Perceptions of "Friendliness" by Small Business The 2013 Thumbtack.com Survey

The 2013 Thumbtack.com Survey provides a detailed look into small business perceptions of the "friendliness" of the regulatory environment in which small business operates. This survey differs from most other similar studies by directly examining the opinions of small business owners and managers.

Table 1 summarizes several well-known assessments of state business climate. The first four are based mostly if not exclusively on underlying numeric measurements. The main advantage of these four assessments is their objectivity. Their main disadvantage is the possibility that the model that relates the underlying numerical measurements to the overall score might be incorrect. The Thumbtack survey allows investigation of whether these assessments accord with the opinions of owners and managers of small business.

The fifth assessment shown in Table 1 is based on a survey of chief executives, with respondents describing the business climate in each state in which they do business. The obvious strength of this survey, similar to the strength of the Thumbtack survey, is that it directly taps into the opinions of business decision-makers. But, whereas the focus of the Chief Executive survey is on larger enterprises with operations in multiple states, the focus of the Thumbtack survey is small businesses.

TABLE 1. Assessments of State Business Climate

Table 2 presents the correlation coefficients of the rankings of the states according to four overall and three component assessments. Most of the correlation coefficients fall between 0.49 and 0.77, indicating only moderate correlation.

TABLE 2. Correlations of Assessments of State Business Climate.

From the responses to ten questions in the Thumbtack survey, an index of business friendliness is constructed. These ten questions are:

• How do you rate state support of small business
• Would you encourage someone to start a business
• How easy it is to start a business
• How easy is it to hire an employee
• How easy is it to comply with health and safety regulations
• How easy is it to comply with employment, labor and hiring regulations
• How easy is it to pay business taxes
• How easy are licensing forms and fees
• How easy it is to comply with environment regulations, and
• How easy is it to comply with land use and zoning regulations

The authors of the report of the Thumbtack survey present some regressions relating their (very similar) index of business confidence to some of the other information collected in their survey.

See if and to what extent the Thumbtack measure of business friendliness is correlated to other indexes in the context of a multiple regression. The particular index that you will compare to the Thumbtack measure is Forbes-overall . You are to include your index along with the five X variables suggested by the authors of the report of the Thumbtack survey.

Second, you are to find one or two additional X variables from the database I have constructed for you from the Thumbtack survey. (Thus, your second multiple regression will have seven or eight X variables.) You are to calculate the regression, interpret its output, and discuss the implications of your analysis for business friendliness.

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