Predicting downtown and small business success: A resource-based view (Michigan)

This study was a unique examination of small downtown business districts, and the businesses within each respective district. I employed resource-based theory to put forward a model that identifies a downtown's resources, and connects those to success. I posited that a downtown has two separate types of resources at its disposal: business resources and structural resources. Business resources are manifest in downtown businesses, while structural resources are created by the downtown (or community) itself. When utilized, these resources have a positive effect on the downtown's success.; Data were collected from 267 business owners in 11 small and medium-sized downtowns in Michigan, using a hand delivered, self-report survey instrument. I utilized structural equation modeling to test the hypothesized relationships between measurement variables and latent constructs. Confirmatory factor analysis was used to test the reliability and validity of the measurement variables. The model proposed in this study was a complex factor model, where some latent constructs were themselves indicated by latent factors. Business and structural resources, and downtown success were latent endogenous constructs. Business resources were indicated by the latent factors of entrepreneurial orientation, small business orientation and social capital. Structural resources were indicated by brand identity, business mix and community characteristics. Downtown success was indicated by vacancies, relative firm performance and longevity of businesses.; Entrepreneurial orientation was indicated by innovativeness, proactiveness and risk taking. Small business orientation was indicated by business owner goals and emotional attachment. Social capital was indicated by trust, reciprocity, shared vision, homophily, network density and frequency of network interaction. Downtown image and positioning were indicators of brand identity. Business mix was indicated by business diversity and complementary businesses. Community characteristics were indicated by sense of place.; Results from fitting the structural model to the data showed small business orientation and social capital were significant indicators of the business resource construct. Social capital, brand image, business mix and community characteristics were all significant indicators of the structural resources construct. Business resources were not a significant predictor of downtown success, though the parameter estimate points to a moderate effect size. Structural resources were found to be a significant and positive predictor of downtown success.; Results support resource-based theory which maintains that firms with superior resources will have a competitive advantage over competitors. A key to this competitive advantage is the ability to maintain and differentiate resources from the competition's. Implications for downtowns imply that structural resources such as brand identity, business mix and sense of place are resources which may provide a sustainable competitive advantage.