Environmental and Ownership Characteristics of Small Businesses and Their Impact on Development

Three neighborhood factors (crime, appearance, and transportation accessibility), and other moderating influences (owner and firm characteristics), are correlated to a small business owner's expectations of future firm growth. Survey data from 1,351 small businesses from the city and county of San Francisco were used. Crime and neighborhood appearance have a significant (p=.001) correlation to the growth expectations of small business owners, but these two factors explain only a very small percentage (about 1 percent) of the variance in growth expectations. The ethnicity of the owner the legal structure of the firm, and firm type and size were also factors that significantly influenced the owners' expectations of growth in their small businesses. Recommendations for changes in public policy are offered. This article explores the relationship between the characteristics of a small business's location (crime, neighborhood appearance, and transportation accessibility) and a small business owner's expectations of future firm growth. Keeping established small businesses in their neighborhood and encouraging small business owners to invest in their present locations would seem to be one important way for a city to enhance the economic and social viability of its neighborhoods (Gottlieb 1995; Imbroscio 1995; Miranda and Rosdil 1995; Porter 1995). For example, Porter (1995) suggests that city officials and economic development agencies should consider city neighborhoods as having distinct competitive advantages and that these competitive advantages should be recognized and enhanced to attract and retain businesses within a city Porter stipulates that the advantages of inner city neighborhoods--such as the proximity to high-value areas, local market demand, unique clusters of specialized regional businesses, and certain types of human resources--offer certain businesses located in inner city neighborhoods significant opportunities for growth and prosperity. However, he notes that such inner city factors as the cost of land, building costs, re gulatory costs and compliance, and the costs of security are significant disadvantages for inner city businesses. It is suggested here that small business owners' optimism (or pessimism) about sales growth will significantly affect whether they undertake efforts to invest in or enhance business operations. Furthermore, it is surmised that the investment decisions of small business owners will have a profound impact on the neighborhoods where these businesses are located. If there are certain neighborhood characteristics that seem to correlate with small business owners' growth expectations, it might be possible for cities to enhance those characteristics to encourage economic development in these neighborhoods. Improving neighborhoods could be viewed as a way to stimulate small business investment and growth, which would lead to further improvements in the neighborhoods. Literature Review The academic literature on factors influencing firm location and growth appears in a diverse range of entrepreneurship, urban studies, and management journals. One view found in this literature suggests that the characteristics of a location can significantly influence all types of firms, as well as their growth patterns. For example, Bull and Winter (1991) compared communities across a wide range of environmental factors using Inc. magazine's measures of business births and the number of fastest growing companies as the dependent variables. They found that business birth and growth measures were negatively correlated with the location factors of health care, environment, climate and terrain, recreation, and crime, and positively correlated with the location's number of college graduates, population mobility, and unemployment. In a study of 365 northern New Jersey municipalities, Gottlieb (1995) found that certain aspects of the area, such as traffic, crime, pollution, recreation, education, and public servi ces, had significant correlations with the density of SIC 87 firms (engineering and management service) in the area. …