Small Firms in Urban and Rural Locations

Posted: 4 Nov 2009

See all articles by James Curran

James Curran

affiliation not provided to SSRN

David J. Storey

Independent

Date Written: 1993

Abstract

For two centuries or more, the United Kingdom was continuously becoming more urbanized. Some time in the 1960s, however, a remarkable reversal in this trend began. Multiple explanations of this phenomenon have been suggested, many of which focused on the quality of life offered by the countryside or - alternatively - on the disadvantages of the urban environment for establishing small businesses. Researchers and agencies such as the Rural Development Commission are concerned with these developments in order to implement appropriate policy to assist smaller businesses in the countryside. The present studies concentrate on non-agricultural activities in rural areas, with special focus on the individual firm. The research presented makes a comparison between small enterprises in rural areas and broadly similar firms located in towns and cities. Five key themes are identified: formation rates, formation ‘types,' problems facing urban-rural firms, performance of urban-rural firms, and policies. Overall, there are some differences between small enterprises established in urban locations and those established in rural areas; however, many of the problems of operating a business are the same irrespective of location, and hence cannot be attributed to rurality. Differences were noted in the types of business and the motivations for starting a business, depending on location. These themes are explored in a series of research reports presented in individual chapters. Rural entrepreneurship has distinct handicaps and advantages; strategies of support agencies and public policies need to distinguish between the process of establishing a small business in a rural area, and establishing one in an urban area. Results of the Cambridge SBRC (Small Business Research Centre) survey covering small and medium-sized enterprises (SMEs) in manufacturing and business services are discussed, with its conclusions concerning the urban-rural shift of business activity and employment. Another study examines the growth and survival of mature manufacturing SMEs in the 1980s, established in urban and rural areas. A sample of manufacturing SMEs from remote rural locations was compared with the development of a similar group of SMEs located in London, in terms of their capacity for growth and the adjustments they have made over the decade with respect to products and markets, production processes, location, ownership and organizational change. An examination of possible spatial variations in the equity investment in SMEs found no evidence to suggest that firms in remote rural areas are disadvantaged in terms of access to equity finance. Evidence also indicates that equity aversion amongst firms in the RDA (Rural Development Areas) sample is lower than in the other areas. A study of small service sector enterprises took a very different approach than most studies of the significance of spatial differences between small rural and small urban businesses. The present study was based on a bottom up view of the small firm using direct evidence drawn from a close study of small businesses in services in different parts of Britain. A careful selection of localities provides the spatial element. The main focus is on the differences between business in a predominantly rural area, North East Suffolk, and businesses in four urban localities. The findings do not reveal a clear contrast between the rural area's small services businesses and their counterparts in the urban areas. (AT)

Keywords: Business services industry, Firm location, Urban areas, Rural economies, Rural development, Firm growth, Firm financing, Equity financing, Spatial analysis, Geographic distribution, Manufacturing industries, Service industries

Suggested Citation

Curran, James and Storey, David J., Small Firms in Urban and Rural Locations (1993). University of Illinois at Urbana-Champaign's Academy for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship, Available at SSRN: https://ssrn.com/abstract=1496207

James Curran

affiliation not provided to SSRN

David J. Storey

Independent

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