The Entrepreneurial Process: Economic Growth,
Men, Women, and Minorities
. Edited by Paul D.
Reynolds and Sammis B. White. Westport,
Connecticut: Quorum Book, 1997. ISBN 1-
Autonomous new firms play a vital role in modern
capitalist economies. New firms are major sources
of innovation, and the continuous renewal of the
population of firms and industries puts competi-
tive pressure on existing firms. Autonomous new
firms are a major source of jobs, with Reynolds
and White estimating that in its first year, the
average new firm creates six jobs, including two
for the founders. Attempts to create new busi-
nesses are quite common in the United States, and
by the time they reach the end of their working
lives, about two-fifths of the workforce have had
at least one spell of self-employment. Readers of
Small Business Economics will probably not need
to be convinced of any of these points, but
Reynolds and White are after a wider audience:
researchers studying small and medium sized
enterprises, government policymakers, and even
This research monograph is based upon five
sources of data. Representative samples of new
firms were collected in three states: Minnesota,
Pennsylvania, and Wisconsin. Two of the samples
were drawn from new entries in the Dun’s Market
Identifier File, and the third from new listings in
the Wisconsin State unemployment insurance file.
Because of selection biases in the Dun’s data, new
firms in it are slightly older and larger than those
in the Wisconsin sample. The three samples were
collected at different time periods and involve
reports over different years. The earliest data are
from 1977 and the latest data are from 1992.
Reynolds and White standardized all economic
data to the base year 1992, making their results
comparable across the states. Depending on the
variables examined, up to 3,093 firms are avail-
able for the analysis.
The other two data sets are based upon repre-
sentative samples of adults 18 years or older who
were asked if they were trying to start a new firm.
Those who responded “yes” were considered
nascent entrepreneurs and their success was
tracked in follow-up studies. A Wisconsin sample
of 683 adults was interviewed in 1991–92 and
yielded 80 nascent entrepreneurs, and a U.S.
sample of 1,016 adults was interviewed in 1993
and yielded 40 nascent entrepreneurs. Follow-up
interviews were conducted with these respondents
8 to 18 months after the initial interviews.
Reynolds and White recognize the preliminary
nature of these small samples, and are careful to
qualify their generalizations as they present their
results. Paul Reynolds, the senior author of this
monograph, is currently the coordinator of the
Entrepreneurship Research Consortium, which is
attempting to put together a nationally represen-
tative sample of nascent entrepreneurs who will
be followed over time, using phone interviews and
This monograph is a gold mine of empirical
generalizations and ideas that will be followed up
by future researchers. Before presenting more
details on each chapter, I note three major themes
of the book. First, an immense amount of human
creative activity is involved in business start-ups.
Every year, roughly 4% of the adult working
population undertakes some serious activities
that could lead to the founding of a business.
Cumulated over the lifetime of working adults,
this means a substantial fraction of the population
at one time or another flirts with the notion of
becoming an entrepreneur. These potential
founders are people from the center, not the
periphery, of the economy. Over 90% already have
jobs, and they are the more stable residents of their
counties. They also tend to have more education
and income than other adults. About half of all
new firms are started by two or more persons with
an ownership stake in the firm, with high growth
firms especially likely to be based on teams.
Small Business Economics
11: 395–398, 1998.