SMBs

Understanding Small Business Heterogeneity

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Executive Summary

In this paper, the authors show that substantial heterogeneity exists among U.S. small businesses owners with respect to their ex-ante expectations of future performance, their ex-ante desire for future growth, and their initial motives for starting a business. Specifically, using new data that samples early stage entrepreneurs just prior to business start up, they show that few small businesses intend to bring a new idea to market. Instead, most intend to provide an existing service to an existing customer base. Further, using the same data, they find that most small businesses have no desire to grow big or to innovate in any observable way.

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