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Abstract

Much of the business activity in the New England region centers around providing goods and services to local residents. An increasingly large percentage of these goods and services are produced by microbusinesses, defined as businesses with five or fewer employees, including the owner. Despite the growing number of microbusinesses in rural communities and the overall economy, their economic importance and determinants of incidence have largely been ignored and not well documented or understood by researchers and economic development professionals. This thesis explored the economic importance of microbusinesses to rural communities and their contribution to the New England economy, examined the important factors that influence the incidence of microbusinesses, and studied the business practices and needs of microentrepreneurs operating in a rural county in Maine. This thesis employed various analyses to examine the microbusiness economy and account for its economic impact and importance particularly to rural communities. First, the sectoral distribution of the microbusiness economy was examined and compared to the overall economy in New England. Second, the economic impact of the microbusinesses in the New England region in terms of employment, output and value added was estimated. Third, several econometric models were estimated to identify factors that might explain microbusiness activity across the New England counties. Finally, based on survey data, the current business practices and needs of microentrepreneurs operating in Piscataquis County, Maine were analyzed. The results of this study indicate that microbusinesses are very important to the New England economy. This importance varies across states, as suggested by the sectoral and economic impact analysis. In addition, microbusiness activity does not occur randomly over space. Selected demographic, spatial and policy variables influence, in different ways, the number of microbusinesses and microbusiness employment in counties across New England. Microbusinesses in Piscataquis County were found to play a very important role in the county's economy. These microbusinesses create employment, sell goods and services, and purchase inputs both locally and nationally. In this research, a generic profile of the typical Piscataquis County microentrepreneur was developed to illustrate the general economic behavior of microbusinesses operating in the county. Differences in business practices and needs across selected groups of rnicrobusinesses were also identified and measured. Differences were found to exist in business startup behavior (reasons for starting business and startup financing), owner's business experience, sales and expense patterns, time spent in the business, business needs and future outlook, and personal attributes betweenlacross businesses that were categorized according to gender, product type, business location, and size. This research provided valuable information on how microbusinesses impact the New England economy, and what important factors influence microbusiness activity in the region. The results of this study will help economic development officials and policy makers in New England formulate more effective rural economic development policies.

Atasoy, Sibel, University of Maine, REP2004-001