This week the Office of Advocacy released its 2009 edition of small business profiles. On the website at www.sba.gov/advo/research/profiles, you will find an array of two-page small business economic profiles for the nation, each of the 50 states, the District of Columbia, and the U.S. territories. Each is loaded with the most current available data on the demographics of business owners, the numbers of businesses, their employment by industry and size, business openings and closings, gross domestic and state product, and the employment picture.

As noted, there are statistics galore. But what’s the story?

Perusing a number of the individual state profiles, I began to notice a pattern in the 2008 data. It seemed that many of the states with the largest shares of small business employment—states like Wyoming and North Dakota, Alaska, and Oklahoma, with between 54 and nearly 70 percent of their employment in small businesses—were often also states with positive—or at least less negative—employment change in 2008. Conversely, states with the lowest employment in small firms—say, between 44 and 49 percent—often had larger overall statewide employment losses—between 1 and 4 percent—in 2008.

This suggested to me that there are some interesting patterns to be found in the data. Take a look at patterns across the years too—there are state profiles on the web going back to 2005.

Dig in, data miners!

—Kathryn Tobias
Senior Editor

            Minority Enterprise Development Week 2009 was a great opportunity to celebrate “Energizing the American Economy with Minority Business Enterprises.” I attended a panel on Thursday morning, August 27 (following an excellent keynote address by Earvin “Magic” Johnson) that featured, as moderator, Derek Dingle, Editor in Chief of Black Enterprise magazine; Aubyn Thomas, Senior Vice President of Marketing for Macy’s; Adrienne T. White, Senior Manager for the African American Market for WalMart and Sam’s Club; and Joseph James of Agri-Tech Producers, LLC. 

Joe James’s business, the only small business represented on the panel, particularly caught my attention. Agri-Tech is commercializing a technology ”using extreme heat on biomass in a low-oxygen environment…to produce a fuel that is easier to transport and store and is carbon neutral.” 

Mr. James, an economic developer by trade for more than 30 years, was astute in obtaining the license to commercialize the technology, which was developed at North Carolina State University in Raleigh and is being manufactured by a partner firm—one of several candidates he interviewed. He encouraged entrepreneurs, particularly those interested in energy industries, to work with the Departments of Energy and Agriculture, with Biomass Councils and with the American Association of Blacks in Energy to learn more about developing their products.

Other innovative ideas surfaced during the Q&A. In response to a question from a small business owner interested in retrofitting large spaces for better energy efficiency, both Adrienne White and Aubyn Thomas encouraged participation in their supplier diversity programs. Adrienne said that mega-retailers WalMart and Sam’s Club are moving toward producing “100 percent zero waste” and becoming energy self-sufficient. They are also finding ways to use local and locally grown products by turning some supplier decision making over to local stores. It’s a way for small businesses to participate as suppliers, and possibly to grow toward larger markets.

– Kathryn Tobias, Senior Editor

            Interested in the relationship between gender and the finances accessed by entrepreneurial firms, or venture capital and the commercialization of technology?  How about business angels, minority entrepreneurship, rural innovators, entrepreneurship in urban areas, veteran business owners, or the cost of regulation?  Perhaps you need to know more about entrepreneurial creativity, firm or job creation, home-based business, federal procurement, survival rates, health care, exporting, or business succession planning. 

            Whatever your small business passion, someone is likely to have studied it.  All of these topics and hundreds more are among those explored by authors who have made use of Advocacy research over the past decade and a half.  Studies citing Advocacy research between 1992 and 2007 are listed by author, study cited, and topic in Office of Advocacy Research Academic Citation Study, 1992-2007.  Take a look at it—it’s a great reference source and an interesting exploration for students and advocates of small business. 

– Kathryn Tobias, Senior Editor

The Office of Advocacy’s mission includes providing research documenting the status of small businesses and the impact of important trends on them.  Areas of continuing interest are listed below.  In addition to increasing knowledge about small business in general, these areas are noteworthy because they may provide policymaking insight or serve as a foundation for further research.

Note that the procedures for submitting proposals are different this year.  These research opportunities are being offered through a broad agency announcement (BAA) with various research areas listed.  Bidders will submit proposals in one or more of the following areas based on this one solicitation.  Bidders are not required to submit a proposal on each topic.

The deadline for submitting proposals is FRIDAY, AUGUST 14, 2009 – a shorter time period than in the past.  The following issue areas are currently open:

• SBAHQ-09-Q-0014: Research on the Tax Gap and Small Business
• SBAHQ-09-Q-0015: Credit Markets for Small Businesses in the United States
• SBAHQ-09-Q-0016: The Role of H1-B Visa Availability in Small Firm Hiring
• SBAHQ-09-Q-0017: Research on Small Business and Innovation, Job Growth, and Green Entrepreneurship
• SBAHQ-09-Q-0018: Research on Health Insurance and Small Business
• SBAHQ-09-Q-0019: Research on Small Business Procurement
• SBAHQ-09-Q-0020: Research on Veteran Entrepreneurship
• SBAHQ-09-Q-0021: Small Business Industrial Organization Research
• SBAHQ-09-Q-0022: Small Business Research by Graduate Students

The proposal solicitations and synopses are listed in FedBizOpps (https://www.fbo.gov/index?s=agency&mode=form&tab=notices&id=2452a817ef67bc6a1609fffe201f1ed9).  (If this link is not active, go to http://www.fbo.gov and search for Small Business Administration listings, solicitation number SBAHQ072309BAA.)  Each of these research opportunities are small business set-asides.

See the attached performance work statements on FedBizOpps for more information on each issue area.  It is important that all respondents follow the instructions provided for submitting proposals.  Please note that regular mail to government offices in Washington, D.C., experiences significant delays.  Other methods, such as overnight and certified mail, are preferred and are more timely. 

For ideas of previously funded research by the Office of Advocacy, see http://www.sba.gov/advo/research/chron.html.

            Many of Advocacy’s studies over its history have focused on how small businesses, as well as entrepreneurs of all demographic groups, contribute to job creation and economic growth through innovative technologies (see, for example, the study released this week on High-tech Immigrant Entrepreneurship in the United States.

            At a recent National Economists Club meeting, Dr. Robert Shapiro, chair of the ecoIdea Institute, discussed economic growth and its relationship to energy independence. He notes that the pace of innovation seems to be accelerating and asks why. “Part of it is science,” he notes. “This is a period of breakthroughs in genomics and computer science in particular. Part of it is the implications and applications of the enormous advances in information technologies. We can figure out things that before we never had the techniques and person power to take on. And part of it is globalization, which gives almost any organization access to much of the global pool of human capital.”

       If, as climate science implies, there is an urgent need to curtail greenhouse gas emissions, he suggests that “the intersection of climate and economic policy lies in innovation.” He further notes that “the development and spread of particular innovations such as breakthrough nanotechnology-based solar applications…depend on the prospect of securing the returns from others’ use of those innovations… That means that we cannot separate preserving the climate and driving economic growth from protecting intellectual property rights since those rights are the essential basis for those returns.”

            Food for thought. The full presentation podcast is located here.

– Kathryn Tobias, Senior Editor

            Ben Bernanke, Chairman of the Federal Reserve, has become one of the most famous men in America over the last year.  Rising from relative obscurity as the Princeton professor who became Alan Greenspan’s successor, he has appeared to handle both the financial crisis and oversight from Congress with the equanimity of a seasoned pro.

            This quality was on display again last week as he sat before the House Budget Committee for two hours, being both grilled and praised by its members.  While Chairman John Spratt (D-SC) and Ranking Member Paul Ryan (R-WI) asked concise questions about policy, Rep. Niki Tsongas (D-Mass) had the sharpest questions for Chairman Bernanke.

            However, the real meat of the meeting was about the current state of the economy, and the greatest concern of the committee members was the burgeoning fiscal deficit.  Chairman Bernanke spent a great deal of time emphasizing that although the deficit is a very worrying long term problem, in the short run, we must continue to take whatever steps we can to end the recession and re-enter our long term growth pattern.  He also made clear that as Chairman of the Federal Reserve, although he can express opinions on the budget deficit and growing national debt, his institution is responsible for monetary policy.  Short of monetizing the debt (printing dollars to buy the debt, thus creating inflation and reducing the real value of the debt), he has no control over fiscal policy.  Without being overly accusatory, he put that job squarely on Congress’s shoulders, letting the Budget Committee know that their actions would determine the long-term growth of the national debt, not his.

            Although he delivered some sobering news, Bernanke stayed positive while remaining reserved about the timeframe for a recovery.  Although he emphasized that the labor market may continue to suffer for many months, he believed that recovery would be in full swing by the end of this year. He also stated firmly that both Troubled Asset Relief Program and the American Recovery and Reinvestment Act played a great deal in creating financial stability and halting the downturn.

            The question of inflation was also of great concern to the House Budget Committee.  After Bernanke issued a flat out denial of any intention of monetizing the debt, the committee was still concerned that natural economic pressures might create intense inflation as the economy regains steam.  However, Bernanke reiterated that the Fed was committed to price stability and would use open market operations as needed to preserve it.

            Chairman Bernanke did not announce any dramatic shifts in policy, though his statement regarding price stability was of the most interest to me.  He went to great lengths to point out that stability means neither inflation nor deflation, a statement intended to reassure a jittery public and world about fears of inflation. However, as many economists believe, a small amount of inflation is preferable to none, in order to raise the cost of holding money (as opposed to investing it) and to build a buffer zone against deflation.  But, Bernanke’s words appeared to oppose this, so it will be interesting to see what policies the Fed pursues.

– Myles MacDonald, Advocacy Intern and Claremont McKenna College Student

From the White House press office:

President Obama Announces More Key Administration Posts

President Obama said, “I’m grateful that such experienced and dedicated individuals have joined my administration at a time when our nation faces great challenges. Their deep commitment to their individual areas of work gives me confidence that they will help us put America back on a path to prosperity and security. I thank them for their service and look forward to working alongside them in the years to come.”

Winslow Sargeant, Nominee for Chief Counsel for Advocacy, Small Business Administration
Winslow Sargeant has been a Managing Director in the technology practice at Venture Investors since 2006. From 2001 to 2005, he was the program manager for the Small Business Innovations Research (SBIR) Program in Electronics, a new office in the National Science Foundation’s (NSF) Engineering Directorate. Previously, Sargeant co-founded Aanetcom, a fabless semiconductor chip startup company with seed funding from Cisco systems which was acquired by PMC-Sierra. Prior to Aanetcom, he held senior engineering positions at Lucent, AT&T Bell Labs and IBM. Sargeant currently serves on the Boards of Silatronix and Pattern Insight. He also serves as a Director of the University of Wisconsin Foundation and is the Vice Chairman of the UW-Madison Astronomy Board of Visitors. He is a member of the Boards of Directors of WiCell, WiSys and the Waisman Center. Sargeant is a Trustee for the Wisconsin Alumni Research Foundation (WARF) and also serves on Purdue University Discovery Center’s Research Board of Visitors. He is a member of the Advisory Board of NSF’s Industrial Innovation and Partnership Division (NSF/SBIR). Winslow received the inaugural 2002 Wisconsin Distinguished Young Alumni Award and was a 2003 Outstanding Engineering Alumni Awardee from Northeastern University. He received a B.S. from Northeastern University, an M.S. from Iowa State University and his Ph.D. from the University of Wisconsin-Madison, all in Electrical Engineering.  Sargeant is also a Kauffman Fellow – Class 11.

            Last week Advocacy released our Quarterly Indicators for the first quarter of 2009.  The economy continued its downward slide in January, February, and March of this year.  The economic recession deepened; real gross domestic product fell by an annualized 6.1 percent.  One bright spot in the first quarter was positive growth in consumer spending.  Other GDP components were down.  Real gross private fixed investment fell 38 percent to $1.44 trillion, mostly from a drop in nonresidential construction.  Exports, imports, and industrial production also declined sharply.

            For those interested in trend analysis, Advocacy’s Quarterly Indicators stretch back to the first quarter of 2004.

– John McDowell

            In a couple weeks, the Office of Advocacy will release the next edition of our quarterly indicators for small business.  Much of that document will hinge on what we learn from the first quarter 2009 real gross domestic product (GDP) figures, which will be released on April 29.  Given the severity of the recession, I would not expect these numbers to show much improvement.  

            The National Association of Business Economists (NABE) earlier this week released an industry survey (members only access) showing that 93 percent of economists felt that real GDP would decline for the year as a whole.  With that said, the survey also suggests that declines in the economy are “abating.”  According to Sara Johnson of IHS Global Insight, “Key indicators — industry demand, employment, capital spending, and profitability — are still declining, but the breadth of the decline is narrowing.”

            There are a couple surveys out which show that there are “glimmers of hope.”  Last month, the University of Maryland’s business school and Network Solutions introduced the Small Business Success Index.  According to its respondents, 67 percent were planning to invest in their businesses this year, bucking the recession; moreover, the small business owners in this survey tended to be optimistic, with nearly half suggesting that the economy will remain unchanged or improve in 2009.

            This finding is also in the American Express Open Small Business Monitor, which finds that four out of ten entrepreneurs are both optimistic about the economy this year and feel that the economy provides opportunities for their businesses.  That is not to suggest that there have not been hardships.  Sizable portions of its respondents have had to take drastic steps such as instituting pay and hiring freezes and other ways of cutting costs.

            However, despite the cautiousness in the down economy, there is also cautious optimism.  I was personally struck by this finding in the American Express survey; 37 percent said that the economy had presented them with opportunities.  Moreover, nearly “all of these glass-half-full entrepreneurs (92%) say that managing through the recession has made them a better business owner, compared to 77% overall.”  

            That is an impressive finding, and one that suggests that even in tough times, entrepreneurs are able to adjust to make the current environment work for them.  That should give us all hope for our future.

– Chad Moutray, Chief Economist