Small businesses and entrepreneurial businesses are both valuable for communities, but in different ways and at different times

Margaret Fitzgerald & Glenn Muske, "Family businesses and community development: the role of small business owners and entrepreneurs," Journal of Community Development 47 (2016): 4

The take-away: Focusing on the varied economic contributions of small and entrepreneurial businesses, this study finds that the latter have the greatest potential for commercial growth, while the former is more valuable in times of economic downturn by providing economic stability. Additionally, the study largely validates the common assumption that these different kinds of businesses can be differentiated by behaviors and attitudes; it then extends this assumption to argue that these businesses consequently do different things for communities, and that they therefore warrant separate analytical treatment. 

Abstract: Family businesses contribute to the economies and social fabric of their communities, often forming the stable business core. Although identified as family businesses, they may also be classified as entrepreneurial or small businesses. Few empirical studies have validated the classification of either group – entrepreneur or small business – based on unique differences or contributions to economic development over time. In this study, panel data from three waves of the National Family Business Survey (USA) spanning 10 years were used to verify the distinct differences between groups. Results indicate the importance of supporting family business owners, whether entrepreneurs or small business owners, in economic development because each group makes important contributions to the long-term sustainability of its community’s economic sector. While entrepreneurs achieve greater gross income and number of employees, small business owners offer stability during economic downturns. Suggestions to guide policy-makers and support agencies are offered.

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