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Week of December 19 - 23, 2005

Welcome to the National Dialogue on Entrepreneurship, an initiative of the Public Forum Institute made possible by a grant from the Kauffman Foundation of Kansas City. Through NDE-news, we bring you short summaries and analyses of various trends driving the innovation economy. Subscribe now to receive your weekly copy. Archived issues are available online. Links to the day's entrepreneurship stories from across the nation and around the world are posted each weekday on the NDE main page - bookmark it and stay informed about the latest entrepreneurship news.

Entrepreneurial Challenge Survey

Entrepreneur magazine and PriceWaterhouseCoopers have initiated a new survey that should offer some useful insights into what makes entrepreneurs tick. The Entrepreneurial Challenges Survey asks business owners to report on the key opportunities and challenges facing their businesses. What keeps them up at night? The top three concerns are (in order): retention of key workers, developing new products and services, and expansion into global markets. Not surprisingly, 73% also noted that retention of key workers was the primary ingredient in future business success. In terms of big picture concerns, entrepreneurs note that the prospect of an unstable US economy would cause the biggest problems for their companies. Other issues include rising health care costs and a shortage of qualified workers.

The results of the first Entrepreneurial Challenges Survey appear in the January 2006 issue of Entrepreneur magazine and can be accessed on-line at www.entrepreneur.com.

Money Can’t Buy You Innovation

For several years, Booz Allen Hamilton has been studying what it calls the Global Innovation 1000, the world’s largest corporate R&D spenders. This research has generated some fascinating results, with one interesting bottom-line take-away: money is not the key driver of a company’s return on their innovation investments. In fact, there appears to be no connection between the amount of R&D spending and various measures of corporate success, such as increased sales and profitability. But, at the same time, there is no free lunch. A firm can spend too much on R&D, but it can also spend too little. The real secret is to spend the “right” amount. What seems to matter? An effective process for managing innovation and a commitment to collaboration are two important factors. In addition, this research suggests that firms do a better job of aligning research priorities to corporate strategy and focus on managing the corporate innovation pipeline with speed and efficiency.

To learn more about the Booz Allen Hamilton Global Innovation 1000, visit
http://www.strategy-business.com/resiliencereport/resilience/rr00027

Entrepreneurship and Economic Growth in Minnesota

An interesting new study from Minnesota’s Department of Employment and Economic Development examines linkages between entrepreneurship and economic growth. The study is an excellent example of how key trends and data regarding entrepreneurship can be interpreted at the state level. It notes the important fact that most new job growth in Minnesota, and the US in general, comes from small and new firms. This effect is quite profound in Minnesota. The smallest firms are the fastest growing segment in all of Minnesota’s 17 largest industrial sectors. These firms account for more than half of all job growth in 11 of these 17 sectors. The paper also notes that encouraging self-employment can be an effective strategy, but that the linkages between self-employment and economic development are less clear. The creation of new firms, with employees, has a much more profound and positive economic impact.

To access the November 2005 Minnesota Department of Employment and Economic Development, “Entrepreneurship and Economic Growth,” by Anthony Schaffhauser, http://www.deed.state.mn.us/lmi/publications/trends/1105/growth.htm

Reforming Sarbanes-Oxley: Breaks for Small Business

The Sarbanes-Oxley financial reporting laws have created lots of problems for American businesses. As is often the case, smaller firms face a disproportionate paperwork and red tape burden. In an effort to ease this burden, the Security and Exchange Commission’s Small Business Advisory Group is recommending that the law’s rules be eased for smaller public companies. Specifically, they recommend that firms with market capitalization below $750 million and revenues below $250 million should not be required to have an outside auditor test their internal control systems. This provision of Sarbanes-Oxley has been very controversial, and the proposed relaxation will affect more than 7,000 companies. The proposals will be reviewed at the Advisory Group’s next meeting on December 14. If approved, the changes could significantly reduce a major administrative burden facing smaller public companies.

To learn more about the Security and Exchange Commission’s Advisory Committee on Smaller Public Companies, visit http://www.sec.gov/info/smallbus/acspc.shtml. Its recommendations are listed in the materials for its December 14, 2005 meeting.

Small Business Relief after Katrina

In the aftermath of the recent Gulf Coast hurricanes, the Small Business Administration has received hundreds of thousands of applications for low-interest disaster loans. To date, it has approved $1.37 billion in loans and has reached daily approval totals as high as $42 million. However, a number of critics have taken SBA to task for not responding quickly – or creatively – enough. While the approved total tops $1 billion, actual disbursements lag far behind and a vast majority ($1.18 billion) is going to homeowners and renters while less than $200 million has been approved for businesses. Following Congressional calls for a quicker response, SBA recently announced Gulf Opportunity Pilot Loans (which provide a federal guarantee for private loans) which should help the cause. The GO Loans program allows SBA commercial lenders to make SBA-guaranteed working capital loans of up to $150,000 more quickly than through the disaster loan program. The overall success of the program remains to be seen, challenged by a lack of awareness coupled with what some are arguing to be high loan fees and interest rates.

To learn more about the status of the Small Business Administration’s disaster relief efforts, including the GO Loan program, visit http://www.sba.gov/disaster_recov/hurricanes/

Open Collaboration Linking Universities & Industry, Accelerating Innovation

The premise behind ‘open source’ is quite simple: allowing developers to share research and modify production approaches taps into a wide pool of talent and creativity that results in rapid advances that easily outpace more isolated forms of proprietary development. Following on the heels of the University & Industry Innovation Summit, leaders from four IT companies, seven universities and the Kauffman Foundation have adopted a set of guiding principles to address how to approach open collaborative research between universities and the IT industry. The expectation is that the principles will promote and accelerate innovation, shortening the time it takes to move from concept to development.

Summit participants developing and adopting the principles include the Kauffman Foundation, Carnegie Mellon University, Georgia Institute of Technology, Rensselaer Polytechnic Institute, Stanford, University of California at Berkeley, University of Illinois - Urbana-Champaign, University of Texas at Austin, Cisco, HP, IBM and Intel. Additional collaborators include the National Science Foundation, the Office of U.S. Senator Joseph Lieberman and the National Academies’ Government University Industry Research Roundtable (GUIRR).

For more information on the Open Collaboration Principles, visit www.kauffman.org.

Comparing Data on Start-ups -- Almost

While policymakers across the globe increasingly look to entrepreneurship as a means to stimulate economic growth in their countries, their efforts -- lacking conclusive data on entrepreneurship -- are based on adapting best practices and hoping for the best. A new OECD study aims to increase the reliability and amount of data available to policymakers, examining the various factors that influence the accuracy and comparability of data on business start-ups from different countries. Written by Steven Vale, the study is based on start-up data from nearly 50 public data sources, mainly national and international statistical agencies. Countering overly-optimistic assumptions, Vale found that a great amount of variability exists between each factor, making reliable comparisons between countries extremely difficult. However, the establishment of a framework of factors affecting the comparability of start-up rates will help improve understanding of the differences and eventually lead to greater usefulness of the data.

To download International Data on Business Start-ups: Factors Affecting Comparability, visit the Kauffman Research Portal.

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All stories © 2005 The Public Forum Institute
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