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The IUP Journal of Entrepreneurship Development :
An Empirical Analysis of the Link Between Entrepreneurship and Economic Growth in West Virginia
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Entrepreneurship variables constructed from county-level proprietorship and firm birth data were included in an endogenous growth model to determine the relationship between entrepreneurship and economic growth in West Virginia. The empirical estimates using Weighted Least Squares (WLS) and Two-Stage Least Squares (2SLS) regressions generally show empirical evidence regarding the positive contribution of entrepreneurial activity to economic growth. Counties with more proprietors and business start-ups exhibited higher growths in population and employment growth compared to less entrepreneurial counties. However, none of the entrepreneurship variables used in the study is statistically significant in determining per capita income growth.

 
 
 

West Virginia is considered one of the most rural states in the US characterized by high levels of unemployment and poverty. Despite the expansion of the US economy in the past decades, rural communities in West Virginia lagged behind in terms of social and economic well-being of its population. Searching for new ways to alleviate poverty in rural areas, new approaches are emerging that support smaller companies instead of the traditional pursuit of large industries in the past. A consequence of this change is the increased importance of entrepreneurship by creating economic value through the establishment of new or the growth of existing firms. New businesses and self-employment contribute jobs at the start of the business operation, resulting in higher income levels and increased wealth, and enhanced market (Fritsch and Mueller, 2004; and Henderson, 2006). One of the most obvious contributions of entrepreneurship to the increased welfare of society is the creation of new jobs and additional income through multiplier effects (Robinson et al., 2004). Entrepreneurs create new wealth for themselves and the communities by taking innovations to the market and commercializing new ideas. Many scholars and professionals believe that entrepreneurship is critical to maintaining an economy's health and that business creation in low income areas is essential for economic development (Smilor, 1997; Goetz and Freshwater, 2001; Lichtenstein and Lyons, 2001; and Acs, 2006). Minniti (1999) argues that entrepreneurs are catalysts for economic growth because they generate a networking externality that promotes the creation of new ideas and new market formations.

Learning about entrepreneurship is important to understanding how it contributes to economic growth and development, and how entrepreneurial capacity can further the dimensions of economic development. Exploring entrepreneurship and its contribution to the local economy can help develop a map in designing specific development policies. These policies will include expanding and improving the status of community-based characteristics that will support rural areas in creating new firms, retaining and expanding local businesses, and expanding entrepreneurial development, and will eventually help in alleviating poverty.

 
 
 

Entrepreneurship Development Journal, Entrepreneurship and Economic Growth, Economic Value, Economic Development, Gross Domestic Product, GDP, Ordinary Least Squares, OLS, Business Environment, Information Communication and Technology, ICT, Business Information Tracking Series, BITS, Bidirectional Relationship, Weighted Least Square, WLS.