Spatial Variations in the Role of Microenterprises in Economic Growth

Using U.S. county data from 1990 and 2000, a family of spatial models examining growth in population and employment are reported. Special attention is paid to the role of microenterprises—firms with less than five employees—in predicting economic growth. Results suggest that microenterprises play an important but complex role in economic growth. Depending on the industry classification of the microenterprises, and coupled with the metric of growth, there is significant heterogeneity in the policy implications of microenterprises and economic growth. Policy implications are that blanket statements about how small businesses influence growth can be misleading. Spatial heterogeneity in the determinants of economic growth using Geographically Weighted Regression (GWR) is also examined. These results provide strong evidence supporting the idea that there is significant spatial variation and that policies must be crafted to fit specific regional needs.