Office of Economic 

Research

Research Publications

2008

www. Advocacy: the voice of small business in government sba.gov/advo

Office of Advocacy

January 2009
Created by Congress in 1976, the Office of Advocacy of the U.S. Small Business

Administration (SBA) is an independent voice for small business within the federal

government. Appointed by the President and confirmed by the U.S. Senate,

the Chief Counsel for Advocacy directs the office. The Chief Counsel advances

the views, concerns, and interests of small business before Congress, the White

House, federal agencies, federal courts, and state policy makers. Economic

research, policy analyses, and small business outreach help identify issues of

concern. Regional Advocates and an office in Washington, D.C., support the Chief

Counsel’s efforts.

For more information on the Office of Advocacy, visit www.sba.gov/advo or call

(202) 205-6533. Receive email notices of new Office of Advocacy information

by signing up on Advocacy’s Listservs at http://web.sba.gov/list.

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Office of Economic 

Research

Research Publications

2008

Office of Advocacy

U.S. Small Business Administration

Washington, D.C.

January 2009
The full text of this report is available on the Office of Advocacy’s 

website at www.sba.gov/advo/research/lending.html.

Reprints are available for purchase from the National Technical 

Information Service, 5285 Port Royal Road, Springfield, VA 22161;

www.ntis.gov.

Federal Recycling Program

Printed on recycled paper.
Access these reports online at www.sba.gov/advo Research Publications 2008 3

Foreword

Each year, the Office of Advocacy examines issues relevant to small businesses in the U.S. economy. This report summarizes the publications generated 

by independent contractors, as well as by staff economists of the Office of 

Economic Research in 2008.

Three reports highlight innovation and entrepreneurship, both crucial to 

U.S. economic revival and competitiveness in a global marketplace. A report 

by Zoltan Acs, William Parsons, and Spencer Tracy updates David Birch’s 

groundbreaking research on “gazelles,” or fast-growing, high-impact firms. 

The authors find that these firms account for almost all of the growth in private 

sector employment and revenue in the economy. Lawrence Plummer and Brian 

Headd’s analysis shows that establishment birth rates are similar in rural and 

urban areas—a surprising result that illustrates the resilience of entrepreneurial 

ventures. Innovation is key to many of these firms’ success; a study by Anthony Breitzman and Diana Hicks confirms the significance of small business 

patents, solidifying previous research published by this office.

The demographics of small business owners—women, minorities, immigrants, veterans—is key to small businesses’ vitality and impact. Robert Fairlie’s report documents in detail the substantial contributions that immigrant entrepreneurs make to our national economy; he shows that immigrant business 

owners generated nearly 12 percent of all U.S. business income. A study led 

by Vivek Wadhwa of Duke University finds that immigrants, particularly those 

in high-technology fields, are often more entrepreneurial than their native-born 

counterparts. Darrene Hackler, Ellen Harpel, and Heike Mayer detail the gains 

that self-employed women have made in recent years and demonstrate the 

importance of human capital.

For small businesses to contribute to our overall economy, they must be 

able to compete effectively at home and abroad. Advocacy examined international trade in two 2008 studies focused on the manufacturing sector. Robert 

M. Feinberg observes increased small firm exit rates as a result of fluctuations 

in currency exchange rates. The consulting firm StratEdge finds that large and 

small business have benefited and suffered from outsourcing, as well as the 

related practice of “insourcing.” E.H. Pechan and Associates find that small 

entities in the manufacturing and construction sectors are disproportionately 

affected by higher energy costs. Advocacy also published research in 2008 on 

the effects of bankruptcy laws on entrepreneurship (a working paper by SeungHyun Lee, Yasuhiro Yamakawa, and Mike W. Peng) and the impact of antitrust 

enforcement on small businesses in the retail grocery and timber industries (a 

study by Innovation and Information Consultants). 
Access these reports online at www.sba.gov/advo Research Publications 2008 4

There are other important publications from 2008 as well. In preparation 

for the change of presidential administrations in 2009, the office published the 

Background Paper on the Office of Advocacy, 2001-2008. This report documents Advocacy’s accomplishments and provides a detailed recent history of 

the office for the next chief counsel for advocacy, as well as for other policymakers.

A number of Advocacy’s economists contributed original research in 2008, 

including Brian Headd, Chad Moutray, Charles Ou, Radwan Saade, and Victoria Williams. 

All of the Office of Advocacy’s research from the mid-1990s to the present can be found online at www.sba.gov/advo/research. To receive regular 

updates on Advocacy’s research, join Advocacy’s research Listserv by visiting 

http://web.sba.gov/list. Please direct all questions or suggestions for future 

studies to Advocacy at (202) 205-6533 or advocacy@sba.gov.

Chad Moutray, Ph.D.

Chief Economist 

Director of Economic Research
Access these reports online at www.sba.gov/advo Research Publications 2008 5

Contents

Banking and Financial Issues. . . . . . . . . . . . . . . . . . . 7

Energy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

General Small Business and Entrepreneurship. . . . . . . . . .10

Human Capital and Employment Benefits . . . . . . . . . . . 13

International Trade . . . . . . . . . . . . . . . . . . . . . . . 15

Innovation and Technology. . . . . . . . . . . . . . . . . . . .16

Owner Demographics. . . . . . . . . . . . . . . . . . . . . . .16

Procurement. . . . . . . . . . . . . . . . . . . . . . . . . . . .17

Regional Economic Development. . . . . . . . . . . . . . . . .17

Regulation and Law. . . . . . . . . . . . . . . . . . . . . . . .18

Taxation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

Other Office of Advocacy Publications. . . . . . . . . . . . . .19
Access these reports online at www.sba.gov/advo Research Publications 2008 7

Banking and Financial 

Issues

Uncovering Knowledge Structures of Venture Capital Investment 

Decision Making

Pankaj Patel and Rodney D’Souza; a working paper released January 

2008

2008 United States Association for Small Business and Entrepreneurship 

(USASBE) Advocacy Best Student Paper Award

www.sba.gov/advo/research/rs315tot.pdf

Entrepreneurs constantly seek capital for new and existing ventures although 

they face considerable constraints in obtaining financing. Venture capital 

from outside investors has been considered an important driver in the startup 

and growth of entrepreneurial firms. Understanding the specific investment 

criteria for venture capital funding is of foremost importance, since this may 

substantially improve these firms’ chances of acquiring funding. The authors 

have chosen to predict funding by measuring the decisions on both funded 

and unfunded business plans. Overall, the study posits that venture capitalists (VCs) may be willing to fund a marginal team with better venture potential than a good venture team with limited venture potential. In other words, 

entrepreneurs need not only to assemble an effective team, but also to clearly 

demonstrate the venture potential of their proposed business. This finding 

contrasts with most prior studies, which identify the venture team as the key 

funding criterion.

Small Business and Micro Business Lending in the United States

Victoria Williams and Charles Ou

For data years 2005-2006, released February 2008: www.sba.gov/advo/

research/sbl_06study.pdf

For data years 2006-2007, released June 2008: www.sba.gov/advo/

research/sbl_07study.pdf 

The Office of Advocacy prepares an annual study of lending to small firms, 

using the most recent data available on small and micro business loans to small 

firms and on the lending institutions that serve them. This study provides a 

brief review of the lending activities based on two types of data reported by 

banks to their regulating agencies—Consolidated Reports of Condition and Income, often referred to as “call reports,” and reports required by the Community Reinvestment Act (CRA). Because data are available only by the size of 

the loan, small business loans are defined as business loans under $1 million, 

and microbusiness loans are those under $100,000.

Office of Economic Research

Research Publications 2008
Access these reports online at www.sba.gov/advo Research Publications 2008 8

Banking and Financial 

Issues (cont’d)

The Tax Debts of Small Business Owners in Bankruptcy

Rafael Efrat; released February 2008

www.sba.gov/advo/research/rs317tot.pdf

The objective of this study is to investigate the burden tax obligations impose 

on small business owners (both individuals and entities) at the time of their 

bankruptcy filing. This is an important area to study given the existing documentation on the adverse impact tax debts have on the financial viability of petitioners both before and after bankruptcy filing. Overall, this study documents 

the pervasiveness and the magnitude of the tax burden among small business 

owners in bankruptcy. The data suggest that the tax burden is more pervasive 

among small business owners in bankruptcy than among consumer petitioners. 

While less than a quarter of all consumers in the bankruptcy sample reported 

tax debts, more than half of individual small business owners reported owing 

some tax debts. Individual small business owners in bankruptcy proceedings 

who are encumbered with high tax debts are generally in a precarious financial 

condition and are worse off financially than small business owners who have 

low or no tax debt.

What Do We Know About the Capital Structure of Privately Held 

Firms? Evidence from the Surveys of Small Business Finances

Rebel A. Cole; released May 2008

www.sba.gov/advo/research/rs324tot.pdf

This paper seeks to shed light on what factors determine the capital structure at 

privately held firms. The capital structure decision—a fundamental issue facing financial managers—is, in its simplest form, the selection of a ratio of debt 

to equity for the firm. This study contributes to the capital structure literature 

in at least three important ways. First, it provides results from the first test of 

two major competing hypotheses—the “pecking order theory” and the “tradeoff theory”—based upon data from small privately held U.S. firms. Second, 

the study provides new evidence of the degree of leverage used by small privately held companies and how their use of leverage differs from small publicly traded firms. Samples of data on small privately held firms are compared 

with data on small publicly traded firms taken from the Compustat database. 

Third, the study presents new evidence on how the use of financial institutions 

influences capital structure, testing whether firms that obtain financial services 

from a larger pool of financial institutions are able to employ more leverage.
Access these reports online at www.sba.gov/advo Research Publications 2008 9

Banking and Financial 

Issues (cont’d)

The Importance of Angel Investing in Financing the Growth of 

Entrepreneurial Ventures

Scott Shane; a working paper released September 2008

www.sba.gov/advo/research/rs331tot.pdf

Many observers consider angel investments to be one of the key drivers behind 

the startup and the growth of new businesses, despite a paucity of information to confirm whether or not this is true. Unlike venture capital investments, 

angel investments are made by individual investors who do not make up a 

known population. Therefore, much of what is reported about angel investing 

comes from anecdotes and surveys of convenience samples, which are prone 

to biases and inaccuracies. Moreover, research on angel investment is plagued 

by definitional confusion, in which different investigators confound informal 

investors, friends and family who invest in startups, accredited and unaccredited angel investors, and individual and group investing. The variation makes 

it difficult to compare findings across studies. As a result, this paper finds that 

the angel capital market is smaller than is generally believed. Few companies 

are appropriate for angel financing, a fact that limits demand for this source 

of financing. Angel investments are smaller and less sophisticated and include 

more debt than is commonly thought. And the companies that receive angel 

financing are more similar to typical startups. 

Energy Characterization and Analysis of Small Business Energy Costs

Andy Bollman, E.H. Pechan and Associates, Inc.; released April 2008

www.sba.gov/advo/research/rs322tot.pdf

To add to the state of knowledge on small entity impacts of energy price increases, this report compiles available information to characterize the potential 

impact of energy price increases on small entities in individual industry sectors; and identify whether, and to what extent, small entities face higher energy 

prices by major economic sector. Overall, this study finds that small entities in 

the manufacturing and construction sectors pay higher prices for most, but not 

all, fuels. These price disparities are most pronounced for electricity and natural gas, with electricity in the manufacturing sector responsible for the greatest 

price differential. The smallest size establishment category (under 50 employees) pays 35 percent more for electricity than the sector average, while the 

largest establishment category (1,000 or more employees) pays 17 percent less 

than the sector average. Therefore, small manufacturing sector entities that use 

substantial amounts of electricity face a significant competitive disadvantage.
Access these reports online at www.sba.gov/advo Research Publications 2008 10

General Small Business 

and Entrepreneurship

Quarterly Indicators: The Economy and Small Business

Chad Moutray

Fourth quarter 2007, released February 2008: www.sba.gov/advo/

research/sbqei0704.pdf

First quarter 2008, released May 2008: www.sba.gov/advo/research/

sbqei0801.pdf

Second quarter 2008, released August 2008: www.sba.gov/advo/

research/sbqei0802.pdf 

Third quarter 2008, released November 2008: www.sba.gov/advo/

research/sbqei0803.pdf 

This regular publication pulls together data from a variety of sources to highlight quarterly economic trends relevant to small businesses.

Rural and Urban Establishment Births and Deaths Using the 

U.S. Census Bureau’s Business Information Tracking Series

Lawrence A. Plummer and Brian Headd; a working paper released 

February 2008

www.sba.gov/advo/research/rs316tot.pdf

This paper has two objectives focusing on local business dynamics. First, it 

documents a set of establishment birth and death tabulations now available 

from the U.S. Census Bureau’s Company Statistics Division. These tabulations report establishment births and deaths by industry classification for every 

county in the United States from 1990 to 2003. In particular, tabulations report 

the total, single-unit, and multi-unit births and deaths. Second, it presents preliminary descriptive analysis of the establishment birth and death rates by rural 

and urban counties. The rural-urban analysis gives a surprising result.

When measured by either of two analytical methods (ecological or labor 

force) the differences in the average rates of establishment births and deaths 

for urban and rural areas are extremely small. While the difference is statistically significant, on average, the general dynamic of economic activities is not 

a function of rural versus urban conditions. This result has implications for the 

setting and study of economic development policy for both rural and urban 

areas, especially where such policies hinge on stimulating and supporting local 

entrepreneurial activity (i.e., “economic gardening”).
Access these reports online at www.sba.gov/advo Research Publications 2008 11

General Small Business 

and Entrepreneurship 

(cont’d)

High-Impact Firms: Gazelles Revisited

Zoltan Acs, William Parsons and Spencer Tracy; released June 2008

www.sba.gov/advo/research/rs328tot.pdf

This study revisits and expands upon some of the conclusions on rapidly growing firms made by the small business research pioneer, David Birch, in the 

1980s. Birch found that rapidly growing firms, which he termed “gazelles,” are 

responsible for most employment growth. While Birch’s definition of gazelles 

was based on their revenue growth, this study examines firms with significant 

revenue growth and expanding employment. These are termed “high-impact 

firms” to distinguish them from gazelles. The research offers summary statistics helping to define the scope and characteristics of high-impact firms. Overall, it finds that high-impact firms are relatively old, rare and contribute to the 

majority of overall economic growth. On average, they are 25 years old, they 

represent between 2 and 3 percent of all firms, and they account for almost all 

of the private sector employment and revenue growth in the economy.

Do Business Definition Decisions Distort Small Business 

Research Results?

Brian Headd and Radwan Saade; a working paper released August 2008

www.sba.gov/advo/research/rs330tot.pdf

One of the most basic assumptions underpinning research on small business 

status and performance (as well as the impact of other factors on small business) is the definition of a small business, or the choice of a business unit. 

This paper shows that mixing data on different kinds of businesses can distort 

research results. It accomplishes this by showing that differences exist among 

business types and emphasizing that the choice of business type at the outset 

of research is significant. Overall, the authors find that the typical nonemployer firm and employer firm differ. The most immediately obvious difference 

is their size and number. Employers are larger operations, but nonemployers 

outnumber employer firms by a three-to-one ratio. Pooling data on both groups 

creates hazards in results and interpretation. And using one group to deduce 

results for the other group or the group as a whole also poses logical problems. 

With nonemployers representing three out of four businesses, researchers 

should be aware that results of business studies that include nonemployers 

will tend to reflect trends among nonemployers because of their overwhelming 

number. On the other hand, the results of research focusing just on employers 

will most likely not apply to nonemployers.
Access these reports online at www.sba.gov/advo Research Publications 2008 12

General Small Business 

and Entrepreneurship 

(cont’d)

Frequently Asked Questions

Chad Moutray; released September 2008

www.sba.gov/advo/stats/sbfaq.pdf 

This document serves as a summary of other research materials and provides 

a series of quick, easy-to-recite facts for an external audience to recognize 

the importance of small business to the economy. As such, it is an excellent 

“introductory” publication for individuals to acquaint themselves with Office 

of Advocacy research and data.

Looking Ahead: Opportunities and Challenges for 

Entrepreneurship and Small Business Owners

Chad Moutray; a working paper released October 2008

www.sba.gov/advo/research/rs332tot.pdf

This paper was prepared for presentation at “Entrepreneurship in a Global 

Economy,” a conference sponsored by the Western New England College’s 

Law and Business Center for Advancing Entrepreneurship, held in Springfield, 

Massachusetts, on October 17, 2008. It outlines some of the most important 

issues and opportunities facing small business owners and entrepreneurs in 

this election year. While it does not delve into policy solutions, the incoming 

administration will almost certainly need to address many of them.

Small Business Profiles for the States and Territories

Brian Headd and Victoria Williams; released November 2008

www.sba.gov/advo/research/profiles 

The economic condition of small businesses in the United States overall and in 

each of the 50 states, the District of Columbia, and the U.S. territories is illustrated. Each state profile contains sections on the following topics: the number 

of firms, industry composition, small business income, banking, women’s and 

minority business ownership, and employment. 
Access these reports online at www.sba.gov/advo Research Publications 2008 13

Human Capital and 

Employment Benefits

Changes in Family Health Insurance Coverage for Small and 

Large Firm Workers and Dependents: Evidence from 1995 to 

2005

Eric E. Seiber and Curtis S. Florence; released March 2008

www.sba.gov/advo/research/rs321tot.pdf

Access to and affordability of health insurance offered by business owners to 

employees continue to be of great concern. The cost of employer-sponsored 

health insurance is often cited as one of the most pressing problems affecting the provision of health insurance for small business owners. The objective 

of this study is to determine whether the decline in family health insurance 

coverage at large firms has increased financial pressure on plans sponsored 

by small firms. The study addresses family health insurance coverage from 

the worker’s perspective. Overall, this study finds that family health insurance 

coverage for workers in both small and large firms is decreasing, and that firm 

size plays a role in the type of dependent coverage children have. Access to 

coverage through a large firm as a dependent remains very important to small 

firm employees.

Human Capital and Women’s Business Ownership

Darrene Hackler, Ellen Harpel, and Heike Mayer; released April 2008

www.sba.gov/advo/research/rs323tot.pdf

This analysis shows that self-employed women differ on most human capital 

variables compared to women who are wage and salary-earning earners. The 

study finds that self-employed women have more education and increased their 

educational attainment at a faster rate compared to other working women. The 

percentage of self-employed women in managerial occupations consistently 

exceeded the rate for other working women, and self-employed women participated in different industries than other working women. Self-employed women 

were also more likely to be self-employed in the previous year, were older than 

wage-and-salary-earning women, and had greater income diversity.

Self-employed men and women differ little in education, experience and 

preparedness—at least by the end of the study period. Important differences 

remain when considering occupational and industry experience. A lower 

percentage of self-employed women hold managerial occupations than do 

self-employed men, and there are lower rates of self-employment in industries where there is less overall female participation (such as communications, 

transportation, wholesale trade, manufacturing, and construction).
Access these reports online at www.sba.gov/advo Research Publications 2008 14

Human Capital and 

Employment Benefits 

(cont’d)

Baccalaureate Education and the Employment Decision: SelfEmployment and the Class of 1993

Chad Moutray; a working paper released October 2008

www.sba.gov/advo/research/rs333tot.pdf

This paper delves into the relationship of collegiate education to the employment decision. We are able to identify specific characteristics of the individuals 

who are self-employed versus those who opt to work for a for-profit business, 

a not-for-profit entity, or the government (including the military). Specifically, 

this research utilizes the U.S. Department of Education’s Baccalaureate & Beyond (B&B) data series, which tracks college and university graduates in the 

class of 1993. This longitudinal survey asks a number of questions to a nationally representative sample of college and university students who were seniors 

during the 1992-1993 academic year. The same students answer follow-up 

questions periodically. In the case of the B&B data, there is information from 

subsequent questionnaires in 1994, 1997, and 2003. Much of the analysis in 

this paper focuses on employment in 2003, i.e., ten years after graduation. 

Overall, this study shows that the self-employed closely resemble the larger 

population in many ways. Unlike others who pursue wage-and-salary occupations in the not-for-profit or government sectors, students in the class of 1993 

who were self-employed in 2003 were less likely to have earned or be currently enrolled in graduate education. Graduates with social science and “other” 

majors were more likely to be self-employed. In addition, those individuals 

who chose self-employment had shorter job tenures than others, such as those 

who now work for government or the military.
Access these reports online at www.sba.gov/advo Research Publications 2008 15

International Trade The Impact of International Competition on Small-Firm Exit in 

U.S. Manufacturing

Robert M. Feinberg; released March 2008

www.sba.gov/advo/research/rs320tot.pdf

This econometric study uses Statistics of U.S. Businesses (SUSB) data to 

examine the impact of trade on small manufacturers. As global trade increases 

and currency exchange rates fluctuate, concerns about their impact on small 

U.S. manufacturers increase. Small manufacturers, by the nature of their scale 

of operations, are less able to insulate themselves from foreign competition 

than large manufacturers. Although not without costs, large manufacturers 

have greater leeway in managing the effects of international competition: they 

can move production offshore, sign long-term commodity contracts in foreign 

currencies, or use other tactics to weather global shifts. Overall, this study 

finds that increased international pressures in the form of currency exchange 

rates lead to increased exit rates among very small manufacturers (those with 

fewer than 20 employees). Slightly bigger manufacturers (20-499 employees) 

are less sensitive to changing conditions in the international marketplace. 

High-tech industries are more insulated from international pressures than lowtech industries are.

Offshoring and U.S. Small Manufacturers

StratEdge; a working paper released December 2008

www.sba.gov/advo/research/rs336tot.pdf

At present, little is known about the effects of outsourcing, insourcing, or 

offshoring on small business, or for that matter, what role small firms play in 

the phenomenon. This study finds that offshoring, outsourcing, and insourcing 

do not follow any constant pattern across small firms, but rather vary greatly 

by industry, just as with larger firms. Results of empirical tests of changes in 

small firm employment do not yield significant results with respect to the effects of outsourcing, offshoring, or insourcing. The preliminary results in this 

paper should not be taken as the final word on how changes in the alignment of 

global production capacity have affected small American businesses. It would 

be more accurate to say that these results show that there is no simple answer 

to this difficult puzzle. Importantly this paper can at least lay to rest any claim 

that globalization is either universally detrimental or beneficial to small firms. 

It appears that a more accurate statement would be that both large and small 

firms located in the United States have benefited and suffered from outsourcing. The case studies in the second part of the paper drive home this fact.
Access these reports online at www.sba.gov/advo Research Publications 2008 16

Innovation and 

Technology

High-Impact Firms: Gazelles Revisited

Zoltan Acs, William Parsons and Spencer Tracy; released June 2008

www.sba.gov/advo/research/rs328tot.pdf

See entry description, page 11.

An Analysis of Small Business Patents by Industry and Firm Size

Anthony Breitzman and Diana Hicks; released November 2008

www.sba.gov/advo/research/rs335tot.pdf

This study is the third in a series that examines small business patent activity. The authors find that small firms are a significant source of innovation 

and patent activity. Small businesses develop more patents per employee than 

larger businesses, with the smallest firms, those with fewer than 25 employees, 

producing the greatest number of patents per employee. Furthermore, small 

firm patents tend to be more significant than large firm patents, outperforming 

them in a number of categories including growth, citation impact, and originality. Finally, small firms tend to specialize in high tech, high growth industries, 

such as biotechnology, pharmaceuticals, information technology, and semiconductors.

Owner Demographics Human Capital and Women’s Business Ownership

Darrene Hackler, Ellen Harpel, and Heike Mayer; released April 2008

www.sba.gov/advo/research/rs323tot.pdf

This analysis shows that self-employed women differ on most human capital 

variables compared to women who are wage and salary-earning earners. The 

study finds that self-employed women have more education and increased their 

educational attainment at a faster rate compared to other working women. The 

percentage of self-employed women in managerial occupations consistently 

exceeded the rate for other working women, and self-employed women participated in different industries than other working women. Self-employed women 

were also more likely to be self-employed in the previous year, were older than 

wage-and-salary-earning women, and had greater income diversity.

Self-employed men and women differ little in education, experience and 

preparedness—at least by the end of the study period. Important differences 

remain when considering occupational and industry experience. A lower 

percentage of self-employed women hold managerial occupations than do 

self-employed men, and there are lower rates of self-employment in industries where there is less overall female participation (such as communications, 

transportation, wholesale trade, manufacturing, and construction).
Access these reports online at www.sba.gov/advo Research Publications 2008 17

Owner Demographics 

(cont’d)

Estimating the Contribution of Immigrant Small Business 

Owners to the U.S. Economy

Robert W. Fairlie; released November 2008

www.sba.gov/advo/research/rs334tot.pdf

The objective of this study is to provide a set of estimates of immigrant business owners in the U.S. economy. Using data from three large nationally 

representative government datasets—the 2000 Census 5 Percent Public Use 

Microdata Sample (PUMS), the 1996-2007 Current Population Survey (CPS), 

and the 1992 Characteristics of Business Owners (CBO)—this study also 

examines the contribution of immigrant businesses to the U.S. economy. The 

author finds that according to Census 2000, immigrants constitute 12.2 percent 

of the total U.S. work force, and 12.5 percent of the total population of U.S. 

business owners. The total business income generated by immigrant business 

owners is $67 billion, representing 11.6 percent of all business income in the 

United States. Immigrant business ownership is geographically concentrated in 

a few states.

Procurement The HUBZone Program Report

Henry Beale and Nicola Deas, Microeconomic Applications, Inc.; 

released May 2008

www.sba.gov/advo/research/rs325tot.pdf

Public Law 108-447 directed the Office of Advocacy to conduct a study measuring the effectiveness of the definitions under Section 3(p)(4) of the Small 

Business Act (15 U.S.C. 632(p)(4) for the purposes of economic impact on 

small business development and job creation. This section of the law is commonly referred to as the HUBZone program. This study examines the impact 

of the definitional changes to the HUBZone program.

Regional Economic 

Development

Rural and Urban Establishment Births and Deaths using the 

U.S. Census Bureau’s Business Information Tracking Series

Lawrence A. Plummer and Brian Headd; a working paper released 

February 2008

www.sba.gov/advo/research/rs316tot.pdf

See entry description, page 10.
Access these reports online at www.sba.gov/advo Research Publications 2008 18

Regulation and Law Entrepreneurship and the Barrier to Exit: How Does a 

Bankruptcy-Friendly Law Affect Entrepreneurship Development 

at a Societal Level?

Seung-Hyun Lee, Yasuhiro Yamakawa, and Mike W. Peng; a working 

paper released June 2008

2008 Babson Entrepreneurship Research Conference Advocacy Best 

Paper Award

www.sba.gov/advo/research/rs326tot.pdf

How a society’s formal institutions, such as bankruptcy laws, govern bankrupt 

entrepreneurs and firms is an important component of the institutional framework within which entrepreneurs and firms operate. The authors examine the 

relationship between bankruptcy law and the value-creating activities in a 

society associated with risk-taking behaviors by entrepreneurial firms. They 

find that a lenient, entrepreneur-friendly bankruptcy law encourages entrepreneurs to take risks and thus lets entrepreneurship prosper. This risk-taking can 

generate variety in the economy by increasing the number of firms with high 

growth potential, which may lead to more entrepreneurship and economic 

development—in short, failure may be good for the economy. The study supports a more informed understanding of how formal institutions governing 

bankruptcy influence entrepreneurial behavior and outcomes. It emphasizes 

that a society that is not willing to absorb the “pain” of having a large number 

of entrepreneurial failures, via an entrepreneur-friendly bankruptcy law, is not 

likely to reap the “gain” of vibrant entrepreneurship development and economic growth.

Analyzing the Impacts of Antitrust Laws and Enforcement on 

Small Business

Innovation and Information Consultants, Inc.; released July 2008

www.sba.gov/advo/research/rs329tot.pdf

The study investigates how antitrust laws and enforcement in the retail grocery 

and timber industries affect small firms. Looking at two industries (retail grocery and timber), the researchers find that, independent of the type of enforcement activity, the number of small grocery retailers declined over time. In the 

timber industry, the vertically integrated dominant firm hoarded the input of its 

small competitors downstream, forcing their exit.
Access these reports online at www.sba.gov/advo Research Publications 2008 19

Taxation The Tax Debts of Small Business Owners in Bankruptcy

Rafael Efrat; released February 2008

www.sba.gov/advo/research/rs317tot.pdf

See entry description, page 8.

Other Office of 

Advocacy Publications

Report on the Regulatory Flexibility Act, FY 2007

Cheryl Johns, editor; released February 2008

www.sba.gov/advo/laws/flex/07regflx.pdf

The Regulatory Flexibility Act (5 U.S.C. 601-612) requires federal agencies to 

consider the effects of their regulatory actions on small businesses and other 

small entities and to minimize any undue disproportionate burden. The chief 

counsel for advocacy of the U.S. Small Business Administration is charged 

with monitoring federal agencies’ compliance with the act and with submitting 

an annual report to Congress. This annual report illustrates the regulatory flexibility accomplishments of FY 2007.

Background Paper on the Office of Advocacy, 2001-2008

Joseph Sobota, editor; released November 2008

www.sba.gov/advo/backgr08.pdf

This report summarizes the mission, activities, and accomplishments of the 

Office of Advocacy from 2001 to 2008.