AN EMPIRICAL STUDY ON THE RELATIONSHIP BETWEEN THE STATE OF THE ECONOMY AND SMALL FIRM CHARACTERISTICS: U.S. CASE

This study examines the relation between small businesses' characteristics and their owners' views on the economy. The main question here is this: "What kind of small firms are more optimistic on the economy ?" To achieve this objective, this study uses the "United States Small Business Friendliness Survey" by Kauffman Foundation and Thumptack.com. The nonparametric tests show that, in the states where business owners have a more positive view on the national economy, firms tend to be larger, but at the same time they tend to have more local sales when compared to the other states. This study also shows that, in these states, firms' age and industry (except for "Business" industry) are not significantly different from firms in other states. On the other hand, the nonparametric tests for "state economy" show that, in the states where business owners have more a positive view on the state economy, firms are smaller, their operational area is smaller and they have more local sales when compared to the other states. This study also shows that, in the states where business owners have a more positive view on the state economy, while firms' age is not significantly different from firms in other states, three firm industry classifications are significantly different from firms in other states. The study concludes that the state economy and the national economy have differing effects on small businesses.