Entrepreneurship in Nebraska Conditions, Attitudes, and Actions

THE GALLUP ORGANIZATION

Eric C. ThompsonAssociate Professor of Economics

Director, Bureau of Business ResearchUniversity of Nebraska-Lincoln

William B. WalstadJohn T. and Mable M. HayProfessor of Economics

University of Nebraska-Lincoln

Entrepreneurship in NebraskaConditions, Attitudes, and Actions

Copyright © 2008 Eric Thompson and William Walstad2

Promise

and

Challenge


Promise• More economic growth• Expanded employment• Greater income and wealth• More variety of products & services• Increased philanthropy


Challenge• How can we expand

entrepreneurship in Nebraska?


Three Themes• Conditions

• Attitudes

• Actions


Our Purpose• Give an overview of the book

• Highlight some major findings

• Discuss potential actions


Credits• Jim Krieger

• Krieger Family Foundation

• Gallup and its associates

• University of Nebraska-Lincoln


Entrepreneurship in Nebraska

Conditions,Attitudes,

and Actions


Business and Economic Analysis

• Long-run Trends in Business Conditions Chapter 2

• Recent Trends in Business Conditions Chapter 3


Comparisons

• There has been tremendous growth in entrepreneurship in the United States economy in recent years

• We compare Nebraska to the nation and other states Has Nebraska fully participated?

• We also compare growth in the 6 community college regions of Nebraska


Community College Regions


Tracking Entrepreneurship in Nebraska

• We tracked the progress of entrepreneurship in Nebraska over both: The last two decades The last three years


Long Run Trends• Net growth in the number of businesses in Nebraska

lags U.S. by 0.5% to 1.0% per year.

• Nebraska population is also growing more slowly.

• These findings are related. Lower rates of business formation is one factor limiting population growth in the state.


Comparison of NE with US Business Counts

• However, there are a number of factors that affect population growth. And, lower population growth also may

limit growth in business counts.

• It is useful to look at per person growth in business – to what extent are Nebraskan’s generating businesses?


Employer Establishment Counts Per Person 2006


Annual Growth in Employer Establishments Counts Per Person 1994-2006


Comparison of NE with US Business Counts

• The growth of employer establishments per person is similar in Nebraska and United States.

• The picture is different when examining all firms, including proprietor’s without employees.


Annual Growth in Business Counts Per Person 1994-2004


Firm Births Per Person 1994-1995 and 2004-2005

Copyright © 2008 Eric Thompson and William Walstad

Selected High Growth IndustriesGrowth in Establishments Per Person

Average Annual Change

2001-2005 Nebraska U.S.

Software Publishers 0.0% -3.1%Computer System Design 2.7% 1.0%Management Consulting 5.5% 4.8%Scientific R&D 7.7% 1.5%

20


Patents Per Thousand Residents

Average

Annual Change 2005 1990-2005

Nebraska 0.117 1.5%

United States 0.279 1.8%

21


Annual Growth in Real Income Per Non-Farm Proprietor 1990-2005

Nebraska Unites States0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%1.3%

0.8%


Relative Per Capita Income 1990-2005Non-Farm Income

Relative Non-Farm Income per Capita Nebraska vs. United States

1990-2006

82.0%

84.0%

86.0%

88.0%

90.0%

92.0%

94.0%

96.0%

1990 1992 1994 1996 1998 2000 2002 2004 2006


Comparison among 6 Community College Districts

• Compare the number of employer establishments per person in the 6 districts, and growth in employer establishments.

• Compare growth in real income per proprietor, and per capita income.


Employer Establishments Per Person 2006by Community College District


Annual Growth in Employer Establishment Counts Per Person 1990-2006

by Community College District


Real Income Per Non-Farm Proprietor 1990-2005 by Community College District

1990

1992

1994

1996

1998

2000

2002

2004

$5,000$7,000$9,000

$11,000$13,000$15,000$17,000$19,000$21,000

Income per Non-Farm Proprietor Community College Regions 1990-2005

Western

Mid-Plains

Central

Northeast

Metropolitan

Southeast

Inco

me

per N

on-F

arm

Pro

prie

tor


State Entrepreneurship Index5 Components

• Percent Growth in Employer Establishments• Percent Growth in Non-Farm Proprietorships per

Person• Business Formation Rate• Real Income per Non-Farm Proprietorship• Patents per Thousand Residents

28


State Entrepreneurship IndexNebraska and Selected Nearby States

2004 2005State Ranking Index Value Ranking Index

ValueNebraska 34 0.89 35 0.85

Colorado 3 1.96 2 2.17Iowa 49 0.45 49 0.46South Dakota 44 0.72 42 0.63Wyoming 7 1.77 9 1.54

29


State Entrepreneurship IndexSelected Leading States

2004 2005State Ranking Index Value Ranking Index

Value

Idaho 1 2.25 1 2.44Colorado 3 1.96 2 2.17Massachusetts 4 1.86 5 1.84Wyoming 7 1.77 9 1.54California 8 1.77 6 1.74

30


Conclusion

• Many indicators suggest an average level of entrepreneurship in Nebraska. Nebraska and the United States have a similar number of

businesses per person. The growth rate among employer establishments is similar

in Nebraska and the nation on a per person basis. Nebraska has a “middle of the pack” value and ranking for

the State Entrepreneurship Index


Conclusion

• While Nebraska is an average state in terms of entrepreneurship, Nebraska is not yet a leading state.

• Further several indicators suggest that entrepreneurial success in the state is concentrated in the Omaha area.

Most strikingly, while the number of employer establishments per person grew strongly in all 6 Community College Districts of Nebraska, the average income of proprietors was flat or declining in 5 of these districts.

Omaha was the only region with rapidly growing average income per proprietor.




and Actions


Survey Analysis

• Interest and Reasons for Entrepreneurship Chapter 4

• Entrepreneurial Knowledge and Education Chapter 5

• Views of Government, Business, and Economic Development Chapter 6


Sampling• General Public

2,460 to 4,935 Nebraskans 18 years of age or older

+/- 1.4% to 2.0% sampling error for state results

• Business Owners

555 to 1,122 Nebraska business owners with 1 to 100 employees

+/- 4.2% to 2.9% sampling error for state results

Surveys conducted: Fall 2005 and 2006


Interest in Entrepreneurship


Interest in Starting A Business

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

32%

11%

Yes Already own business

Percent yes or already own one

General Public (n = 4,935)

43% total


Community College Regions


Interest in Starting a Business

Metro Southeast Central Northeast Mid-Plains Western0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

37%30% 31% 28% 26%

30%

9%

10% 11%12% 15%

16%

Yes Already own a business

Community College Districts


46%

40% 42% 40% 41%46%


Interest in Starting A Business by Age

18-29 30-39 40-49 50+0%

10%

20%

30%

40%

50%

60%

70%

55%45%

37%

15%

5%13%

14%

11%

Yes Already own business

Age in yearsGeneral Public (n = 4,935)

60% 58%

51%

26%


Age When First Thought of Starting Own Business

<30 30-39 40-49 50+0%

10%20%30%40%50%60%70%80%

64%

20%

9% 5%

Age

Business Owners (n=1,122)


First Thought of Starting Own Business at Age 29 or younger

1-10 11-19 20-49 50-1000%

10%

20%

30%

40%

50%

60%

70%

80%

65%57% 60%

65%

Firm size by number of employees



Interest Findings

• Over half of Nebraskans ages 18-29 are interested in starting a business. And, over half of this group say they are very likely or likely to do so.

• Among the ~ 300,000 Nebraskans (age18-29) there are about 84,000 with genuine interest in starting a business.

• There is a large untapped pool of potential entrepreneurs

among young adults in Nebraska!


Business Succession


Years to Exit Business

0-5 6-10 More than 10 years

0%

5%

10%

15%

20%

25%

30%

35%

40%

29%

23%

38%



Who to Transfer Business to

Family Employee(s) Third party Liquidate0%

5%

10%

15%

20%

25%

30%

35%

40%36%

10%

19%

25%



Succession Findings • There is a succession problem for businesses.

• Most owners plan to exit the business in next 10 years.

• Many owners, especially of smaller businesses, plan to liquidate their business.


Role of Government


Government Regulations Make ItToo Difficult to Start a Business

Series10%

10%

20%

30%

40%

50%

60%

70%

56%

67%

General Public (n=2,475) Business Owners (n=567)

Percent in agreement


Government Regulations Make ItToo Difficult to Start a Business

(% in agreement)

Metro Southeast Central Northeast Mid-Plains Western0%10%20%30%40%50%60%70%80%

52% 55% 59% 61% 62%67%




Government Taxes Make ItToo Difficult to Start a Business

Series10%

10%

20%

30%

40%

50%

60%

70%

51%56%


Percent in agreement


Government Should Provide MoreTax Incentives for New Businesses

Percent saying yes0%

10%20%30%40%50%60%70%80%90%

100%

75%81%

General Public (n=4,935) Business Owners (n=1,122)


Government Findings • Government regulations are perceived as making

it too difficult to start new businesses

• Taxation is also viewed as an impediment to starting new businesses.

• Of possible actions, people would like to see more tax incentives given for starting businesses.


Business Climate


Positive Climate for Business

Percent positive response0%

10%

20%

30%

40%

50%

60%

70%

46%50%



Positive Climate for Business(% positive response)

Metro Southeast Central Northeast Mid-Plains Western0%

10%

20%

30%

40%

50%

60%52%

44%40% 41%

44%

35%




Effectiveness of Economic Development

Percent effective or very effective0%

10%

20%

30%

40%

50%

60%

70%

42%34%

General Public (n=4, 935) Business Owners (n=1,122)


Effectiveness of Economic Development(% saying effective)

Metro Southeast Central Northeast Mid-Plains Western0%5%

10%15%20%25%30%35%40%45%50% 46%

34%

44%38% 38%

32%




Major Problems for Starting a Business

Cost of Health Care Poor Economic Condi-tions

Finding Workers0%

10%20%30%40%50%60%70%80%90%

100%

79%

46%37%

80%

49% 49%



Who Should Improve Accessto Financing for Starting Businesses

Banks Investors Business organiza-

tions

Government0%

10%20%30%40%50%60%70%80%90%

100% 91%82%

72%

46%



Climate Findings • The business climate is fairly positive, but it

varies by region across the state.

• Economic development is not generally viewed as being effective and it also varies by region.

• There are concerns about health care and financing as barriers to starting new businesses.


Careers, Education, Knowledge


Number of Other Businesses Started

Just this one 1 2 3 or more0%

5%

10%

15%

20%

25%30%

35% 33%29%

22%

16%

Chart Title

Number of other businesses started

Business Owners (n=555)


Child Become an Entrepreneur

Percent saying yes0%

10%20%30%40%50%60%70%80%90%

100% 91%81%



Importance of Schools To Teach Entrepreneurship

Percent Saying Important or Very Important0%

10%20%30%40%50%60%70%80%90%

100%

80%86%



Importance of Colleges To Teach Entrepreneurship

Percent Saying Important or Very Important0%

10%20%30%40%50%60%70%80%90%

100%85% 88%



Knowledge of Starting and Managing a Business

Percent saying good or excellent0%

10%

20%

30%

40%

50%

39% 36%

General Public (n=4,935)Business Owners--at first (n=1,122)


Careers, Education, Knowledge • Entrepreneurship is a satisfying career choice as

indicated by its serial nature (starting more than one business) and wanting a child to be one.

• There is great support for the teaching entrepreneurship in schools and colleges.

• Knowledge of entrepreneurship is limited and needs to be improved.




and Actions


Actions to Advance Entrepreneurship

in Nebraska


Advance Technology and Capital Formation

A.Technology transferTransfer inventions to local firms

B.Angel investorsIdentify, fund, and advise high-growth firms

C.Entrepreneurship endowmentPrivate investment in funds loaning money to

and advising start-up firms

D.Technical supportProfessional services for start-up firms


Increase the supply of potential entrepreneurs

A. Entrepreneurship education

1: Provide entrepreneurship curricula

2: Identify students with entrepreneurial potential

B. Encouraging business succession

1: Increase interest in family business

2: Recruit new entrepreneurs


Improve the Business Climate

A. TaxesReduce state tax rates

B. RegulationMore flexible regulation

C. Health Care 1: Insurance pools for small firms 2: Reduce malpractice costs

D. Qual i ty of L i feImprove amenities and recreation


Call to Action to Advance

Entrepreneurshipin Nebraska

Jim Krieger


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and

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Entrepreneurship in Nebraska Conditions, Attitudes, and Actions

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