DOES RURAL LOCATION MATTER? THE SIGNIFICANCE OF A RURAL SETTING FOR SMALL BUSINESSES

1. Introduction

Geographically more than three quarters of the United States, home to 56 million people, is rural (Whitener and McGranahan, 2003). Roughly one-fifth of all Americans lives and work in rural areas (Economic Research Service, 2000). Small businesses dominate rural communities and are vital to economic prosperity (McDaniel, 2001). Rural areas, however, present unique conditions that have been associated with adversity for rural entrepreneurs and small businesses, consistent with external dependency (Pfeffer and Salancik, 1978). Small businesses in rural communities face issues such as low population density (Drabenstott, 1999), consumer income and educational levels below those found in metropolitan areas (Economic Research Service, 2000; Economic Research Service 2003a), and socio-cultural values (Allen and Dillman, 1994) that wield economic influence (Duncan, 1996).

Despite the potential hardship posed by the rural context, the extent and nature of its actual relationship to rural entrepreneurship and small business operations has not been adequately considered in studies of rural business (Wortman, 1990). Facts about characteristics of rural communities in the United States and traditional stereotypes about life in rural America underlie implicit and explicit assumptions that have been made about the effects of rurality on small businesses. One of two approaches often has been taken. In one approach, the study does not address rurality and does not attempt to link characteristics of the rural setting to findings (see for example, Robinson, 2001; Sullivan et al., 1997). The rural location has little obvious bearing on the results of the study beyond providing a sample for the research. In a second approach, the research sample similarly is drawn from a rural location and in this case the relationship of study findings to rurality is made explicit in the discussion of findings. The implications of rurality, however, are merely presumed because the variables discussed are not measured (see, for example, Tigges and Green, 1992).

Assumptions that rural settings for small business are like metropolitan settings or that rural areas are in crisis, presenting extreme adversity to business, are not necessarily accurate (W.K. Kellogg Foundation, 2001; Buss and Yancer, 1999; Buss and Lin, 1990;). Furthermore, rural America has undergone significant changes over the past two decades and continues to evolve. For example, its traditional agriculture-based economy now depends on a diverse mix of manufacturing, services, recreation, and other non-farm activities (Whitener and McGranahan, 2003).

Both failure to acknowledge and possible misinterpretation of the implications of rurality for small business prevent understanding of its effects and whether it truly "matters", that is, creates a unique context that significantly affects entrepreneurship and the management of small businesses. More complete knowledge of the effects of rurality can be important to small business owners and entrepreneurs so that they focus their efforts appropriately. It also can play a role in focusing rural development efforts within the United States.

The purpose of this study is to take a first step toward developing a more accurate understanding of the importance of a rural setting for small businesses in the United States. A major interest is in exploring whether assumptions about rurality would be supported by data provided by small business owners themselves. After reviewing literature on characteristics of both rural community and rural business, a questionnaire that examined potential effects of rurality on small businesses was developed. In the following sections, this study reviews relevant theory, findings from prior studies of rural areas, and previous research on rural businesses in the United States where the setting was taken into account. This is followed by presentation of the methods employed, results, discussion of findings, and conclusions.

2. Review of the Literature

The environment for small business in rural settings has distinct characteristics in two broad areas: geo-demographic and socio-cultural. These dual themes that emerged from the literature review are used to organize the following discussion. Rural areas are considered in this study to be the same as nonmetropolitan areas (for a discussion of definitional issues see Davis et al., 1994), exhibiting relatively low population density.

2.1. Geo-demographic features

Geography and the natural environment play a central role in rural life and can significantly affect economic development (Ghelfi and Parker, 1997), creating adversity for rural business. While the rural economy in the United States is not as dependent as it once was on farming, forestry and mining, natural amenities are still crucial to recreation and tourism in rural areas (Whitener and McGranahan, 2003).

The remoteness of many rural places presents transportation challenges to small businesses because population is widely scattered (Barkema and Drabenstott, 2000). For example, worktrip length and the reasons for it vary among rural and urban residents (Peters and McDonald, 1994). Manufacturing relies on transportation of goods while tourism and recreation industries rely on travel infrastructure to transport people. Distances among points in sparsely populated regions or between rural and urban areas exacerbate the effects of terrain and harsh climates. Rural businesses face higher commuting and shipping costs (Economic Research Service, 2003b).

Demography plays a critical role in rural locations. Low population density limits business growth (Drabenstott and Meeker, 1999; Johnson, 1988), even when demand is high (Gladwin et al., 1989). Rural businesses, thus, tend to be small (Drabenstott and Meeker, 1999).

Daycare and employment options may be limited in rural areas (Griffin et al., 1998; Hamilton, 1994; Tigges and Green, 1992). Limited population also can restrict the pool of available skilled labor, reducing the flexibility to hire appropriate help as needed in rural labor markets (Hoy and Vaught, 1980).

The per capita and household income in rural communities is low in comparison to urban areas (Economic Research Service, 2002; Kean et al., 1998). For example, the median household income in the rural county where this study was conducted is only two-thirds of the median statewide income (US Bureau of the Census, 2002). Rural consumer markets have poorer populations than urban markets (Frenzen and Parker, 2000).

The rural characteristics of lower income and educational levels and more elderly residents are associated with reduced computer access and use (Leatherman, 2000). Rural communities also have lagged urban areas in investments in infrastructure and bandwidth capacity (Trujillo, 1999; Leatherman, 2000), attributed to problems of distance (i.e., geography) and low population density. However, it is precisely these technologies that facilitate entrepreneurship and rural economies (Allen and Dillman, 1994; Leatherman, 2000; Riux, 2000; Thomas, 2000).

Rural businesses historically have lacked sufficient access to financing. Investors tend to seek firms with high growth potential, larger firms, and geographic clusters of entrepreneurs yet, at least in part a result of rural demography, these characteristics do not apply to most rural businesses (Drabenstott and Meeker, 1999). A number of policy-makers and researchers have explored the issue of rural banking and the failure to adequately back entrepreneurs (for a review, see Buss and Yancer, 1999).

2.2. Socio-cultural features

Developed over time, culture is an ongoing process of reality construction that leads people to see actions and situations in a distinctive way (Morgan, 1997). There is an identifiable culture associated with rural locations in the United States that may influence business and entrepreneurship (Westhead and Wright, 1998). In contrast to rural geo-demographic features, there have been few adverse effects on business previously presumed to be related to specific rural socio-cultural features. Rather, because socio-cultural features prevail in everyday life there is a logical assumption that they are closely intertwined with business operations. There has been practically no quantitative empirical research on this relationship or its effects (e.g., adversity).

Long term residents of rural communities have a unique sense of place, tradition, reputation, and history (Duncan, 1996). They also share interpersonal networks that vary from those in metropolitan locations with respect to intensity, kinship and neighbor ties, and size (Beggs et al., 1996). The literature suggests that rural settings are characterized by distinct socio-cultural values, or preferences, in at least four areas that can affect small business: gender roles, cooperation, communication, and network composition.

Gender attitudes are less egalitarian (Cotter et al., 1996) and rural communities tend to cling to traditional notions about women's roles (Buck, 1996; Allen and Dillman, 1994) that may present barriers to women as business owners (Tigges and Green, 1992). The role of women has been to stay at home rather than participate in the labor force, especially in jobs traditionally held by men (Tallichet, 2000). Small businesses owned by women have had significantly lower sales revenue than those owned by men even after controlling for characteristics such as size and type of business (Tigges and Green, 1992). According to Tigges and Green (1992, p. 306), "The force of traditional sex roles may be greater in rural than in urban areas and thus may constitute a greater barrier to women as business owners".

Miller and Kim (1999) found that consumer shopping in rural communities was tied to social involvement, highlighting the importance of understanding social exchange networks as factors in rural business survival. Rural business owners appear to maintain an implicitly cooperative strategy of not competing directly with other local businesses by not duplicating the goods or services that others provide (Allen and Dillman, 1994). As an example of this collective orientation, in Alien and Dillman's (1994) study of the rural community of "Bremer", the grocery store in "Bremer" did not carry toothpaste because toothpaste was sold in the local drugstore. In addition, "word of mouth" communication is central to rural community, a reflection of the strength of informal social relations. In "Bremer", news traveled quickly. Thus, "word of mouth" also may be significant in establishing and maintaining business reputation in a rural location.

Networks, a form of social capital, are considered to be key resources for entrepreneurs (Lyons, 2002). Entrepreneurs who contribute to their communities and who are supported by the community are more likely to consider their businesses to be successful (Kilkenny et al., 1999). Networks in which people are embedded may influence their individual outcomes (for example, job finding) as well as the community (for example, poverty rates) (Granovetter, 1982). Social network theory views interpersonal ties as relatively strong or weak based on factors such as emotional intensity, intimacy, and reciprocity (Granovetter, 1973). Close or strong ties are characteristic of rural communities, where people rely on long-term, smaller, denser, kin- and neighbor-centered relationships (Beggs et al., 1996). Of these ties, those of family or kin are closest, followed by friends and neighbors. Rural social networks may be linked to business networks (Miller and Kean, 1997).

3. Hypotheses

Geo-demographic features such as sparse population, limited access to transportation, a restricted labor market, and others as noted in the preceding discussion are expected to create adversity for small businesses.

Hypothesis 1: Rural geo-demographic features have significant adverse effects on small businesses. Gender attitudes observed in rural locations constitute a socio-cultural feature that is expected to create adversity for women's businesses.

Hypothesis 2: Rural gender stereotypes have significant adverse effects on women-owned small businesses.

Values for non-duplication, reliance on word of mouth communication, and strong ties to kin and neighbors present a powerful socio-cultural milieu that is expected to have an isomorphic effect (DiMaggio and Powell, 1983) on the way rural businesses are run.

Hypothesis 3: Rural small business owners manage their businesses consistent with rural socio-cultural values.

4. Method

4.1. Sample and data collection

The sample employed for this study consisted of small business owners in a county classified as rural (US Bureau of the Census, 2002) and located in the mid-Atlantic region. This location was selected because its economy reflects a mix of manufacturing, services, and recreation. The sample was taken from a business membership list of the local Chamber of Commerce and a list of manufacturing companies supplied by the County Economic Development Commission. These lists were cross-referenced with state tax records to verify current owners. Data were collected by means of a semi-structured mail questionnaire, following Dillman's (2000) Total Design Method procedures for four timed, hand-signed mailings and the assurance of full confidentiality to respondents. One hundred and ninety questionnaires were mailed. Eighty-seven surveys were returned for an overall response rate of 46%, with 76 usable responses. No significant differences were found between early and late responders (Fowler, 1988).

4.2. Measures

Except where otherwise noted, each of the variables was measured on a seven point Likert-type scale, with response categories ranging from "Strongly Disagree" to "Strongly Agree". Items are stated below. The multiple item scales included an open-ended response category labeled, "Other, please specify". Cronbach's alphas met or exceeded acceptable values (Nunnally, 1978).

Geo-Demographic Variables. Respondents were given the instruction, "A number of conditions commonly associated with a rural location may be harmful to small businesses. To what extent do you agree that the following conditions adversely affect your business?" The item responses were factor analyzed (Principal Components with Oblimin rotation) and a three-factor solution explained 75% of the variance. The resulting scales measured marketability (Market), labor issues (Labor), and resource constraints (Resources). Market (Eigenvalue = 5.3, Cronbach's alpha = 0.88) included six items: "small population", "income of local residents", "low demand for 'extras' beyond basic product/service", "limited potential for growth", "weather", and "time spent on local travel". These items are representative of a typical rural community, with its constrained economic opportunities, limited population, and reliance on the natural environment for economic survival. They affect business owners' ability to sell their products and services. Labor (Eigenvalue = 1.85, Cronbach's alpha = 0.76) included two items: "number of skilled workers" and "childcare options". Childcare options either facilitate or hinder the ability of parents to be active participants in the workforce so it is logical that they are a corollary labor issue to the availability of skilled workers. Resources (Eigenvalue = 1.05, Cronbach's alpha = 0.75) included three items: "access to technology", "access to financing", and "access to transportation". These items all deal with resources that affect small business owners.

Socio-Cultural Variables. Rural socio-cultural variables included stereotypes about women's business capabilities, the importance of not duplicating other businesses' products, importance of word of mouth communication, and important relationships. Single items measured all but relationships.

The importance of gender stereotypes (Stereotypes) was measured by asking, "To what extent do you agree or disagree that the following condition adversely affects your business?" The item was "traditional stereotypes about women's business capabilities". The remaining measures assessed whether the business owners' management of their businesses is consistent with their rural socio-cultural values. The importance of not duplicating other businesses' products (Noduplicate) was measured by a single item that asked: "How important is it to you that your products/services do not duplicate and compete directly with those offered by other local businesses?" The importance of word of mouth communication to business reputation (Wordofmouth) was measured by a single item that asked: "How important is 'word of mouth' reputation to your business?" Response categories for Noduplicate and Wordofmouth ranged from "Not at All Important" to "Extremely Important".

Relationships were measured by three scales that assessed the importance of relationships with three groups: family, friends, and neighbors (Kin) (Eigenvalue = 6.65, Cronbach's alpha = 0.81); community contacts (Comm) (Eigenvalue = 1.73, Cronbach's alpha = 0.91); and business contacts (Bus) (Eigenvalue = 1.34, Cronbach's alpha = 0.65). Items for the scales were responses to the question, "How important are relationships with each of the following for representing or running your business?" based on Renzuli, Aldrich, and Moody (2000). Factor analysis of the original fifteen items (Principal Components with Oblimin rotation) confirmed a three-factor solution that explained 65% of the variance. These factors comprised the three scales: Kin included "immediate family", "extended family", "friends", and "neighbors"; Comm included "school contacts", "social/hobby/sports clubs", "civic/service clubs", "retail/tourism/commerce groups", "women's business groups", "government/economic development groups", "local business owners", and "church /religious contacts"; and Bus included "previous employers", "suppliers to my business", and "bankers/accountants/lawyers".

For follow-up analysis, several other variables relevant to rural business that might help to explain results from hypothesis tests were examined. Respondents were asked to indicate their type of business (i.e., service, manufacturing, construction, retail trade, and wholesale) due to the potentially diverse operations and customer bases of various services versus manufacturing enterprises. Percent of sales to permanent residents was measured because of the changing rural economy in the United States with its rising dependence on tourism and recreation. Length of respondents' residency in the county was measured because of the dominance of long-term ties in rural community social structure. Correlations among the variables are shown in Table 1.

5. Results

Descriptive statistics for the sample are shown in Tables 2 and 3. Respondents' mean age is 49.5 years. Just over half (54%) are female. Half (50%) are natives of the county where their business is located and almost three-quarters (72%) of respondents have lived in this county 21 years or longer. The average age of their businesses is 24 years. Slightly over a third (35%) are service businesses, 24% are manufacturing, 22% are retail trade, and 5% are construction businesses. They employ, on average, 10 full-time and 5 part-time employees. Fifteen percent have no employees. Reported revenues for 2001 average $1,214,448 with median revenues of $432,258.

In most cases, one sample t-tests were used to test the hypotheses. For tests of H1 and H2, two-tailed t-tests assessed whether the sample mean was significantly different from the test mean (4 on the seven point scale). Lacking a population value to compare, a test value of 4, the mid-point of the seven-point response scale, was employed to represent no effect. Results of the t-tests are shown in Table 4. H1, rural geo-demographic features adversely affect small businesses, is partially supported. Marketability is perceived by respondents to have significant adverse effects on their businesses (t = 2.38, p < 0.05) with a mean (M) of 4.47. This result supports H1. Adversity due to resource constraints is not significant (t = -0.53, p > 0.05) and does not support H1. Adversity due to labor issues is marginally significant (t = -1.84, p < 0.10) with a mean of 3.61 that is not in the predicted direction so it also does not support H1.

Subsequent analysis using one-way analysis of variance (ANOVA) reveals that there are significant differences among different types of businesses with respect to the mean of marketability (F = 8.50, p < 0.01). Post hoc analysis using Tukey tests shows that manufacturing (M = 3.07) business owners are significantly different from service (M = 4.84) and retail (M = 5.05) business owners (p < 0.01 and p < 0.01 respectively). Subsequent t-tests by type of business reveal that while both service business owners (t = 2.44, p < 0.05) and retail owners (t = 4.50, p < 0.01) perceive significantly greater adversity than might be expected, manufacturing business owners' (t = -2.25, p < 0.05) ratings of adverse marketability are significantly lower than the test value of 4. In addition, follow-up analysis shows that retail business owners (M = 3.19) experience significantly less adversity due to labor issues (using a test value of 4) (t = -2.50, p < 0.05).

For H2, male respondents' scores were not analyzed because the literature does not suggest that men suffer gender bias in rural locations. The t-test shows that traditional stereotypes about women's business capabilities are not perceived as adverse to the female respondents' businesses (t = -3.10, p < 0.01). Findings are statistically significant but not in the predicted direction so H2 is not supported.

H3, that rural small business owners will manage their businesses consistent with rural socio-cultural values is partially supported. The importance of not duplicating other businesses' products and competing with them is not significant (t = 1.17, p > 0.10). Word of mouth communication of business reputation is significantly important to small business owners (t = 28.19, p < 0.01), offering support for H3. For relationships, t-tests compared the mean scale scores for the variables Kin, Comm, and Bus. Business owners perceive their relationships with family, friends, and neighbors to be significantly more important to running their businesses than relationships with community contacts (t = 5.39, p < 0.01) or business contacts (t = 3.24, p < 0.01), supporting H3.

Follow-up analysis using one- way ANOVA with type of business as a factor reveals that there are significant differences (F = 3.62, p < 0.05) with respect to not duplicating other businesses' products. Post hoc analysis using Tukey tests shows that these differences are between manufacturing (M = 3.23) and retail (M = 5.29) business owners (p < 0.05). Subsequent t-tests show that retail business owners are significantly likely to value the importance of not duplicating others' products and directly competing with them (t = 3.10, p < 0.01). One-way ANOVA also found significant differences among business owners with respect to community contacts (F = 5.31, p < 0.01). Post hoc analysis using Tukey tests shows that manufacturing (M = 2.71) business owners are significantly different from retail (M = 4.30) and service (M = 3.56) business owners (p < 0.01 and p < 0.05, respectively).

Follow-up analysis revealed that manufacturing business owners report that only 14 percent of their sales are to permanent residents, compared to the 45% of sales to permanent residents reported by service business owners and the 52% of sales to permanent residents reported by retail business owners. The percentage of a business's sales to permanent county residents is significantly and positively correlated with the owner's perceived importance of relationships with family, friends, and neighbors (0.28, p < 0.05) and with community contacts (0.37, p < 0.01). Sales to permanent residents had marginally significant positive correlations with adverse marketability (0.24, p = 0.07) and importance of word of mouth reputation (0.23, p = 0.07).

With respect to owners' length of residency, follow-up analysis using one-way ANOVA found significant differences in the percentage of their total sales that is made to permanent residents (F = 5.28, p < 0.01). Post hoc analysis using Tukey tests shows that owners with short term residency (10 years or less) are significantly different from owners with the longest residency (21 + years) (p < 0.01). The mean sales to permanent residents is 6 percent for owners with short term residency (10 years or less) and 48 percent for owners with the longest residency (21 + years). Years as a county resident is not significantly correlated with the type of business owned (0.25, p = 0.41).

One-way ANOVA with length of owner residency as a factor found significant differences in adverse marketability according to the number of years that the owner has lived in the county (F = 3.20, p < 0.05). Post hoc analysis using Tukey tests shows that owners with a residency of 10 years or less (M = 3.31) are significantly different (p < 0.05) from owners with residency of 11-20 years (M = 5.09); further, owners with a residency of 10 years or less are marginally significantly different (p < 0.10) from owners with residency of 21 or more years (M = 4.56).

One-way ANOVA also found significant differences among owners with varying lengths of residency with respect to the value placed on relationships with family, friends, and neighbors (F = 4.94, p < 0.05). Post hoc analysis using Tukey tests reveals that owners who have lived in the county for 21 or more years (M = 4.95) are significantly different (p < 0.05) from owners who have lived in the county for ten years or less (M = 3.28).

6. Discussion and Conclusions

These findings begin to reveal the significance of rurality by demonstrating the extent to which characteristics associated with rural locations have a discernable effect on small businesses. Although H2 is not supported, both H1 and H3 are supported.

Hypothesis 1, that rural geo-demographic features have significant adverse effects on small businesses, received mixed support. First, results show that business owners find that marketability factors present marked adversity for their businesses, echoing the findings of Hoy and Vaught (1980) more than two decades ago that rural entrepreneurs were frustrated by external variables over which they felt that they had little control. However, findings do not support other types of adversity associated with geo-demography previously reported in the literature. Neither resource constraints (financing, technology, and transportation) nor labor issues (availability of skilled workers and childcare) are viewed as significant sources of adversity, contradicting widely held assumptions. It is likely that the strong social ties to family, friends, and neighbors found in this study minimize childcare problems. Lack of difficulty with financing supports evidence that rural businesses do not currently face a credit gap (Buss and Yancer, 1999; Popovich, 1993) despite past problems.

Results strongly support H3, that rural small business owners manage their businesses consistent with rural socio-cultural values, and demonstrate the considerable influence of rurality on small business activities. Its effects are reflected in the importance business owners place on word of mouth reputation and on the primacy of relationships with family, friends, and neighbors to the successful operation of their businesses, affirming the significance of rural social networks (Miller and Kim, 1999). These results suggest that traditional business advisors, such as accountants, and community groups, such as chambers of commerce or civic clubs, take a backseat to family, friends and neighbors.

The significance of strong interpersonal ties becomes more apparent when it is noted that half of the business owners in this study are natives of the county where their business is located and nearly three-fourths have lived in the county twenty-one years or more. Although not necessarily a function of the length of residency, embeddedness (i.e., where an individual is integrated within and helps to maintain a community social structure) is increasingly viewed as a key variable in the entrepreneurial process (Jack and Anderson, 2002). A potential danger is the association of strong ties with persistent poverty in rural communities (Duncan, 1996). Previous findings regarding the effects of strong ties on small businesses, not necessarily rural, are mixed (Aldrich and Martinez, 2001; Honig and Davidsson, 2000; Jenssen and Koenig, 2002).

There are several possible explanations for the finding that length of residency in the rural community is related to the customers served by the business, with short term resident business owners making significantly fewer sales to permanent local residents. These short-term resident owners also report less adversity due to marketability and they show significantly less affinity for strong ties, with diminished importance placed on relations with family, friends, and neighbors. It may be that businesses started by newer residents face an uphill battle in gaining local acceptance, reflected in fewer sales to locals. This would be indicative of the clannish, tightly knit rural culture (Duncan, 1996) and the difficulty this poses for small business owners from the outside (Gladwin et al., 1989). Alternatively, the businesses that newcomer entrepreneurs initiate upon their arrival in a rural community may differ from those owned by long-time residents. Findings here do not include detailed information on the specific businesses owned by respondents, beyond business type. Length of owner residency is not related to whether the business is service, manufacturing, or retail. In some cases, newcomers capitalize on the rural nature of a locale by starting tourist-related services targeted primarily toward customers who are not permanent residents rather than starting traditional businesses that serve the local residents (Anderson and McAuley, 1999).

The value for not duplicating other businesses' products and services is strong among retail business owners, although not among others. Since Alien and Dillman's (1994) report of this value was from their observation of retail businesses, this finding is not surprising. However, it hints at the larger picture that becomes apparent when other results are examined by type of business. Rurality appears to affect business sectors in differing ways. Specifically, manufacturing businesses' dependence on the rural setting appears to be less than that of service and retail businesses. They make substantially fewer sales to permanent residents and thus logically fail to show concern for duplicating other local products. Similarly, they report significantly less concern for community contacts than might be expected and report less adversity due to marketability. Manufacturing businesses may be more buffered from both the geo-demographic and socio-cultural effects of rurality because they can export products more readily than many service and retail businesses. In fact, rural firms appear to be able to access even foreign export markets at similar rates as metropolitan firms (Gale, 1998). Those conducting small business research or economic policy targeted primarily toward rural manufacturing businesses should be aware that rurality appears to carry different implications for these businesses. Coupled with the results reported here that rural businesses as a whole do not face adversity arising from human, financial, transportation, and technological resources, rural manufacturers appear to face significantly less adversity than may commonly be perceived.

H2, that rural gender stereotypes have significant adverse effects on women-owned small businesses, is not supported. In fact, the significant but negative findings demonstrate respondents' strong disagreement that their businesses suffer from gender bias. Women constitute a large portion of rural business owners, evident in the sample here (see Table 2). Paradoxically, might women's businesses be favored by either their gender or traditional stereotypes in rural communities? Would women whose businesses have failed or male business owners provide a differing perspective? Future studies can examine these and other questions that may elucidate women's experiences within a rural socio-cultural environment.

This research has several limitations. The sample for the study was selected from one geographic locale, potentially limiting its generalizability. In addition to studies in multiple rural locations, future research should also explore differences between rural and non-rural businesses. Only limited differences among types of businesses (e.g., retail, manufacturing) could be examined in this study due to small numbers of businesses in some categories. Another limitation of the study was its reliance on self-reported perceptual data. Future studies should employ other sources of data (e.g., archival). Finally, the nature of survey methodology limits the amount of qualitative information that can be gathered.

Although it was conducted in only one rural location, the results of this study can be generalized. Despite progress with respect to many assumed sources of adversity for rural small businesses (e.g., access to transportation and financing), the marketability issue is likely to be universal because rural locations by definition lack the population density that would enable a robust consumer market. Marketability problems fall largely on service and retail businesses because their market is local. Manufacturing businesses are not as affected because they are able to readily serve customers from outside the rural location.

Using evidence from the perceptions of business owners in this study as a foundation, future studies now can investigate how they respond strategically or tactically to mitigate effects of rural geo-demography. It may be especially important to study successful service and retail businesses. Gathering information about the outcomes that result from enacting rural socio-cultural values also will lead to a more complete understanding of rural business operations. For example, in what ways do strong ties influence entrepreneurial success or failure in rural communities?

This study is a significant first step in response to the call for a fuller understanding of rural setting and values on entrepreneurship and small business activities (Wortman, 1990). The findings confirm that rural business owners do experience some adversity related to the geo-demography of their location and further show that they manage their businesses consistent with rural socio-cultural values. These results support the conclusion that indeed a rural location does matter. But findings here also counter prior assumptions by showing that rurality is not uniformly adverse, nor are its influences consistent across different types of businesses. These diverse experiences of rurality lay a foundation for future studies of rural entrepreneurship and small business and should be taken into account in the formulation of rural economic development policy.