How Does The Use Of Technology In Entrepreneurial Process Affect Firms’ Growth?

This paper summarizes the arguments and counterarguments within the scientific discussion on the issue of how technology use in entrepreneurial process relates to firm performance and business owner's optimism in U.S. states. We specifically focus on each U.S. state's success in employing internet as a tool during the startup process, the tax payment process, and the licensing process. We try to answer the following question: “Do the small firms that operate in an internet-friendly state perform better than the small firms that operate in a less internet-friendly state?” We also examine how internet usage affects owners' outlook for the future. Our results show that the prevalence of internet use for tax payments or for licensing in a state is not related to companies' performance or their owners' outlook. The prevalence of internet use during the startup process also does not affect firms' performance. However, our findings indicate that the prevalence of internet use during the startup process affects owners' outlook for the future. If a state is more business friendly in terms of the internet startup process, the small business owners in that state tend to be more optimistic in terms of future hiring plans and in terms of encouraging others to start a business in their state. The relevance of these findings is that, to improve the environment for small businesses, states should focus on starting an internet startup process or on improving their existing process. Investigation of the impact of technology use on growth and on owner's optimism in the paper is carried out in the following logical sequence: First, each state is assigned into one of two groups based on their “Internet start score”. The states that have a score higher than the mean state were assigned into the “High-Internet Start Score” group and the others were assigned into the “Low-Internet Start Score” group. Then, the two groups were compared in terms of firm growth and owner's optimism. Then, the same procedure is followed for “Internet Tax Score”. The states that have a score higher than the mean state were assigned into the “High-Internet Tax Score” group and the others were assigned into the “Low-Internet Tax Score” group. The two groups were compared in terms of firm growth and owner's optimism. Finally, the same procedure is followed for “Internet Licensing Score”. The states that have a score higher than the mean state were assigned into the “High-Internet Licensing Score” group and the others were assigned into the “Low-Internet Licensing Score” group. Then, the two groups were compared in terms of firm growth and owner's optimism. We used nonparametric tests to compare high and low score states in each category. Only 41 states had sufficient data to run the analyses. The paper presents the results of these nonparametric tests which showed that internet start score, internet tax score, or internet licensing score does not explain firm growth. However, the prevalence of internet use during the startup process affects owners' outlook for the future. The results of the research can be useful for state or local governments that want to support their small businesses by improving the technology use in these areas.