Week
of March 1 - 5, 2004
Welcome
to the National Dialogue on Entrepreneurship and e-News, an electronic
newsletter sponsored by the Kauffman Foundation of Kansas City for
followers of the entrepreneurial economy. Through e-News, we bring you
short summaries and analyses of various trends driving the innovation
economy. Please feel free to share this with friends and colleagues. To
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Regulations on Home-Based Business
It’s tough to have a home-based business. The kids get in the way, you’re on your own, and there are chores to do as well. On top of that, the Internal Revenue Service (IRS) makes life tough---that’s one take-away from a new Small Business Administration Office of Advocacy-funded study entitled Home-Based Business and Economic Regulation. The study follows upon previous research that shows that small businesses (those with under 500 employees) are disproportionately affected by regulatory burdens. But, does this mean that the burden grows as the firm gets smaller? This new report indicates that this may indeed be the case. Home-based businesses are penalized by the IRS in their use of deductions, and zoning rules can complicate matters as well. The report suggests that the IRS consider easing its rules for home office deductions. Because so many other tax deductions are dependent on being able to deduct one’s home office, this step would provide significant tax benefits to the 53% of small businesses based at home.
The February 2004 report, Home-Based Business and Economic Regulation, by Henry Beale of Microeconomic Applications, Inc. is available at
http://www.sba.gov/advo/research/rs235tot.pdf
2003’s Biggest Givers
One of the biggest benefits that accrues from entrepreneurial development is that entrepreneurs aggressively give back to their communities, as local leaders, mentors and philanthropists. And they can become big-time philanthropists. For evidence, one only needs to briefly skim the Slate 60, Slate magazine’s listing of the top 60 charitable gifts made in 2003. This year’s list is just out, and it contains some interesting stuff. Overall, big charitable contributions are up—this year’s Slate 60 comes in at $5.9 billion, a slight rise from last year’s total of $4.6 billion. The single biggest contributor was the late Joan Kroc, widow of McDonalds’ Ray Kroc, who donated more than $1.91 billion to various causes such as the Salvation Army and National Public Radio. Michael Dell ranks No. 2; his Dell Foundation made more than $673 million in grants last year. Other big entrepreneurial givers include Ted Turner, Paul Allen, and Pierre Omidyar of Ebay.
To access the 2003 version of the Slate 60, visit http://slate.msn.com/id/2094846
Europe in the Creative Age
In his best-selling book, Rise of the Creative Class, Richard Florida projected how a new class of highly educated, creative, and diverse workers would transform American society. In a new report, Europe in the Creative Age, he takes this analysis across the Atlantic to examine how Western Europe may fare in its ability to attract, nurture and support the creative class. The report examines 14 European nations and compares their performance in terms of technology development, diversity, and talent to previous data developed for the US. The authors find that the US continues to excel in developing technology and attracting talent, but that a cluster of northern European countries—Belgium, Denmark, Finland, the Netherlands, and Sweden---is becoming increasingly competitive. Sweden tops the report’s Euro-Creativity Index. Meanwhile, several of the southern European countries, especially Portugal and Italy, have a long way to go in terms of developing a strong creative economy.
The February 2004 report, Europe in the Creative Age, by Richard Florida and Irene Tinagli is available at
http://www.creativeclass.org/acrobat/Europe_in_the_Creative_Age_2004.pdf
The UK’s Small Business Action Plan
The United Kingdom falls in the middle of the pack in the Euro-Creativity Index cited above, but that ranking is surely not from lack of effort. As we have noted in past newsletters, the British government is pursuing a variety of steps to help nurture the entrepreneurial spirit. The latest effort comes from the Small Business Service (SBS) and its newly released Action Plan. As part of this plan, SBS envisions its role in the center of a virtuous circle, developing effective small business policies at the national level while also ensuring that services are effectively and efficiently delivered at the grass-roots level. SBS is organizing its future work around seven key strategic themes which include building a more dynamic start-up environment, expanding the availability of growth capital for small businesses, and nurturing entrepreneurship in distressed areas and among under-represented populations. The action plan is an ambitious exercise to build an “enterprise culture” across the UK.
The SBS report, A Government Action Plan for Small Business: Making the UK the Best Place in the World to Start and Grow a Business, is available at
http://www.sbs.gov.uk/content/7-strategies/ActionPlan.pdf
Self-Employment: A Cautionary Tale
As many Americans opt for self-employment, we must remind ourselves that while this shift has many upsides (e.g. greater flexibility, more dynamism), the picture is not always 100% rosy. That’s the important message contained in a new National Bureau of Economic Research (NBER) paper by Dartmouth researcher David Blanchflower. In Self-Employment: More May Not be Better, Blanchflower makes an attempt to quantify the downsides of self-employment using data from both Europe and the US. He notes that the self-employed are more satisfied with their pay and the type of work they do. However, his literature review also finds that the self-employed report that they work more hours, are more stressed, more tired, and find less time to spend on family and leisure pursuits. The research also shows that these negative effects are most pronounced in firms that produce jobs---the self-employed without employees tend to face fewer of these negative effects. None of these findings should surprise entrepreneurs, but they remind us that self-employment (like any job) has both pros and cons that must be understood before an aspiring entrepreneur decides to “take the leap.”
The February 2004 NBER Working Paper (No. w10286) by David Blanchflower, Self-Employment: More May Not be Better is available at
http://papers.nber.org/papers/W10286
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