New Research on Local Roles in Small Business Growth

By McFarland, Christiana | Nation's Cities Weekly, October 17, 2011 | Go to article overview

New Research on Local Roles in Small Business Growth


McFarland, Christiana, Nation's Cities Weekly


The recent recessionary period has focused new attention on the role of small businesses in generating economic growth. Many local leaders are turning attention to supporting and growing their small business community in order to realize tangible economic impacts including job creation and exporting local goods and services. But what are the most effective roles for cities in small business development?

NLC conducted research, reported in Small Business Growth: U.S. Local Policy Implications, on the impacts of local policies on the growth of small businesses, including: access to capital programs (revolving loan funds), management development (small business development centers), regulatory and permitting assistance and marketing assistance. Also included in the analysis is whether the local government partners with the small business community for policy development. The analysis is based on the 2009 National League of Cities/International City/County Management Association Economic Development survey.

The most effective way local governments create opportunities for small businesses, according to the new research, is by providing an efficient regulatory environment and avenues for local businesses to engage with policy makers. Surprisingly, other local tools to support small businesses, including management development assistance, revolving loan funds and marketing assistance do not have the expected impact on small business growth.

Regulatory Assistance

Ideally, a local government's regulatory processes--permitting and zoning--exist to guard against detrimental development, preserve local assets and safeguard citizens.

However, regulatory processes can also present barriers to small businesses, imposing time-consuming bureaucratic requirements, complex rules and regulation and inefficient processes.

The speed and efficiency of regulatory processes is an indicator of local government responsiveness to small businesses that often do not have the time or resources to navigate bureaucratic steps.

Partnering with Small Business

Partnerships and open communication with the small business community and service providers help local governments understanding what businesses exist in the community, uncover their challenges, realize gaps in support and help drive policies that are most responsive to needs.

Entrepreneurs and growth companies, in particular, likely fly under the radar of traditional economic development programs meant to attract and retain larger employers. In order to begin to forge connections with small businesses and to get a handle on what services are available in the community, local leaders can seek out partners that commonly interact with the local business community, such as chambers of commerce, technology councils, universities, small business development centers and economic development organizations.

Management and Skills Development

Lack of management and business skills is a common culprit in small business failure. Local programs for small business management and skills development typically include general management training, financial advising, assistance with formulating a business plan and other technical assistance associated with business ownership. …

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