entrepreneurs are motivated to own a business for both pull and push reasons. Push motivation is associated with only one innovation strategy (utilization of new/advanced technologies) and not related to risk taking. However, as anticipated pull motivation is associated with both innovation strategies and the willingness to take risks. Interestingly belonging to more formal business networks is not associated with innovation or cooperating with other local businesses, but does relate to owners' experience and the willingness to take risks. Community bridging social capital is positively correlated with pull motivation, memberships in business networks, the innovation strategies, and cooperating with local businesses. The correlation statistics 21 suggest entrepreneurs in remote rural communities with higher levels of bridging social capital belong to more business networks, are more likely to be motivated by pull factors for business ownership, rank cooperation and innovative strategies as important to their business success, and are more successful than entrepreneurs in rural towns with less social capital. Place Table 4 here. Hierarchical multivariate regression analysis was used to ascertain which set of factors, entrepreneurial motivations, network memberships and cooperative strategies, innovative and risk taking strategies, or community bridging social capital are most important in predicting the success of rural entrepreneurs. The results are displayed in Table 4. All equations are significant, but the R squared statistics reveal that only 7 to 8 percent of the variation in entrepreneurs' success is explained by the variables in the equations. Model 1 reveals that push motivation is associated with entrepreneurs' success net of years of experience, pull motivation, and network memberships. The strategies for success and willingness to take risks variables are added in Model 2. The Beta for push motivation is not diminished when the other variables are introduced. Even though pull motivation and utilizing new and advanced technologies were correlated with success at the zero level as shown in Table 3, when push motivation is controlled their coefficients are no longer significant. The two other strategies and willingness to take risks are still not significantly related to success after controlling for the other predictors. Model 3 shows the results after community bridging social capital is introduced into the regression analysis. Essentially nothing changes except bridging social capital is significant and the adjusted R square increases slightly (from .07 to .08). Model 3 22 suggests that entrepreneurs who perceive themselves to be successful in remote rural communities are characterised by push motivation and operate their businesses in towns with higher bridging social capital. The lack of significance of the network membership, innovative and cooperative strategies for success, and risk taking variables in Model 2 indicates that bridging social capital is not influencing entrepreneurs' perception of success through creating a climate that encourages these behaviors. Instead bridging social capital is apparently influencing perceived success through elements not captured by the variables in the equations. These non specified environmental factors that distinguish towns with more bridging social capital may include reducing costs, assisting with the creation, attraction, and retention of skilled labour, increasing revenue, and providing access to venture capital at reasonable rates. Conclusion Entrepreneurship is viewed by scholars and policy makers alike as an important mechanism for revitalizing depressed rural regions. In order to encourage rural residents to become entrepreneurs and then assist them to be successful, development professionals and community leaders need research that focuses on the specific challenges posed by rural locations. However much of the research on rural entrepreneurship in the U.S. has aggregated all non metropolitan regions together misspecifying the challenges and rewards experienced by entrepreneurs in remote rural communities. In fact, we argue that the business climate is quite different in remote rural areas compared to small cities and rural towns adjacent to metropolitan areas, making generalizations from this body of literature hazardous. 23 Businesses in remote rural locations must contend with greater distances to markets and suppliers, lower economies of scale, diminishing labour supply, lack of government investment in infrastructure (education, roads, utilities), and a limited numbers of other businesses in the same or ancillary industries. This latter feature of the business environment of rural towns means businesses have little opportunity to realise the benefits of agglomeration available to their peers in metropolitan areas. Additionally, the social environment of the community may be more important to the success of rural entrepreneurs than it is to their counterparts located elsewhere. The purpose of this analysis was to focus specifically on entrepreneurs operating in remote rural communities. Findings from the entrepreneurship literature led us to predict that the education and experience of the entrepreneur, pull motivational elements, memberships in business networks, cooperation with other businesses, willingness to take risks, and utilise innovative technologies and ideas would be associated with success. Also several studies suggested that community bridging social capital is associated with entrepreneurial success. Community bridging social capital is particularly important to remote rural and periphery locations as it a resource over which they have control (unlike distance to major markets and suppliers). Contrary to previous studies, our findings revealed that the education of entrepreneurs operating in remote rural U.S. communities and the age of their businesses were not significantly related to the perceived success of their businesses, while years of experience, number of employees, and business revenue were. Rather than providing an explanation for business success, however, the positive association of number of employees and business revenue serve to provide validation for the perceptual variable as 24 an indicator of business success. Findings from this analysis support Yusuf and Schindehutte's (2000) and Jack and Anderson's (2002) suggestion that rural entrepreneurs are motivated more by push factors to start a business than by the pull factors which typically characterise metropolitan start-ups. Given the scarcity of opportunities for high quality jobs in rural areas and the relationship and financial investments that root residents to those areas, starting a business may be a way to stay in place and still provide a decent income and economic security. However, the significant correlation between the two indices found in this study indicates that they are not mutually exclusive. Some business owners operating in the sampled rural towns started their businesses for both reasons. Both motivational indices are significant predictors of perceived business success until they are entered together in the regression analysis. When push motivation is controlled, pull motivation is no longer significantly related to perceived success. Push motivation is the most important predictor of success among the variables included in this analysis. Community bridging social capital is the only other variable to be positively associated with entrepreneurs' success in the final model. The association of push motivation with entrepreneurs' perceived success seems counterintuitive given the current understanding of entrepreneurship. Perhaps as Jack and Anderson's (2002) conclusions imply, push motivated entrepreneurs are happier, and thus rate their business as more successful than do pull motivated entrepreneurs at the same level of business accomplishments. In order to test this possibility, we would need an "objective" measure of business accomplishments. If we use business revenue as that indicator and calculate the partial correlation coefficient between pull motivation factors and perceived success 25 when revenue and push motivation are controlled, we find that pull motivation is not related to perceived success. However, when revenue and pull motivation are controlled, the push motivation factor is still significantly related to success. In other words, these correlations suggest that the significance of push motivation to perceived success for rural entrepreneurs is robust regardless of business revenue. This is an intriguing and potentially important difference between rural entrepreneurs and the entrepreneurs studied in previous research. Another finding that contradicts previous research is the lack of association of membership in formal business networks with perceived success. Speculating that the number of network memberships may be less important than whether one belongs or does not belong, we tested the relationship of the dummy variable of network membership with perceived success. It was not significantly associated with perceived success before or after other variables were controlled. It appears that business network memberships contribute less to rural entrepreneurs' perceived success than the social environment of the community itself. Research is needed to explain this anomalous finding also. The major contributions of this analysis are the focus on the under researched topic of entrepreneurs in remote rural areas in the U.S. and the discoveries that push motivation and community bridging social capital are significant predictors of perceived success for this group. Bridging social capital's impact is not explained by its potential association with business owners' network membership, enhanced innovation, cooperation with other businesses, and risk taking. This conclusion supports scholars' (Flora, 1998; Kalantaridis, 2006; North and Smallbone, 2006) contention that contextual factors in rural towns are critically important for entrepreneurial success. Flora (1998) 26 elaborates that bridging social capital has an indirect effect on business success by helping to ensure that local government is effective and the existence of higher quality community services and amenities including community foundations and other sources of venture capital. Kalantaridis (2006) and North and Smallbone (2006) point to a more direct connection. Bridging social capital is associated with higher levels of overall civic engagement. Towns with more civic engagement will be places with greater community and business input into government policies and programmes aimed at advancing business success which increases the effectiveness of those efforts. The propensity of residents in high social capital rural towns to shop locally also may enhance business success. The factors studied in this examination explained only a small proportion of the variation in perceived success among rural entrepreneurs. Even though the findings suggest that bridging social capital and push motivations are important to entrepreneurs' perceived success in remote rural communities, much remains to be learned. 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Indices for Motivation and Social Capital Variables Component Factor Statistic Mean Push Motivation Factors Cronbach's Standard Deviation ? = .57, variance explained = 56.41% There are a variety of reasons that people decide to go into business. We'd like to understand your motivations for becoming a business owner. Please rate the following possible reasons where: 1 = not important to 5 = very important. 1. Having flexibility for your personal or family life 2. Greater financial security for yourself and your family 3. To provide an income for yourself or your family Pull Motivation Factors Cronbach's 3.90 4.08 4.54 1.31 1.12 .80 .57 .82 .83 ? = .53, variance explained = 47.57% 1. Developing ideas for new products/services/processes 2. Having a chance to earn great wealth or a very high income 3. Challenging yourself Perceived Community Bridging Social Capital 2.79 3.15 4.28 1.39 1.28 .91 .70 .70 .76 Please indicate whether you strongly disagree, disagree, neither agree nor disagree, agree, or strongly agree with the following statements about (name of town). Cronbach's ? = .71, variance explained = 45.15 1. Being a resident of (town) is living with a group of close friends. 2. If you do not look out for yourself in (town), no one else will (reverse coded for factor scale). 3. When something needs to get done in (town), the whole community gets behind it. 4. Community clubs and organizations are interested in what is best for whole town. 5. Please rate the friendliness of (town) where 1 = very unfriendly and 7 = very friendly. 6. How would you rate (town) on trust with 1 = trusting and 7 = not trusting (reverse coded for factor scale). 3.72 2.48 3.66 3.75 5.55 3.10 .87 1.02 .94 .81 1.06 1.60 .69 .66 .73 .71 .74 .47 35 Table 2. Descriptive and Bivariate Correlation Statistics for Owner and Business Characteristics with Success (N=450) Mean or Percentage 51.86 74.40 17.41 5.32 98.90 74.60 2.13 2.25 -.02 .07 11.92 2.11 Standard Deviation 10.92 Correlation with Success -.01 .01 .10* .02 Owner Characteristics Age Gender (Percent male) Years of experience Educational level (1 = less than high school to 9 = graduate or professional degree) Race (percent white) Member of business network (percent yes) Number of business network memberships (with nonmembers = 0) Business Characteristics Business age Number of full time and part time employees Revenue in FY2008 Success (1 = total failure to 10 = extreme success) 30.07 9.31 6.98 ($400,000) 7.27 26.87 31.81 3.13 1.78 .06 .10* .25** Strategies for Success Please rate the following business strategies by their importance to the success of your present business on a scale of 1 to 5 with 1 being 'not important' and 5 being 'extremely important.' How would you rate....? Incorporating new ideas/innovation Utilising new/advanced technologies Cooperating with other local businesses Willingness to Take Risks How often are you willing to take high (or great) risks in business related matters? 1=never, 2=seldom, 3=sometimes, 4= often, 5=very often. 4.26 4.16 3.83 .90 1.05 1.21 .03 .15** .07 3.18 1.03 -.02 *p<.05, **p<.01 36 Table 3: The Correlation of Motivations, Strategies for Success, Community Social Capital and Business Success Variables 1 1. Success 2. Owner's experience 3. Push motivation 4. Pull motivation 5. Incorporate new ideas 6. Utilise new/ advanced technology 7. Cooperate with other local businesses 8. Willingness to take risks 9. Network memberships 10. Community bridging social capital 2 3 4 5 6 7 8 9 .10* .25** .18** .03 .08 -.01 -.07 .42** .06 .17** .06 -.01 .02 .05 .18** .27** .26** .12* .07 .12* .33** .24** .07 .01 .14* .24** .03 .16** .17** .00 .04 .22** .01 -.06 .24** .15** .15** .07 -.02 -.04 .02 .07 .16** .16** .06 *p<.05, **p<.01 37 Table 4: Predictors of Success among Rural Entrepreneurs Ordinary Least Squares Regression, Beta (t value) Model 1 .08 (1.58) .06 (1.19) .21 (3.76)** .10 (1.73) Model 2 .08 (1.49) .05 (1.05) .20 (3.59)** .09 (1.50) .04 (.73) -.02 (-.30) .02 (.41) -.06 (-1.11) Model 3 .07 (1.38) .03 (.54) 20 (3.64)** .08 (1.44) .04 (.63) -.03 (-.49) -.00 (-.05) -.04 (-.90) .12 (2.26)* Years of experience Network memberships Push motivation Pull motivation Business strategies Utilise new/advanced technologies Incorporate new ideas Cooperate with other local businesses Willing to take risks Community bridging social capital F statistic Adj. R squared *p<.05, **p<.01 8.41** .07 4.45** .07 4.57** .08 38