The Vital Role of Local Ownership of Local Businesses

May 20, 2012

Quotes from a research report titled, "The health and wealth of US counties: how the small business environment impacts alternative measures of development".

Read the complete report with tables and references in the HTML version (with reference links included) Oxford Journal.  Or download a PDF version here.

Note:  The phrase, 'collective efficacy', is used throughout this report. The authors wish to demonstrate that an entrepreneurial community, one that supports local ownership, will achieve higher levels of collective efficacy.  Here's a simple definition to help you grasp their meaning.

Collective efficacy: social cohesion among neighbors combined with their willingness to intervene on behalf of the common good.


"In this study, we draw on the civic community tradition to develop an alternative framework for understanding the linkage between economic development and health. We argue that economic development strategies aimed at growing the small-business sector have a latent beneficial effect on health outcomes. Our findings support a small businesses perspective. We find that counties with a vibrant small-business sector have lower rates of mortality and a lower prevalence of obesity and diabetes. Small-business owners produce important noneconomic rewards for communities, such as enhanced stocks of social capital and collective efficacy. In this way, the small-business sector may produce salutary rather than unfavourable community health outcomes."

"Our analysis demonstrates that communities with a greater concentration of small businesses, all other things remaining the same, have greater levels of population health."

"When it comes to economic development, US policy makers have traditionally pursued a smokestack chasing approach to enhance the welfare of local residents. Communities sought to lure large employers from the outside to provide residents with high-paying jobs."

"More recently, economic development strategists have shifted focus away from efforts to attract external capital into making investments locally to stimulate the creation of small businesses. This approach has been fueled by statistics showing that from 1990 to 2003 the small-business sector was responsible for 79.5% of US job creation."

"We maintain that an important implication of the small-business sector for public health is that small locally oriented businesses contribute to the collective efficacy of a community."

"Because they are investing in the local community, the local entrepreneur classes are seeking significant returns on their investments. It is in their financial interest to use their resources to maximize the efficacy of the community. In contrast, communities seeking to develop through outside investment become dependent on the actions of external entities to address problems."

"The value of the entrepreneurial spirit and community self-development was described decades ago by Mills and Ulmer (1946). In a comparative analysis of communities with and without a strong small-business sector, the authors found that small businesses are central to local problem solving through two mechanisms. First, small-business owners were motivated to help solve local problems because community improvement enhanced their quality of life and the profitability of their business. In contrast, communities lacking a strong small-business sector demonstrated a diminished capacity to address local problems."

"…regarding small-business communities, residents in communities with smaller competitive business environments are far more active in local problem solving and demonstrate a higher level of community efficacy."

"An important implication of the entrepreneurial culture for public health is that the small-business sector contributes to the collective efficacy of a community."

"We proposed that the presence of a strong entrepreneurial culture, measured as the number of small businesses with zero to four employees, would be associated with healthier communities. We find support for this argument. The concentration of small businesses is associated with lower rates of mortality, obesity and diabetes."