December 6, 2018
Miller School Snapshot: Eastern North Carolina Small Business
(photo by Cliff Hollis)
By Dennis Barber, III and Dr. Mike Harris, Miller School of Entrepreneurship, College of Business, East Carolina University
The Miller School of Entrepreneurship in the College of Business at East Carolina University (ECU) had the honor of a visit in early May by Linda McMahon, administrator of the Small Business Administration (SBA). Earlier in the spring ’18 semester, the Small Business Administration’s Office of Advocacy released state-level Small Business Profiles. In the 2018 North Carolina profile, it was noted that small businesses (those with less than 500 employees) accounted for 99.6 percent of the businesses in the state and employed over 1.6 million people in 2015. Small businesses also accounted for 50,881 net new jobs in the state. When we look at this data more closely, we find that 60 percent of those new jobs were created by microbusinesses, which have 20 or fewer employees.
Photo courtesy of ECU News Services
These types of businesses in North Carolina are often concentrated in service, construction, retail and health care/social assistance industries. The agriculture sector is also typically dominated by microfirms. Only 8 percent of the net new jobs were created by the largest small businesses—those with 100-499 total employees. Often a microfirm has characteristics that distinguish it from other small businesses. They have fewer formal processes, and the owner/manager plays multiple roles in the business. When firms reach around 25-30 employees, they normally divide operations into distinct functional areas. Microbusinesses also enjoy flexibility and centralized decision-making, which make them resilient in times of economic uncertainty.
Entrepreneurs in North Carolina
Startups are a distinct type of microbusiness. In 2016, 4,043 net startups were created in North Carolina. These successful startups provided 16,923 net new jobs. This number does not account for the more than 700,000 sole proprietorships that were created during the same period. North Carolina has seen consistently more startup births than deaths since 1992, except during the economic recession years between 2008 and 2010.
Rural areas are often characterized by low levels of mobility with a high level of social cohesion. Since many larger firms choose not to locate in rural areas, these regions are often more saturated with microfirms, family businesses and self-employed. Rural areas also experience higher poverty rates and have little recourse to welfare programs. With less access to formal capital to start businesses, microbusiness owners are more diligent to protect their limited resources.
At the national level, the number of microenterprise programs has increased substantially. Most of these programs target the working poor and the unemployed. In the South, many microbusinesses are in depressed areas where they face low demand and high competition. Whether they are microfirms or small and medium-sized firms, organizations are constantly working to lower costs, develop competitive advantages and increase productivity.
Photo courtesy of Cliff Hollis
Small Business Strategy for North Carolina
Many local communities are turning to targeted development projects that focus on indigenous strategies where they “grow their own.” A microbusiness centered strategy is an example of this type of policy approach. Policymakers focus on enabling the existing firms to succeed while creating a welcoming environment for the creation of new microenterprises. Some of the policy tools include subsidies for capital, investment in infrastructure, tax breaks, deregulation, human capital development and management training.
Microbusinesses are a clear mechanism for people to exit poverty. The jobs created by these firms foster skill development, employ local residents and offer valuable skills training. Many of the people employed by these firms are either disadvantaged or excluded from other formal labor market opportunities. Microfirms are critical resources for rural communities. They provide tailored products and services and occupy otherwise vacant commercial real estate. Also, they stimulate an inflow of community resources, provide a place for neighbors to meet, and often serve as role models and support for aspiring entrepreneurs.
ECU researchers understand the value of microbusinesses. The Miller School of Entrepreneurship and ECU’s Division of Research, Economic Development and Engagement have recently started the Microenterprise Program that will assist the regional transformation efforts of ECU’s Rural Prosperity Initiative. An objective of this program is to assist students who want to create microbusinesses with the intention of locating in rural communities throughout the region. Linkages with regional partners and access to entrepreneurial resources will be a key element of this program. It takes a campus-wide initiative to tackle the economic challenges in rural areas, and ECU is committed to building a vibrant and thriving entrepreneurial ecosystem in eastern North Carolina.
Established in 2015, the Miller School of Entrepreneurship at ECU’s College of Business. It serves as a regional hub for preparing students to take an entrepreneurial mindset and skillset into their communities. It’s the only named entrepreneurial school in North Carolina.
About the Authors
Dr. Mike Harris is the director of the Miller School of Entrepreneurship. Dr. Dennis Barber, III, is an assistant professor with the Miller School.
The Summer Innovation Academy at the Miller School of Entrepreneurship was designed to introduce area teenagers to the idea of entrepreneurship in North Carolina. (Photo courtesy of Rhett Butler)