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Federal mentor -protege programs: A pilot study on protege survival and growth

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Federal mentor -protege programs: A pilot study on protege survival and growth

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Content FEDERAL MENTOR-PROTEGE PROGRAiMS: A PILOT STUDY ON PROTEGE SURVIVAL AND GROWTH by Brenda J. DeGraffenreid A Dissertation Presented to the FACULTY OF THE SCHOOL OF POLICY, PLANNING, AND DEVELOPMENT UNIVERSITY OF SOUTHERN CALIFORNIA In Partial Fulfillment of the Requirements for the Degree DOCTOR OF PUBLIC ADMINISTRATION May 2004 Copyright 2004 Brenda J. DeGraffenreid Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. UMI Number: 3140463 Copyright 2004 by DeGraffenreid, Brenda J. All rights reserved. INFORMATION TO USERS The quality of this reproduction is dependent upon the quality of the copy submitted. Broken or indistinct print, colored or poor quality illustrations and photographs, print bleed-through, substandard margins, and improper alignment can adversely affect reproduction. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if unauthorized copyright material had to be removed, a note will indicate the deletion. UMI UMI Microform 3140463 Copyright 2004 by ProQuest Information and Learning Company. All rights reserved. This microform edition is protected against unauthorized copying under Title 17, United States Code. ProQuest Information and Learning Company 300 North Zeeb Road P.O. Box 1346 Ann Arbor, Ml 48106-1346 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. DEDICATION To the memory of my late parents and particularly my mother who encouraged formal and informal education and woidd be proud of this achievement; To my brother who supports me in this and all endeavors; and To all those who face the difficult chaiienge of pursuing a doctoral degree. 1 1 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ACKNOWLEDGEMENTS There have been so many contribntioKS made by so many people that led to the successful conclusion of this dissertation and of my doctoral program. I am deeply grateful to my family, mainly my brother, Willie, and my extended family, for allowing me the time and space to accomplish this task. My late mother, Vencie, and father, Willie, who instilled in me self-confidence, the desire to aim high, the persistence to complete my endeavors, and the belief that through God “all things are possible.” Many relatives, good friends, and colleagues, as well as faculty and fellow students at the former Washington Public Affairs Center of the University of Southern California, provided unlimited moral support at various times throughout this doctoral process. It is difficult to do justice to the contributions made by so many people, and I regret that I cannot name each of them individually. However, several persons stand out. Dr. Joseph S.Wholey encouraged me from the day I met him in class, and further encouraged me each time I began to sort out my thoughts in preparation for the enormous task of writing a dissertation. Moreover, he was patient and encouraging even when I became frustrated. I will be forever grateful to him for Ms encouragement. Dr. John McLaughlin willingly stepped in during those periods when 1 1 1 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. preparation for w iting the dissertation Mt plateaus. Dr. Gerald (Jake) Barkdoll should be considered a “national treasure,” as he gave me so much assistance in developing the dissertation and did not seem to tire of my calls for consultation. Although I have not met Dr. LaVonna Blair Lewis face to face, I thank her for her insightful comments that helped me complete the dissertation. Completing the dissertation and complying with ail of the administrative standards and requirements for submission of the dissertation would have been impossible without Roylene Sims, who is an expert in the intricacies of dissertation formatting and editing. Although they may never read this dissertation, I thank the subjects of this dissertation who responded to my surveys and allowed me to interview them, as well as other small business advocates who assisted me in any way. They are each experts in their respective fields, and thus have M l schedules, but still allowed me to interrupt those schedules in pursuit of my dream. To all of you, I thank you more than you will ever know. IV Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. TABLE OF CONTENTS DEDICATION ............ ii ACKNOWLEDGEMENTS............................... iii LIST OF TABLES ............................... viii LIST OF FIGURES ................ x LIST OF ACRONYMS .............. xi DEFINITIONS .................. xii ABSTRACT ............................... xvii Chapter I. INTRODUCTION TO SMALL BUSINESS CONTRACTING ..... 1 Summary of the Research .......... 1 The Great American Dream ......................... 4 The Role of Small Business in the U.S. Economy ............ 5 Historical Small Business Performance ........................... 10 Minority and Women-Owned Small Businesses 13 Impact of Federal Contracting on Small Businesses ........... 14 Background on the DOD Pilot Mentor-Protege Program ...... 16 The DOD-PMPP Program Operation ...................... 23 Potential Significance of the Study ............ 24 Basis for the Researcher’s Interest .......... 25 Focus of the S tu d y ........ 26 II. FINDINGS FROM EARLIER STUDIES ........... 34 Overview ............................. 34 Background on Early Entrepreneurship................... 39 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Basiiiess Sonwal and GroMli ........................... 41 Business-to-Business Alliances .......................... 54 III. RESEARCH DESIGN AND METHODOLOGY ......... 68 Conceptual Framework ... ... ... ... .................... 68 Program O peration..................... 70 Research Questions .......... 72 Hypothesis 1— Survival ....................... 73 Demographic Characteristics of the Groups ........... 75 Statistical Analysis for HI . .............. 78 Hypothesis 2—G row th .......................... 79 Demographic Characteristics of the G roups 82 Statistical Analysis for H 2 .................. 82 Hypothesis 3—^Training ........................... 83 Training Received by Protege Firms ........... 84 Statistical Analysis for H3 ................... 84 Data Collection ............ 88 The Survey ................ 89 Stage 1— Sample ......................... 89 Stage 2—Development of the Survey Instrument. . . . . . . 93 Stage 3—^Interviews ........................... 99 A Case Study ............................... 101 IV. FINDINGS AND ANALYSES.................. 102 Summary of the Study’s Design and Findings ............... 102 Findings ......................... 108 H I— Survival of the Protege Firms and Control Group Members ....................... 109 Demographic Characteristics of Protege Firms ........ 109 Demographic Characteristics of Control Group ........ 114 Comparison of Survival Rate between Both Groups .... 116 The Chi Square Test of Significance for Both Groups . . . 119 H2—Growth of the Protege Firms and Control Group Members .......... 120 Growth Rate and Demographic Characteristics of the Protege Fim s ......................... 121 The Chi Square Test ................ 121 A Logistic Regression M o d el................ 122 VI Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. H3—Training (Development Assistance) Received by the Protege Firms .......... 124 The First Logistic Regression Model .......... 127 The Second Logistic Regression Model .............. 128 The CM Square Test ............................ 130 A Case Study in Business Mentoring .................. 131 The Firm Over Time and Its Industry .................. 131 V. ANALYSIS AND CONCLUSIONS ......................... 135 Limitations of the Study .. .............................. 135 Responses to the Research Questions ................ 138 Findings for HI— Survival .............................. 140 Comparison of Results from Other Studies ......... 141 Results of the HI Statistical Tests ..................... 147 Findings for H2—Grovvtli ......... 148 Comparison of Growth Statistics from Other SDBs ....... 149 Results of the H2 Statistical Tests ..................... 150 Findings for H3—Training ....................... 151 Results of H3 Statistical Test .............. 153 Conclusion .............. 155 Lessons Learned................... 157 Benefits of this Study ....... ...... ...... ...... .... ..... 157 Recommendations ..................... 158 Implications for Future Research ............ 160 SELECTED BIBLIOGRAPHY ..................... 162 APPENDICES A. Letter to DOD-PMPP Participants .............................................. 173 B. DOD-Fiiot Mentor-Protege Program Survey........................ 175 C. DOD Control Group Survey ........ 180 D. In-Person and Telephone Interview Questions................ 183 V ll Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. LIST OF TABLES 1. Report on Annual Procurement Preference Goaling Achievements (Abbreviated) ................ 7 2. Indicators Related to Small Business, 1991-2001 ................... 11 3. Comparison of Original Samples of Protege Firms and Control Group Members ....... ... ... ... ... .. ... ... ... ... ... ... .. . 78 4. Outline of Statistical Analyses Used in the Study ................... 103 5. Demographic Characteristics of Protege Firms ................................ 110 6. Technical and Consulting Protege and Control Group F irm s................... 113 7. New and Old Protege and Control Group F irm s......... 114 8. Demographic Characteristics of the Control Group ................. 115 9. Comparison of Leading Demographic Characteristics of the Protege Firms and the Control Group ......................... 117 10. Financial Assistance Received by Growth and Non-Growth Firms ..... 118 11. The Chi Square Test of Significance on Survival of the Two Groups ................ 119 12. The Chi Square Test of Significance on Growth Between the Two Groups ............................. 122 13. Analysis of Growth in Protege Firms and Control Group Relative to Business Types and Company Ages ..................... 123 14. Developmental Assistance (Training) Received by Protege Firms from Their Mentors .................. 125 Vlll Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 15. Analysis of the Relationship of Protege Firm Growth to Training Received ............... ... ... ... ... .. ... ... ... .. 128 16. Analysis of Protege Firm Growth Relative to Three Hood and Young Requisite Categories of Training ............ 129 17. The CM Square Test of Significance of Protege Growth Relative to the Amount of Training Received......................................................... 130 18. Training Received by Growth Protege Firms ...................... 153 IX Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. LIST OF FIGURES 1. Small Business (SB) and Large Business (LB) Percent of Employers and Gross Domestic Product (G D P ).................. 9 2. Small Business (SB) and Large Business (LB) Share of Federal Contract Dollars—FY 1999 .............. 12 3. The Business Mentoring Partnership ............ 36 4. Model: Business Mentoring Leads to Growth that Expands to Success and Survival .......... 81 5. Requisite Areas of Development for Successful Entrepreneurship ..... 86 6. Prescriptive Mentoring (Training) for Successful Entrepreneurship .... 87 X Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. LIST OF ACRONYMS 8(a); Section 8(a) business concern DOD: Department of Defense DOD-OSDBU: Department of Defense Office of Small and Disadvantaged Business Utilization DOD-PMPP: Department of Defense Pilot Mentor-Protege Program DOE:' Department of Energy DOE-OSDBU: Department of Energy Office of Small and Disadvantaged Business Utilization HUB Zone: HUBZone Small Business Concern SB: Small Business or Small Business Concern SDB: Small Disadvantaged Business or Small Disadvantaged Business Concern VET: Veteran-Owned or Service-Disabled Veteran-Owned Business WOB; Women-Owned Business or Women-Owned Business Concern XI Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. DEFINITIONS Definitions of some of the common terms used in the study are listed. Affiliates; Business concerns are affiliates of each other if, directly or indirectly, either one controls or has the power to control the other, or another concern controls or has the power to control both. Business Mentoring Relationship, Partnership or Alliance: A business relationship in which a large business mentors a small business making it a Mentor- Protege relationship. When the mentor and protege form an informal or formal partnership to pursue business opportunities, it is a Business Mentoring Partnership. Concern: Any business entity organized for profit (even if its ownership is in the hands of a nonprofit entity). Emerging Small Disadvantaged Business Concern: A small disadvantaged business whose size is no greater than 50 percent of the numerical size standard applicable to the standard industrial code for the supplies or services which the protege firm provides or would provide to the mentor firm. Employment: Paid employment consists of full- and part-time employees, including salaried officers and executives of corporations. Included are employees on sick leave, holidays, and vacations; not included are proprietors and partners of XU Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. unincorporated businesses. (This definition is used in statistics provided by the United States Census Bureau.) Eaterprise: An enterprise is a business organization consisting of one or more domestic establishments that were specified under common ownership or control. The enterprise and the establishment are the same for single-establishment firms. Each multi-establishment company forms one enterprise—^the enterprise’s employment and annual payroll axe summed from the associated establishments. Enterprise Size: Enterprise size designations are determined by the summed employment of all associated establishments. The enterprise size group “0" includes enterprises for which no associated establishments reported paid employees in the mid-March pay period but paid employees at some time during the year. (The United States Census Bureau uses “Enterprise Size” in its tabulations of business statistics.) Entrepreneiir: The American Heritage Dictionary defines an entrepreneur as a person who organizes, operates, and assumes the risks for a business venture. Some business researchers refer to an entrepreneur as an individual who: (1) owns and operates his/her own business and (2) is the owner of a new business. Other literature use the terms “entrepreneur” and “small business owner” interchangeably. In this study, “entrepreneur” will refer to the owner of a new business. Entrepreneurship: The act or state of owning a business or owning a new business. X lll Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. EstablisiHient; A single physical location where business is conducted or where services or industrial operations are performed. (This is a business category used by the United States Census Bureau in compiling business statistics.) Firm; A firm is a business organization consisting of one or more domestic establishments in the same state and industry that were specified under common ownership or control. The firm and the establishment are the same for single- establishment firms. For each multi-establishment firm, establishments in the same industry within a state will be counted as one firm—the firm’s employment and annual payroll are summed from the associated establishments. Historically Black Coiege or University (HBCU): An institution determined by the Secretary of Education to meet the requirements of 34 CFR, Section 6082. The term also means any nonprofit research institution that was an integral part of such a college or university before November 14, 1986. Historically llnderntilized Business Zone (HUBZone) small business concern: A firm certified by the Small Business Administration as a business located and operating the business in a HUBZone. To determine if a business is located in a HUBZone, access www.sba.gov. Industry; All concerns primarily engaged in similar lines of activity. Minority Institution of Higher Education (MI); An institution meeting the requirements of Section 1046(3) of the Higher Education Act of 1965 (20 U.S.C. XIV Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 1135d-5(3). The term also includes Hispaoic-serving institutions, as defined in Section 316(b)(1) of such Act (20 U.S.C. 1059c(b)(l)). Nonemployer: A nonemployer business is one that has no paid employees, has annual business receipts of $1,000 or more ($1 or more in the constraction industries), and is subject to federal income taxes. (The United States Census Bureau used “Nonemployer” as a category of business in its tabulation of statistics on business activity.) North American Industry Classification System (NAICS); The North American Industry Classification System was developed by representatives from the United States, Canada, and Mexico and replaces each country’s separate classification systems with one uniform system for classifying industries. In the United States, NAICS replaces the Standard Industrial Classification (SIC)—a system that federal, state, and local governments, the business community, and the general public have used since the 1930s. Small Business or Small Business Concern (SB): An entity, including its affiliates, that is independently owned and operated, is not dominant in its field of operation, and qualifies as a small business under the criteria and size standards in 13 CFR, Part 121—e.g., it does not exercise a controlling or major influence on a national basis in the business activity in which it is engaged. The Federal Acquisition Regulation (FAR), Part 19, further defines a small business concern by its employees and aimual receipts in its major field of operation. XV Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Small Disadvantogei Business (SDB): A term for a business entity that is 51 percent owned and controlled by socially and economically disadvantaged individuals—a group that primarily comprises presumed socially disadvantaged members of minority gi'oups that include African Americans, Hispanic Americans, Native Americans (including Native Hawaiians), Asian Pacific Americans and Asian Indian Americans. Women-Owned Business (WOB): A term for a business entity that is 51 percent owned by one or more women that are socially and economically disadvantaged individuals, as set forth in FAR, Part 19. In Federal Government contracting, women-owned businesses also are small business concerns. XVI Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ABSTRACT Small busiaesses are so important to the United States economy that many American citizens support the enactment of laws to help small business grow. This research examines a business mentoring alliance, the “Department of Defense’s Pilot Mentor-Protege Program,” to determine if it promotes small business survival and growth. Federal business mentoring takes place when an experienced business, typically a large business, selects a small business as its protege, and then provides developmental assistance to the protege firm for the purpose of helping it grow. Hypotheses were developed to examine the comparative survival and growth of the program participants, i.e., the protege firms, against similar firms not participating in a mentoring program. In addition, the study explores the possibility that the type of developmental assistance received from the mentor is related to protege growth. The study of 247 proteges found that protege firms are more likely to survive and grow than are their non-mentored counterparts, i.e., a control group of 207 similar firms. Although the survival rate of the firms in both groups presents issues for future research, the protege firms’ survival rate was nearly twice that of the xvii Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. compaxison group. This would suggest that participating in a mentoring program could benefit the small business. Since very little was learned about the non-surviving firms of both groups, the research pertained only to the surviving firms. The findings suggest that small businesses are more likely to grow at a greater rate than their small business counterparts. Also, the statistical analysis showed that survival and growth are related to the age of the company. Further, growth is likely to occur with protege firms that received three or more types of developmental assistance. The study’s findings suggest recommendations to practitioners for program improvement, e.g., identifying characteristics of the protege firms that contribute to growth, determining the reasons for non-survival of protege firms, determining what factors influence growth, and determining the extent of consistency in the developmental assistance received by the protege firms. XVlll Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. CHAPTER I INTMODUCTION TO SMALL BUSINESS CONTRACTING In making legislative policy in the United States federal government, there are at least three considerations that mfluence the enactment of laws. They ai'e: (1) the budget; (2) the impact of the law on the economy; and (3) the will of the people. Small businesses operate 99 percent of United States businesses, and therefore, exercise considerable influence on policy makers responsible for national economic decisions. As a congressman addressing small business contracting quipped, “Small businesses are so important to this economy that neither political party would dare ignore tiiem.” This research examines a federal mentoring program that is designed to help eligible small businesses grow. This chapter will begin by summarizing the dissertation in order to provide the reader with a general concept of the topic, variables, approach, and the study’s outcome. Further details of the study are provided in this and successive chapters. SmninaFy of the Research The benefits received by small businesses in a Dspartmmt of Defense (DOD) program entitled, “Pilot Mentor-Protege Program (PMPP),” is studied in this 1 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. dissertation. Specifically, the purpose of the study is to examine the benefits, namefy simival and growth, experienced by the fimis participating in the program’s mentoring alliances. This study postulates three hypotheses, the first two of w'hich pertain to survival (HI) and groivth (H2). HI and H2 posit that the rotege firms experience greater survival and growth than similar firms not participating in the program. The third hypothesis (H3) pertains to the developmental assistance, hereafter referred to as “training,” paths chosen by each mentor-protege team, and the relationship of those paths to the growth of the protege firm. Hypothesis 3 proposes that tlie type(s) of training received by the protege firm is related to protege growth. The underlying approach to this research involves comparing the experiences of the program participants to a similar group of non-mentored DOD contractors (hereafter referred to as “control group”) from the private sector. This study examines a sample of 24? protege firms and 207 control group members. The program participation period by which “growth” is measured in this study is from 1991 through 1997. Four additional years, extending to the year 2001, are considered when deteitnining survival of the firms in both groups. A survey instrument (questionnaire) was administered to the protege firms and the control group. A number of variables were generated from the survey instrument. The variables were: (1) the age of the owner or Chief Executive Office (CEO); (2) the owner’s educational level; (3) the owner’s prior business ownership; (4) the age of business; (5) whether technical or fuiancial assistance was received; and (6) the types Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. of assistance received by the protege firms. Responses to the sni'vey questions provided the data for comparison of the two groups. Several configurations of the variables were tested using probability statistics, i.e., the CM Square test and logistic regression model, to test the hypotheses and support the data derived from the surveys. The results of the Chi Square tests showed that protege firms have a statistically significant relatioesMp to survival and growdh over firms in the control group. The logistic regression model showed that the odds are that survival and growth are also related to the age of the company. The findings also revealed that protege firms that received three or more types of training are more likely to grow than protege firms receiving two or fewer types of training. In fact, protege firms out perfonned control group members in both survival and growth. They survived nearly twice as often as control group members and grew nearly twice as often as the comparison group. Despite the protege firms’ performance over the comparison group, the overall survival rate was problematic in both groups. There is virtually no infonnatioii available on non-surviving protege firms or the control group. Therefore, the results of the this study pertain to surviving protege firms and control group members. The study’s findings led to recommendations for improvement in several ai'eas of the program, including dociimentation of survivors and non-survivors, growth and non-growth firms, and internal controls. Further, there are implications for future research, which are outlined in Chapter 5. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. The remainder of this chapter addresses: (1) the importance o f studying this topic, i.e., a topic on small business development; (2) program operation; (3) the focus o f the study; and (4) the potential significance of the study. Since small businesses capture approximately one-fourth of the Federal procurement budget, along mith additional fiindiiig support through financial assistance and other cooperative agreements, this chapter also will address the impact that small businesses have on Federal contracting. The Great American Dream To own one’s own business is to M fill the “Great American Dream” and, as many believe, to set out on the road to riches, especial!)? in the United States. The story of business success in this country is truly an amazing one. From the first settler or farmer who set up a stand to sell Ms produce, Americans have been starting their own businesses. Over the years, many o f these businesses have grown into large multi-faceted entities that are owned by stockholders. These businesses are started for a variety of reasons, iacluding independence, income, creativity, personal and family considerations, to exercise one’s own initiative or to provide products or services not available elsewhere. Many of the country’s innovations w?ere either developed by small businesses or resulted in the establishment of small businesses to produce and market these inventions and technologies. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. The Role of Small Business in the U.S. Economy Small businesses have been at the forefront of high-level government debates that focus on how to assist these firms in becoming ioiig-te,nn viable entities. Throughout the 80’ s, 90's, and in the early 2000’ s, small business growth dominated the topics of leading business magazines and journals, and it was the topic of choice for members of Congress to champion. That makes the study of small business growth both relevant and timely. The United States Census Bureau states that nearly three quarters of all U.S. business firms have no payroll. Most are self-employed persons operating unincorporated businesses and may or may not be the owner’s principal source of income. Since nonemployers account for only about 3 percent of business receipts, they are not included in most of its business statistics, e.g., from the Economic Census. It should also be noted that the United States Census Bureau does not define a business as smail or large, but provides statistics that allow users to define business categories in any of the following ways: (1) Employers and Nonemployers; (2) Employment Size of Firms; (3) Employment Size of Establishments; (4) Receipts Size of Firms; and (5) Legal Form of Organization. Herein lies the difference in statistics reported in this study from the U.S. Census Bureau .and the General Services Administration’s Federal Data Procurement System (FPDS). Unlike the Census Bureau, the FPDS distinguishes between contracts awarded to small businesses versus large businesses. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. In the United States, small basiness success is believed to be closely intertwined with job creation, as well as iimovation.' It already has been noted that small businesses represent 99 percent of all businesses. However, they also employ more than half of the American work force and create two-tliirds of the net new jobs? An example of substantial job creation occurred from 1997 to 1998 in the service industry. Services ted all sectors of the economy, adding nearly 3 million new'jobs over the periodd Small businesses accounted for about 55 percent of service industry emplojanent during the same period."^ Due to the dominance of small businesses (99 percent), in the number of businesses operating, very small fluctuations in the share of firms can indicate real changes to the economy. A national economic downturn, particularly in the billions of Federal dollars contracted each year, would impact a large share of the population since smail businesses are supported heavily by federal dollars (Table 1). 'The State o f Small Business: A Report o f the President (Washington, DC: United States Govemnient Printing Office, 1999-2000), 8. % id., 9. hbid., 10. rtbid. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Table 1 Mep©rt ©a Annual Pr®c«reiiieiit Preference G oalng Achievements (Abbreviated) (Fiscal Year 2000 Through Fourth Quarter) SB ($000) SB (% ) S D B ($000) SE (O y Total Federal 44,718,714 22.26 7,251,948 3.61 Executive Office o f the President 20,007 54.89 8,297 22.76 Departfflent o f Agriculture 1,435,009 38.58 175,879 4.73 Departirient o f D efease 27,029,062 21.41 3,680,997 2.92 Departm ent o f Energy 500,254 2.96 59,452 0.3 Department o f Health & Human Services 1,129,116 26.02 315,564 7.27 Departm ent o f Justice 1,192,246 32.75 169,483 4.66 Departm ent o f Transportation 1,010,013 53.45 92,817 4.91 Departmen t o f the Treasury 614,301 32.14 135,783 7.10 D epartm eat o f Veterans Affairs 1,594,865 30.34 241,425 4.59 National Aeronautics & Space Adm inistration 1,485,504 13.54 382,035 3.48 Environmental Protection Agency 277,681 25.56 23,733 2.18 Small Business Adm inistration 26,786 62.69 14,481 33.89 General Services Admin istration 4,386,284 40.03 1,238,146 11.30 Source: Federal Procurement Data System Report. WasMngtoo, DC: United States General Services Administration, 1999-2001. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. The Gross Domestic Product (GDP) is the most comprehensive single measure of aggregate economic output for the overal! economy. It is the value of the total output of goods and sendees produced by the nation’s economy. In 1999, the GDP was $9.3 billion, while the business measures (often referred to as the “Real GDP”) were $8.9 billion for the same period.^ Overall, the small business share of private sector GDP has remained around 50 percent armually, creating 52 percent of the total non-farm private output for that period (Figure 1 ).*’ Economists believe that this is a result of ser\dces becoming a large part of the economy.’ It is widely believed that small businesses help to provide a competitive environment as they introduce new ideas and processes and fill niches in the free enterprise system that are not covered by large businesses. Although the growth rate of the economy changes, the number of small businesses (99 percent of all employers) does not change dramatically over time.® The reason may be due to the nature of the ever-evoiving business enterprise system in wtech businesses consistently start, shrink, expand and dissolve entirely. ^Small Business Indicators fo r 2001: A Reference Guide to the Latest Data on Small Business Activity, Including State and Industry Data (Washington, DC: U.S. Small Business Administratioii, February 2003), 9-11. Toei Popkin, Srmll Business Share o f Private, Nonfarm Gross Domestic Product (Washington, DC: U.S. Small Business Administration, October 1997). ’Joel Popkin, Small Business Share o f Economic Growth (Washington, DC: U.S. Small Business Administration, January 2002). ^Small Bminess Indicators fo r 2001: A Refereme Guide to the Latest Data On Small Business Activity, Including State and Industry Data, 11. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. CD ■ D O Q . C o CD Q . ■ D CD C /) ( / ) O O ■ D c q ' S m all B u sin ess (SB) & L a rg e B usiness (L B ) P e rc e n t of E m p lo y e rs a n d G ro ss D om estic P ro d u c t (G D P ) CD ■ D O Q. C a o ■ o o CD Q. E m p lo y ers i »% jffig mLB s] C3-DP C o iitr llsiitto ii Life nSEte BLB* T 3 CD C /) C /) Figure 1. Small Business (SB) and Large Business (LB) Percent of Employers and Gross Domestic Product (GDP) V O Historical Small Business Performance The small business sector as a whole has achieved considerable growth in the Federal procurement arena over the last 20 years, and especially during the last 10 years.^ (Table 2 reflects a Census Bureau report that shows an increase in the miniber of “Self-employed and Employment-Nonfarm businesses over a 10-year period.) In terms of dollars, in Fiscal Year (FY) 1999, w'Mch began in October and ended in September, the total procurement base of goods and services procured was $185.7 billion.™ Of this amount, small businesses won $42.9 billion, or 23.1 percent, in Federal p rim e contracts (Figure T)P Of the 23.1 percent awarded to small businesses, small disadvantaged businesses, including minority-owned firms and firms certified under the U.S. Small Business Administration’s section 8(a) program, were awarded $12.4 billion, or 6.7 percent in prime contracts.*^ (Prime contracts are those awarded directly to a recipient by a Federal agency.) In FY 1999, Federal prime contractors subcontracted $69.0 billion of its Federal dollars, awarding $27.9 billion, or 40.4 percent, in subcontracts to small businesses. Of the $27.9 billion in subcontracts awarded to small businesses, $4.5 billion, or 6.5 percent, in subcontracts was awarded to small disadvantaged Tbid, 10. State o f Small Business: A Report o f the President, 18. “Ibid. ‘ hbid. 10 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ::o CD ■ a S Q . c o CD Q . ■ D CD C /) o' o Table 2 CD O O ■ D C Q ' 13 CD CD ■ D S Q . C o o' =3 ■ O S CD Q . O C T 3 CD C /) C /) Indicators Related to Small Business, 1991-2001 1991 1998 1999 2000 2001 Percent Change 2000-2001 Number of businesses (1) Employer firms (nonfami) (2) S elf-employment (unincorporated) Business tax returns (non farm) 5,051,025 10,274,000 20,498,855 5,685,900 10,303,000 24,285,900 5,607,743 10.087.000 24.750.000 5,730,400 e. 9,907,000 25,106,900 e. 5,819,300 e. 9,826,000 25,551,800 e. 1.6 (0.8) 1.8 Business turnover Employer firm births (2) 541,141 589,982 579,609 604,500 e. 574,500 e. (5.0) Employer firm tenninations (2) 546,518 504,601 544,487 560,600 e. 585,800 e. 4.5 Bankruptcies 70,605 44,197 37,639 35,219 39,719 12.8 Income (billions) Wage and salary income 2,812.3 4,192.8 4,469.3 4,835.8 4,998.1 3.4 Proprietors’ income 384.4 625.0 674.4 716.2 745.1 4,0 State corporate taxes NA 31.8 30.7 32.3 31.7 (1.8) (]) These measures overlap when the self-employed have employees. Self-employment presented here represents individuals whose primary occupation is self-employment (about another 1 million are self-employed as secondaiy occupations). (2) Data for 2000 and 2001 are estimated from 1999 data from the Bmeau of tlie Census, yearly percent changes in similar data provided by the Department of Labor, Employment and Training Administration and rounded. Births and terminations are from prior year’s March through current year’s March. For 2000 and 2001, the net difference in births and terminations does not necessarily result in the change in employer firms because of the method of estimates. Sources: Office of Advocacy, U.S. Small Business Administration, from data provided by the Bureau of the Census, Bureau of Labor Statistics, Employment and Training Administration, Bureau of Economic Analysis and Administrative Office of the U.S. Courts. CD ■ D O Q . C o CD Q . ■ D CD C /) (/) O O ■ D c q ' Small Business (SB) M Barge Business (LB) Share of Federal Contract Dollars^^FY 1 9 9 9 O ’ Q CD ■ D O Q . C a o ■ o o CD Q . LBs F fsd -e ra l C o a t r a c t l it t llm 's SBs 74% □ SBs b LB s □ S s BLBs T 3 CD (/) (/) Figure 2. Small Business (SB) and Large Business (LB) Share of Federal Contract Dollars—FY 1999 I s ) businesses. Subcontracting takes place when the Federal government awards a contract to a prime contractor, that in turn, awards a subcontract. Minority and Women-Owned Small Businesses Small business continued to be a means by wMch minorities, w^omee, and immigrants entered the American economic mamstream and increased their share in the economy. The number of businesses owned by minorities, including Hispanic and African Americans, has also been increasing rapidly. African American-owned businesses increased by 26 percent over the 1992-1997 period, compared with an increase of 7 percent in the number of all businesses.’^ The number of Hispanic- owned businesses rose by 30 percent from 1992-1997, and their receipts rose by 49 percent, exceeding the 40 percent increase in all comparable businesses.M inority- owned firms, in general, were awarded $12 billion during the same period.’^ Women-owned sole proprietorships increased their share of average net income as well as their share of the number of businesses overall, as new data from the Bureau of the Census showed women owning 26 percent of the nation’s 20.8 'Tbid., 18. 'ribid., 18. 11 . 13 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. million non-faxm businesses.'® In Fiscal Yeai* 1997, women-owned businesses generated $818.7 billion in receipts.^’ Impact ©f Federal Coatracting ©a Small Basimesses This dissertation topic is at the intersectloii of two trends that have altered govemment contracting in the United States over the last 30 years. One trend is the ever-expanding role of small business contracting in the Federal procurement process, and the other trend involves the use of business alliances to assist in increasing contracting opportunities for small businesses. Over the last fiscal years, total Federal procurement has been in the range of $200 billion, wdth small firms capturing approximately 20-24 percent of these Federal prime contracting dollars. In January 1993, Richard F. Fuilenbaum and Mariana A. McNeill conducted a study for the U.S. Small Business Administration (SBA) on the impact that Federal procurement had on small business development.’® The purpose of the study was to measure the differential impact of small businesses with government contracts versus small businesses without govemment contracts. Specifically, this study attempted to establish a correlation between Federal contract aw'ards with long-term growth and viability of small firms and compare these firms to the growth and survivability of a *®Richard F. Fuilenbaum and Mariana A. McNeill, Impact o f Federal Procurement on Small Business Development (Washington, DC: M&R Associates, U.S. Small Business Administration, Januaiy" 1993). 14 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. comparable (size and industry) group of firms that had not participated in. Federal govemment contracting. Their research findings concluded that winning Federal government contracts greatly increases the small film’s chances for survival, and the results of the study ftirtlier suggested that Federal procurement activity is ^sociated with far greater small firm employment growth as well as survival rates than private sector activity.’* * The study also concluded that winning multipie awards increases a firm’s chances significantly over firms wdnning a single award and firms not participating in the Federal contracting market.“ This dissertation has the potential to add an additional perspective to the work done in the Fuilenbaum and McNeill study, as the participants in the DOD Pilot Mentor-Protege Program, hereafter referred to as the “DOD-PMPP,” also are Federal government contractors, as well as subcontractors to large Federal prime contractors. The control group members also are Federal prime contractors. Both the executive and the legislative branches of the Federal government are active promoters of maximum utilization of small businesses, particularly in Federal procurements. This support for small business is due in part to the role that small businesses play in imderpinning the United States economy. Small businesses are such an important part of the American economy that what is good for small business generally is good for the overall economy. Understanding small business status. 'dbid. “ibid. 15 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. perfonBaiice, survival, and growth trends at the macro level provides an appreciation for the significance of examining the success of small business dei^elopment programs, such as the DOD-PMPP. The impact of Federal procurements on minority small businesses in FY 1999 equated to $6.1 billion, or 3.3 percent, of total prime contracts of $185.7 billion.^’ During the same period, Federal procurements had a similar impact on women business owners. O f the $185.7 billion in prime contracts awarded in 1999, $3.6 billion, or 2.5 percent, went to women-owned b u sin esses.In the 1993 Fuilenbaum and McNeill study, which also pertained to the experiences of minority and women- owned businesses during the late eighties, minority business contractors out performed all small Federal contractors by 15 percentage points; and women business contractors fared significantly better, on average, than the rate for all small firms in the economy Background on the DOD Pilot Mentor-Protege Program For many years, business and govemment leaders have recognized that entrepreneurship and business ownership are cornerstones of a capitalized society. In 1953, the United States govemment officially began assisting small businesses with the enactment of the Small Business Act, which created the SBA. The Act, as ^%id, 2i0. rfbid.,217. ^hbid. 16 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. amended (15 U.S.C. 631 et. seq.. Public Law 85-536),^'* created the SBA to aid, counsel, assist and protect the interests of small businesses (SBs) in the United States thi'oiigh the establishment of a Federal smail business program. In its 50 years of existence, the Federal small business program has been expanded by numerous laws, executive orders and initiatives to further assist small firms in obtaining government business and becoming viable entities. One initiative contained in Public Law 95-507 provided that each Federal agency annualiy negotiate its agency’s small business goals with the SBA. These goals would reflect the agency’s targets for contract awards to small businesses. The Federaiiy-mandated government-wide smalt business prime contracting goal is 23 percent, a 5 percent goal for prime contracts and subcontracts to small disadvantaged businesses (SDBs), a 5 percent goal for prime contracts and subcontracts to women-owned businesses (WOB), a 3 percent prime contracting goal for service disabled veteran-owned businesses (VET), and, as of the year 2003, a 3 percent prime contracting goal for contracts to firms certified as HUBZone (HUBZone) small businesses. (See “Definitions” section.) Each Federal agency annually negotiates goals for these target socioeconomic groups that must collectively total the Federally-mandated goal for these groups. The National Defense Authorization Act of 1987, Section 1207, established a goal of 5 percent for DOD’s major contractors for subcontracting dollars with SDBs ^Public Law 83-163 was referred to as the Small Business Act until Public Law 85-536, containing most of the current small business Federal provisions, was enacted by the 85* Congress. 17 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. (Public Law 99-661), which is a goal that other agencies were not required to meet. During the early years. Congress and DOD looked for ways to assist DOD in achieving the goal. Section 834 of the National Defense Authorization Act for Fiscal Year 1991 (Public Law 101-189) authorized DOD to conduct a test program which allow'ed selected government contractors to enter into comprehensive subcontracting plans on a corporate, division, or plant-wide basis in order to increase subcontracting opportunities to SDBs by 5 percent. Notwithstanding this initiative and other initiatives, the goal was not met. The DOD’s prime contractors indicated that the goal was not met because many SDB firms did not have the necessary capabilities to perform DOD-related work, even where subcontract opportunities may have existed. In 1991, Congress enacted the National Defense Authorization Act, as amended (Public Law 101-510), which provided in Section 831 of Title VIII for: (1) a flexible framework for a mentor firm to assist in developing those SDBs capable of meeting available defense and other procurement opportunities and (2) an environment that w^ould foster the establishment of stable, long-term business relationships between large DOD government contractors and SDBs. Accordingly, the DOD-PMPP was established to: ® Provide incentives to major DOD contractors, performing under at least one active approved subcontracting plan^^ negotiated with DOD or other subcontracting plan is a requirement established by Public Law 95-507, requiring prime contractors, awarded contracts with the Federal government of $500,000 or larger ($1 million for construction), to submit a plan with goals indicating the percentage of subcontracts it plans to award to small businesses. 18 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Federal agencies, to assist SDBs in enhancing their capabilities to satisfy DOD and other contract and subcontract requirements; Increase the overall participation of SDBs as subcontractors and suppliers under DOD contracts, other Federal agency contracts, and commercial contracts; and Foster the establishment of long-term relationships between SDBs and such contractors. The program, as envisioned by Congress, would have DOD’s prime contractors enter into mentor-protege agreements with eligible SDBs as protege firms to provide appropriate developmental assistance to enhance the capabilities of SDBs to perform as subcontractors and suppliers. DOD, and other agencies have expanded the eligible small businesses to include some of the following: WOBs, VETs, HUBZones small businesses. Historically Black Colleges and Universities (HBCUs), other Minority Institutions (MI), Native American tribes. Native Hawaiian Organizations, and businesses and organizations employing the severely handicapped. Since that time, the DOD program also authorizes its mentors to seek proteges in “emerging SDBs,” which are SDBs whose sizes are not greater than 50 percent of the numerical size standard applicable to the Standard Industrial Classification (SIC) code for the supplies and services which the protege provides. In the DOD-PMPP, the mentor could be rewarded for its participation in four ways: (1) reimbursement for developmental assistance costs expended for a protege 19 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. firm.; (2) in lieu of reimbiirsement for developmental assistance costs, credit under a mentor’s subcontracting plan towards its 5 percent goal; (3) a combination of reimbursement and credit; and (4) reimbursement of advance and progress payments made to a protege fim . The potential rewards for the protege firm are: (1) growth in its contracting and subcontracting volume; (2) improvement in its standing in the industry; (3) fostering the establishment of long-term business relationships with majority contractors; (4) improving its general business management and planning skills; (5) improving its marketing techniques; (6) developing specialized technical skills; (7) increasing future profits, and (8) increasing in the number of employees. This study does not evaluate DOD’s impiementation of the DOD-PMPP. However, it is important to know how it measures its program’s success. The DOD- PMPP is measured by the extent to which the program results in: ® An increase in the dollar value of subcontracts awarded to SDBs by mentor firms under DOD contracts; An increase in the dollar value of contract and subcontract awards to protege firms (under DOD contracts, contracts awarded by other Federal agencies, and under commercial contracts), since the date of their entry into the program; 20 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ® An increase in the number and dollar value of subcontracts awarded to a protege firm (or former protege firm) by its mentor firm (or former mentor firm); ® An improvement in the participation of SDBs in DOD, other Federal agencies, and commercial contracting opportunities that can be attributed to the development of SDBs as protege firms under the program; An increase in subcontracting with SDB concerns in industry categories where SDBs have not traditionally participated within the mentor firm’s vendor base; ® The involvement of emerging SDBs in the program; An expanded relationship between mentor firms and protege firms to include non-DOD programs; and ® The development o f protege firms that are competitive as subcontractors and suppliers to DOD or in other Federal agencies or commercial markets. Program results are measured periodically by the General Accounting Office (GAO) to determine if the program is meeting Congressional and DOD objectives. GAO performed four reviews o f the DOD-PMPP during the period covered by this study and concluded: 1. 1992—“Defense Contracting: Interim Report on Mentor-Protege Program for Small Disadvantaged Firms” (GAO/N SIAD-92-135): DOD 21 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. had no internal controls for reviewing and approving firms that apply for the program nor for monitoring the program; 2. I f f 4— -‘"Defeiise Contracting: Implementation of the Pilot Mentor- Protege Program” (GAO/NSIAD-98-92): Sufficient information was not available to GAO to determine whether the program’s purpose could have been achieved or whether reauthorization or extension of the program to other agencies was warranted; 3. 1998—“Defense Contracting: Sufficient, Reliable Information on DOD’s Mentor-Protege Program is Unavailable” (GAO/NSIAD-98-92): DOD’s performance reviews, which enabled management to evaluate the program effectiveness and the manner in which the funds were obligated, had shortcomings and were insufficient to evaluate mentor assistance. Further, DOD was unable to obtain responses from the participant firms. 4. 2001—“Defense Contract Management: Benefits of the DOD Mentor- Protege Program Are Not Conclusive” (GAO-01-767); DOD lacked enough information to assess whether the DOD-PMPP enhanced business competitiveness. Needless to say, the conclusions of the 1998 report, .. DOD was unable to obtain responses from the participant firms,” prompted this researcher to undertake contacting each DOD-PMPP participant by phone as well as by mail, as the 22 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. completion of this study depended on receiving an adequate number of responses from DOD-PMPP participants. The DOD-PMPP Program Operation The DOD-PMPP is administered by the DOD Office of Small and Disadvantaged Business Utilization (OSDBU), with impiementation by the services. The Mentor-Protege agreements in this study were written with prime contractors to the Army, Navy, Air Force, Defense Intelligence Agency, and Defense Logistics Agency. Although each service has its own procedures for conducting the DOD- PMPP, generally, an eligible defense contractor applies to the service for acceptance as a mentor. With the approval of the defense contractor as a mentor, DOD agrees to provide the mentor firm with either cost reimbursement, credit against SDB subcontracting goals established under DOD contracts, or both. There is a specific amount provided to the DOD prime contractor for developmental assistance. The mentor selects a protege firm from eligible small businesses that independently seek protege status with the mentor. Subsequently, they develop a mentor-protege agreement. Upon the program’s inception, the participants were smail businesses that were primaiily comprised of small disadvantaged firms, including minority-owned businesses, but has since been extended to include other eligible firms. The mentor selects a protege for participation in the DOD-PMPP. The program guidelmes allow the mentor to have more than one protege but the protege can have only one active mentor-protege agreement. The developmental assistance is 23 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. administered on a one-to-one basis between the mentor and the protege firm. This mentoring program is one of several types of Federal procurement programs designed to assist small business owners in increasing their share of government contracts. Potential Sigalficanee of the Study Since the inception of the DOD-PMPP in 1991, Federal agencies adopted the belief that Federal mentor-protege programs, e.g. , the DOD-PMPP, contribute to the participants’ viability as long-term enterprises. Hence, several agencies initiated their own mentor-protege program, each with slight variations in operation and eligible target groups. These agencies include: the Departments of Agriculture, Energy, and Treasury, the National Aeronautics and Space Administration, and the Environmental Protection Agency. Even the SBA, the agency whose mission it is to assist individuals in starting and expanding their small businesses, extended its own regulations to include a mentor-protege program. Furthermore, anecdotal information suggests that at least two other Federal agencies have plans to start a mentor-protege program. Congress closely monitors the DOD-PMPP to ensure the program is meeting its stated goals. On several occasions, it indicated that it continues to seek metrics on the benefits of the program to determine its effectrieness. Accordingly, the potential significance of this research is twofold: (1) to provide evidence of the positive impact that the DOD-PMPP has on small business development, and generalize the findings to other mentor-protege programs, and (2) to help agencies make decisions on starting and designing their own mentor- 24 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. protege programs. The findings from the study can help those who deal frequently ■w ith entrepreneurs, such as bankers, venture capitalists, consultants, accountants, lawyers, and Federal agency small business advocates, to draw reasonable inferences about a host of characteristics about small businesses and the conditions under which they succeed. Basis for the Researeher’s Interest This researcher’s interest in the benefits of the DOD-PMPP stems from her program role at the Department of Energ}^ (DOE), as this researcher has recently assumed responsibility for the development and management of the Department’s Mentor-Protege Program. While the regulations governing the program were already in place, most of the basic elements of the program had not yet been implemented. This provides an opportunity to put in place guidelines that are believed to contribute to small firm growth. Like many other small business advocates, this researcher’s interest also stems from the program’s presumed benefits to small firms. As Federal agencies initiate mentor-protege programs absent of evidence that the program will actually benefit small businesses, it would be helpftil to have some evidence of its effect oft these firms. One i.vouM naturally ask why this researcher is not studying the mentor- protege program at DOE. First, the DOD program has been in existence longer than any other such program (1991). In contrast, DOE’s and NASA’s programs have 25 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. been in existence since 1995. Other agencies’ programs have had an even shorter existence. The DOE program is currently undergoing revision. However, even at its peak, the program had only 32 mentor-protege agreements. In contrast, the DOD program has had more than 300 mentor-protege agreements (as of the year 2003) that provide the longest period over which to measure the firms’ growth and survival. Moreover, DOD has the only Federal program with appropriated fiuads to reimburse the mentors for their developmental assistance—a distinct advantage over the other agencies with regard to available assistance to the protege firms. Focus of the Study The purpose of this dissertation is to illuminate the impact of the DOD-PMPP mentoring alliance, particularly as the small business’ experience is associated with small business survival and growth. By provision of a listing of protege firms, DOD indicated that its prime contractors mentored 278 protege firms through 1997. The specific objectives of this study are to determine if the businesses that graduated fi'om the DOD-PMPP during the six-year period from 1991 through 1997: (1) survived beyond graduation through the year 2001; (2) experienced growth during the program participation period; and (3) determined what factors may have contributed to that growth. As stated, the DOD-PMPP is a business mentoring program in which pre-approved DOD prime contractors, usually large businesses, mentor or provide training, in business and technical areas, to eligible protege firms. In order to determine how well, statistically, the experiences of the DOD-PMPP graduates place 26 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. against similar fimis that did not participate in and graduate from the program, tliis study also will examine the experiences of other SDB and similar defense contractors that performed work for DOD during the same period. The results of the investigation of the survival and ^ow th experience of both groups will be compared. The first area of study is business “survival,” or Hypothesis 1. Hypothesis 1 states: HI: Proteges graduating from the DOD-PMPP are more likely to survive than similar firms not mentored in a mentoring program. When we think of small business survival in a macro-sense, several studies provide a frame of reference for measuring results obtained from this study. For example, in their study of the impact of Federal procurements on small business development, Fullenbaiim and McNeill found the dissolutioii rate of small Federal contractors to be about half the rate of similar firms in the economy.^*’ Dissolution rates declined as firm size increased for both govemineiit contractors and small firms without govemment contracts. Minoritj? contractors had higher dissolution rates than ail Federal contractors, but still experienced significantly lower dissolution rates than all small firms in the economy. In fact, during the late eighties, the dissolution rate for minority-owmed Federal contractors was lower than that for non-Federal contracting firms by 15.2 percentage points, but higher by 2.3 percentage points than the dissolution for all ''’ Fuilenbaum and McNeill. 27 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Federal contractors induded in the studyMoreover, their study found dissolution rates among small business Federal contractors to be significantly lower and emplo3 mient growth substantially higher than in all small firms in general. The literature further points to numerous reasons for small business suivivaL In another eighties study on business survival, Joel Popkin^® provides a descriptive overview of patterns in business survival rates and examines some factors influencing those rates. Two conclusions of his study are: (1) the older a business is at a given point in time, the more likely it is to survive over some finite time interval; and (2) the larger a business is at a given point in time, the more likely it is to survive over some finite time interval. His study found no relationship between geographic location and business survival rates. However, other studies have found differences among businesses in different geographic locations. Regression analyses failed to identify a relationship between industry and survival rates in Popkin’s study. However, businesses in the manufacturing and wholesale trade industry divisions exhibited higher than average survival rates; and the study also revealed that, the more employees a business has, the more likely it will be to survive over some specified time interval. Long-term survival and viability of the program participants is the intent of programs, such as the DOD-PMPP, SBA’s section 8(a) program, and other small "Tbid., 3. ^ Joel Popkin and Company, Business Survival Rates ofAge Cohort o f Business (Washington, DC: U.S. Small Business Administration, April 1991). 28 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. business development programs. The extent to which the DOD-PMPP participants survived to FY 2001 could support a recommeedation of continuation of the program in its present format. On the other hand, the dissolution of a substantial number of DOD-PMPP participants could suggest that the current format is insufficient to promote survival. The second factor impacting small business development is “growth,” or Hypothesis 2. Hypothesis 2 states: H2: Proteges ff'aduatingfrom the DOD-PMPP are more likely to experience growth than similar firms not mentored in a mentoring program. Chapter 2 addresses “business growth” in more detail, particularly as it relates to findings in earlier literature. Business growth has been researched, reviewed, studied, and documented, as 'well as written and argued al?out in every medium and fomm since businesses began keeping records. Some business growth literature focuses on the differences in firm growth as related to industrial sectors, firm size, the geographical location, the use of high-technology or low-technology, and the life cycle (start-up vs. mature firms) of the firm. Other literature examines aspects of small businesses, e.g., ways in which entrepreneurs can be differeiitiated from small business managers. Some literature uses the term “entrepreneur” interchangeably with the term “smail business owner,” although most of the literature considers an entrepreneur to be a “new” or “start-up” business owner. Still other literature suggests that 29 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. entrepreneurs are rapid gro-^th venturers. TMs study will use the term “entrepreneui*” to refer to a new' business owner. This study, which compares the experiences of the DOD-PMPP participants and a similar number of control group members, seeks to test a “taken-for-granted” assumption about small firm growth and Federal mentor-protege programs. Perhaps the widely-presumed benefits of these types of programs have resulted in few review's (overall) being performed to determine if the facts fit the hype. Meanwfiile, more agencies initiate mentor-protege programs each year. In accomplishing the objective to determine if the DOD-PMPP participants grew, the findings should reveal certain demographics about the firms, and their owners, e.g., whether a firm experienced growth; and the relationship between growth and the type of firm. Also, it should reveal the prior business experience of the owner/chief Executive Officer (CEO), and the age and education of owner/CEO. Recent research has suggested the need for more studies comparing high-growth firms with slow'er-growth firms in order to better delineate their differences by their behavior and strategic choices. Although this study does not address high versus low growth, it is an area for future studies. Business “survival” and “growth” are intertwined concepts that also are interdependent. In this study, success is considered both survival and growth. The DOD-PMPP participants and control group members could have survived without experiencing growth, although growth could not have occuixed without surviving the 30 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. business experience. It is possible that some fimi(s) may have experienced growth through the program participation period (1997) but did not survive to the year 2001. A firm in this category will be considered a non-survivor. DOD-PMPP participants and control group members that ceased business operations due to the sale of the business entit}' (after program graduation) are considered survivors. All other business dissolutions are considered non-survivors. Certainly, a significant number of dissolutions in the sample w^ould be implication for possible re-stnicturing of the DOD-PhtPP and other similar agency programs. Growth will be measured in two ways: (1) an increase in the firm’s employee base and (2) an increase in gross receipts or revenues. While profit is often the key determinant of business success, obtaining this type of information, that falls within the respondent’s rights to privacy, would be difficult. Revenues will include receipts from contract awards received during the program participation period, which would have contributed to the firm’s growth. There may have been instances in which participants may not have won a contract award but placed higher among the lowest responsive bidders. Although these potential results, i.e., .. may have won a contract award . . are not considered as revenues in this study. Several program participants were queried during the interview phase as to their improved competitiveness status. 31 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. The third area of consideratioB in this dissertation, Hypothesis 3, involves the respoiident's perceptions of the independent variables that contribute to the participant’s growth. Hypothesis 3 states: H3: There is a relationship between the type o f assistance received by the DOD-PMPP graduates and growth. These variables represent the type of training, received by the participants and include assistance in the areas, i.e., bid/proposal preparation, finance/budget management, marketing strategy, new product/sendee innovation, staffing, office management, managerial guidance, company organizational structure, et al. The results of these findings can assist persons who advocate for small businesses in gaining a better sense of what types of training small firms generally lack. The entrepreneurial process is a dynamic and continuous state of change for small business owners. It involves numerous variables that, simultaneously, can positively and negatively impact the firm’s success. Entrepreneurship is extremely sensitive to industrial, financial, business, economic and even personal conditions. Accordingly, small firms are even more susceptible to business downturns and are often predisposed to face economic challenges in order to keep the business afloat. Despite the obstacles to growing a successM business, the small business sector as a whole has made phenomenal growth over the last 20 years. At the same time. Dun and Bradstreet has published reports and projections over the years indicatliig that a significant number of small businesses fail each year. What makes some businesses 32 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. succeed while others fail? The right management, product, pricing, staffing, location and market niche all contribute to a firm’s success. Perhaps success for a small business is related to being mentored by a large business. Has the DOD-PMPP contributed to the growth and long-term viabilit}'? It seems likely that this stu% is unique in examining the experiences of small firms in a mentoring relationship, particiilariy from the perceptions of the participants. Moreover, this researcher believes that, to date, there has not been performed a rigorous study of the path of program paiticipants after completion of the mentoring program. Therefore, it is anticipated that the findings in this study will contribute to the limited body of knowledge on business mentoring. 33 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. CHAPTEM II FINMMGS FSOM EARLIER STUDIES Overview Ib order to put the purpose of this dissertation into proper context and to delve into the historical and theoretical perspectives of the subject area, it is necessary to review the two different streams of literature applicable to this study—(1) business growth and (2) mentoring—and examine the integration of the streams that form, the subject for tMs study—“business mentoring programs.” The success of traditional mentoring programs used in impiementing the social aspects of public policy have led legislators and public administrators to extend the mentoring concept to business relationships. Hence, a similar arrangement, such as a business-to-business relationship, i.e., a large experienced business mentoring a small business, would appear to be a conceptual framew^ork destined for success. On the other hand, is there any type or form of business where success is assured or even predictable? Does a business mentoring relationship lead to a protege’s long-temi viability? The focus of this study is to determine if, in fact, the federal business-to-business mentoring programs are a predictor of success. This is attempted by examining the 34 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. DOD-PMPP to determine whether the theory of long-term protege success is valid for these types of programs. During the last two decades, articles about entrepreneurs and small businesses have imjltiplied, as the federal govenm ent academia, and the private sector increased their initiatives aimed at assisting these fimis. Although the articles cover various forms and types of businesses, e.g., proprietorships, partnerships, and corporations, as well as the service industry, franchises, and manufacturing businesses, the literature is sparse on certain types of business-to-business relationships—especially business mentoring partnerships. One might ask why the terniinoiogy “partnership” is used when referring to a business mentoring relationsMp. In federal mentoring programs, the business-to-business relationship typically begins as a mentor-protege relationship, with the mentor selecting a firm that could ultimately become one of its suppliers. By the end of the program participation period, the mentor and protege often form a joint venture or “prime-subcontractor partnership” in order to bid/propose as a team on future government work. (In these arrangements, the large business could be either the prime or subcontractor to the team.) The two dynamics of the federal mentor- protege programs, i.e., mentoring for growth and partnering for future opportunities, are noted in Figure 3. An example of this arrangement can also be seen in the SBA’s Mentor-Protege Program, which authorizes its mentor-protege team to form, a joint venture in order to seek and perform federal contracting opportunities. 35 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. t ^ u I Z h 1 M ' 0 I i D h z i I I 1 2 I w I M I i 3 1 i I h z h i < a h a s 3 I - 1 U > a I 0 . « I I P z M I z u z B I I y z i 3 1 a S £ « f « s 6® e X © a » 5 ® s .s 3 a « H rn u a 36 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. The concept of a formal business mentoring program is fairly new to the federal government althongli federal prime contractors have assisted tlieir small business subcontractors informally for years in the performance of their subcontracts. Business meatoring is one of several t}?pes of business alliances that include: consortia, joint ventures, mergers, business incubators, and networking relationships, involving the sharing of resources. It is important to distinguish “corporate mentoring,” from “business-to- business mentoring programs.” “Corporate mentoring” is an intra-firm relationsliip that is conducted within an organization or company and generally involves company executives and managers mentoring company employees. One should also draw a distinction between “business incubators” and other business-to-business or inter-fimi partnerships. Business incubators are organized to nurture young firms for the purpose of helping them to survive and grow during the start-up period, when they are most vulnerable. Although the incubator provides some hands-on management assistance, primarily it is known for providing access to financing and exposure to critical business or technical support services. It is especially known for the assistance it provides in offering entrepreneurial and small firms shared-office services, access to equipment, flexible leases and expandable space—^ a l! under one roof. (Some networking relationships also share office space, equipment and leases.) Small businesses interested in joining a business incubation project would contact their local business services office or one of the national 37 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. associations that champion basiness incubation. The National Business Incubation Association (NIBA) is one of the largest business incubation membersliip organizations. Since the historical findings on this subject are extracted primarily from two streams of literature. Chapter 2 will be structured in the following manner. First, it will begin with a brief historical review of the “entrepreneurship” literature, followed by a theoretical perspective on business survival (including small business), growth, and failure. The remainder of the chapter will cover the mentoring literature, which includes a discussion of business-to-business alliances and how the new paradigm of alliances can contribute to business effectiveness. The desired end-product of this chapter is a conceptualization of the evolution of small business and the nature of federal contracting in the 2 1 ® * Century. Since findings from earlier GAO reviews were discussed in Chapter 1, the findings will not be covered again in this chapter. The literature search was primarily limited to research conducted within the decades of the 1980s, 1990s, and 2000s. However, it also included some earlier research germane to this study. The focus of this study is on the achievement of small businesses in the Federal contracting arena of the American business enterprise system. However, to gain an appreciation for the evolution of small businesses, as well as the similarities in the issues that perplexed the world’s earliest business theorists, this chapter will take a 38 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. brief detour to capture the tlioiights of the business theorists of the 18* and 19* Centuries. Backgroiiiid on Early Eatreprenearehip In the way of background on entrepreneurship, for the last 300 years, entrepreneursMp has meant different things to different people. However, there was enough consensus among business theorists for formal theoretical concepts to develop. The term “entrepreneursMp” came to be defined by a business’ size, ownersMp, industry, participants, goals, and other related characteristics. The research further revealed that the first and most noted formal theories of entrepreneurship were developed by an international banker named Richard Cantilloii around 1730. Cantillon and other noted theorists of the era, i.e., Frank Knight, Jean- Baptiste Say, and Harvey Leibenstein, fommlated theories of entrepreneursMp that appeared to be founded on three themes. Early literature outlined three themes or formal theories about business or entrepreneurship: (!) uncertainty and risk; (2) managerial competence; and (3) innovatioii and creative opportunisin. EntrepreneursMp was labeled “risky,” because theorists noted that merchants would buy goods at certain prices, but often, would be forced to sell them at uncertain prices in foture transactions— a characteristic of entrepreneurship that has not changed in today’s marketplace transactions. It W 'as during the 18* and 19* centuries that theorists began to investigate and scrutinize the circuinstaiices surrounding business failures in order to develop theories 39 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. that would lead to corrective action. The first mention of the importajice of managerial skills to the longevity of the enterprise appeared in the literature during these centuries. The cause of business failure was blamed on “poor management.” As with today’s business theorists, early theorists disagreed as to what that entailed. The third theme—that of creativity and innovation—gained Hsomentiiiii with a leading business theorist of the 20* Century—Joseph Schumpter. Schumpter, who was once referred to as the father of modem entrepreneurial thought, projected the view that entrepreneurs were unlike “heads of firms, managers or industrialists who merely managed establishments.” Entrepreneurs were owners of inventions, creative products and processes, and innovators of new technologies. Although the definition of an “entrepreneur” has evolved over time as the world’s economic structure has changed and become more complex, an “entrepreneur” or small business, is still associated with risk-taking and innovation. In fact, during the 1980s, Congress enacted a law authorizing federal agencies with research dollars to conduct a “Small Business Innovation Research Program,” in order for the federal government to take advantage of some of the innovations of small inventors. Since the SBA and science- oriented organizations began keeping records on inventors and inventions, small businesses have been placed in a position of esteem in regard to their innovating spirit.^^ It is apparent that small businesses had a discernible impact on the economy long before scholars traly understood and defined it. State o f Small Business: A Report o f the President (Washington, DC: United States Government Printing Office, 1999-2000), 8. 40 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Business Survival and Growth Growth in a business means success. However, success in a business, and in a small business in particular, is not easily attainable. The small business OM aier must offer a good product or service and know the basics of general m.an^emeiit, i.e., acquiring merchandise, marketing its product, and selling it. Of course, selling to the govemment, as well as to the private sector, is a highly competitive proposition for today’s small businesses. The ability of a small business to adapt its organization to the constant demands of a dynamic environment is a definite prerequisite to operating a successful business. In an earlier study, entitled “A Nonfinancial Business Success Versus Failure Prediction Model for Young Firms,” the researcher undertook a study whose purpose was to develop and test a generic nonfinancial model to predict a young business’ chances for success or failure.^® The model variables were similar to the variables in this study, i.e., capital, record keeping and financial control, industry experience, management experience, planning, professional advisors, education, staffing, product/service timing, economic timing, age of owner, partners, parents mvned a business, minority, and marketing skills. The sample was limited to six New England states. The failure sample was generated from the bankruptcy court records. A CM Square test was peifonned to compare the sample’s frequency distributions to the success and failure population by state and industry to ensure that ^ “ Robert H. Lussier, “A Nonfinancial Business Success Versus Failure Prediction Model for Young Firms,” Journal o f Small Business Management (January 1995). 41 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. the sample represented the population. Correlation analysis was nm to assess the degree of multicolinearity among the 15 variables. The correlation matrix shows that most o f the correlations were relatively low. The two samples were compared for significant differences among the 15 variables. The results of the tests (Bivariate) were that professional advice, education, staffing, and “parents” were significantly different between the successful and failed businesses. In the model, however, “planning” was significant, and “parents owning a business” was not. Education and staffing were significantly greater for failed than for successful firms. The researcher was surprised by this finding, because it implied that failed firms have greater resources in these areas than successful firms. It might prove interesting to compare the findings in this study to the findings in the success versus failure prediction model. The successful firms in the study developed more specific strategic plans than did fail firms. The results support the hypothesis that business planning contributes to success. The survey instrument used in this study include some of the same variables as the success versus failure prediction model. TMs study’s variables reflect the types of training received by the protege firms. They are: finance, marketing strategy, product/service improvement, staffing, and planning. Other variables captured in the dissertation survey are: age, education, industry, and management experience. The results of the Lussier study indicate both the predictability and unpredictability, in some instances, of success or failure in a young business when 42 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. financial assistance is excluded from the study. The design of the Lussier study is similar to this study. Although this study’s design does not test the effect that financial assistance has on the study’s subjects, survey responses allow the researcher to distinguish between firms that received financial assistance and those that did not. From the responses, comparisons can be made regarding the growth and non-growth of firms that received financial assistance. Conclusions can be drawn from these comparisons. It is important for the small business owner to know the appropriate paths to follow ill building the financial structure of the firm. Inadequate financing is one of the two reasons cited for today’s small bminess failures. As mentioned earlier, the other reason is the lack of management expertise. Of course, wfren one thinks about survival and growth, it is natural to consider the alternative predicament, i.e., failure. The failure rate among entrepreneurs or start-up small businesses is high, because small businesses are often plagued with problems that do not affect large businesses. Of the businesses started in 1992, 47 percent survived until at least 1996.^* During the same period, 44.9 percent of Hispanic businesses survived, and 34.7 percent of African American businesses survived.^^ As mentioned above, a major problem among small businesses is a shortage of finances or working capital, which makes it difficult to keep new facilities. ^^Dr. Richard J. Boden, Jr. Analyses o f Business Dissoiiition by Demographic Category o f Ownership (Washington, DC: United States Small Business Administration, December 2000). “ Ibid. 43 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. equipment, processes, and personnel in line with those of larger competitors. In fact, in times of a lagging economy and a poor domestic economic outlook, it may even be difficult, if not irspossibie, for a small business to borrow the capital it needs to fund its business. That is why it is tempting for a small business to concentrate only on survival. When the economy is stagnant, businesses accept that their businesses’ results will probably be stagnate and sometimes never find their way back to striving for growth. “Poor management” is still the theorists’ favorite simplistic and yet all- encompassing cause of business failure. Today, when a business fails, it is also seen as poorly managed but, like the 18* Century, no one agrees to which aspect of “poor manageiHent” failure can be attributed. Managers of small businesses must be generalists rather than specialists. It is impossible for any one person to be a specialist at everything. Small business owners start out as generalist and are often reluctant to relinquish any managerial control. Instead, they often hold on to all of the functions too long, crippling the growing process. The rate of business failures is staggering. The Service Corps of Retired Executives (SCORE), a group of retired executives who aid and advise small business managers as a public service, has estimated that around 400,000 small firms go out of business each year in the U.S., and 100,000 of these firms fail in the first year of existence.^^ Still other scholars estimate that 20 percent of new small businesses fail ^^SCORE: Service Score o f Retired Executives, (Washington, DC: United States Small Business Administration, 1998). 44 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. each year, especially diiriBg the first five years of their ventures. After five years, about 33 percent of those who begin a new venture are still in business.'"^ The threat of failure is ever present for many small businesses, but this does not discourage people, including current business owners, from starting businesses. These statistics highlight the importance of research to identify predictors of small business growth. Tliere is no specific recipe for operating a successful business, of any kind. Nevertheless, scholars believe that they can develop contingency theories about business success and failure, wherein they examine facts and make predictions about business behavior based on insights gained from empirical evidence. There is, in actuality, extensive literature on various theoretical perspectives surrounding the complex reasons for business success or failure. In fact, the literature is replete with books, reports, and articles that explain business phenomenon and the critical success factors that are thought to predict business growth. It appears that the theorists have settled on several variables that are considered to be the keys to a winning or failing business. These factors include management skills, networks, financing or capitalization, marketing, innovation, business cycles, technical expertise, and it even extends to the personality traits of the owner. A search of the literature found a study by Larry Herron and Richard B. Robinson, entitled “A Structural Model of the Effects of Entrepreneurial ^Tbid. ” Ibid. 45 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Characteristics on Venture Performance.”^ ® It provides a causal model of the relationships between entrepreneurial characteristics and performance. First, it develops a discussion to illustrate the importance of personality to behavior. The study uses an earlier study to address the causal linkage between personality traits and performance. The Hollenbeck and Whitener (1988) model simply states that the effects o f personality traits on job performance are mediated by motivation and moderated by ability. The model is based on a theoretical fonnuiation that job performajice is a multiplicative ftinctioa of ability and motivation, which is a normative variable. The theorists propose that a business’ ability to succeed is directly related to owner’s motivation. Herron and Robinson’s study also drew upon other models that examined new venture performance and characteristics of the entrepreneur or owner. The mode! began with personality traits and evaluated skills, aptitude, and training. The results of the model are that: (1) both skills and behaviors are more proximal to venture performance than are personality traits; (2) experience and formal training, such as school, would both have an impact on skills moderated by aptitude; and that (3) personality traits work on behaviors primarily through motivation to perform various skills. The study concludes with several implications for fiiture research but finds that, without the contextual examination of the variables, the linkage may not be valid. ^*Lanny Herron and Richard B. Robinson, Jr., “A Structural Model of the Effects of Entrepreneurial Characteristics on Venture Performance,” Journal o f Business Venturing {1993). 46 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. If personaiit}:’ traits work on behavior, then measurmg behavior alone would be meatiingless without determining which traits impacted behavior. In the DOD- PMPP study, the owner or manager is solicited for comments on the firm’s, behavior in the program, and perfomiance of its contracts. If possible, an assessment is made of observable personality traits of the owner or manager. However, personality traits are not measured, because it is proposed that, to a great degree, the guidance received in the business mentoring relationsMp during program participation oveirides the personalities traits that may be desirous in the owner. Further, it is assumed that the owner was highly motivated, as evidenced by his/her seeking participation in the mentoring program. Theorists continue to pursue theories that support an ideal expansion process for growth-oriented small businesses. Two modem theorists have a lot to say about the success factors and other aspects of entrepreneurship in the 20* and 2F ‘ centuries. The first theorist is a prolific writer about business and entrepreneurship in the modem business era. Peter Dmcker, a professor and writer of popular textbooks, originally focused on the management and structure of corporate life but has written on small and large businesses, as well as nonprofit organizations. Drucker is considered a modem thinker with “flashes of genius.” Drucker purports that “entrepreneursMp” is different from what most books mean. It is widely believed that entrepreneurship is having a great idea and that innovation is largely research and development, which is the technical aspect of the business. Instead, he contends that 47 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. “entrepreneursliip” is a fairly rigorous discipline, and that has been proven over again. He contends that innovatioa is an economic, not a technical, term, because it has to be organized to create a business.^’ As an advocate for small business, the researcher can attest to liigMy innovative small businesses with cutting edge inventions or processes being unable to get their inventions to market because they lack the entrepreneurial skills to create a business, Drucker, who is referred to as “father of modem management,” once referred to “mattagemenf’ as a factor of corporate life but has since said it is a factor of enterprise and is even more critical in the life of an entrepreneur. Neither Drucker nor other notable writers have been successM in offering a predictive technique for consistently determining the potential of a large or small business to grow. The reason is probably because so many factors affect the growth of a business. Writers would have to compile volumes of contingency theories in order to make such a proposal and still probably would not have a guaranteed success model. Despite limited success to date, it is certain that almost every business theorist would advise that scholars not forsake research on predictors of entrepreneurial or small business performance. This pilot study takes a bold step by predicting small business performance within the encapsulated context of a federal business mentoring program and further predicts that the results are generalizable to firms in simllai programs. ^ ’George Gendron, “F tehes o f Genius,” Inc. Magazine (New York: Iiic.com, 2003). 48 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Even the federal small business programs are now concerned with the growth of small firms. When the small business programs started in the 1950$, and minority programs in the 1960s, the focus was to direct a fair share of govenimeiit contracts to small business concerns. The Business Opportunity Development Reform Act of 1988 (Public Law 100-656) amended the Small business Act to require the President to establish an annual government-wide goal of awarding not less than 20 percent of prime contract dollars to small business concerns. The Small Business Reauthorization Act of 1997 (Public Law- 105-135) flirther amended the Act to increase this goal to not less than a 23 percent government-wide goal. As indicated in Chapter 1, government-wide prime and subcontracting goals for small disadvantaged and women-owned businesses are 5 percent for each group. The SBA is responsible for coordinating with Executive Branch agencies to ensure that the federal government meets the mandated goals. During the 1980s and 1990s, the federal government became concerned with small business growth, particularly as it pertained to growing small businesses in order to have small businesses as prime and subcontracting suppliers to meet critical needs in the government. This was primarily the result of prime contractors not being able to meet their small business goals. Thus, mentor-protege programs and similar programs, e.g., workshops seminars, and training courses, are held annually to instruct small businesses on doing business with the United States government. 49 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Generally, businesses poised for success have a growth objective which goes hand-in-hand with an inteixelated objective—-profit Eveiy business goes through a series of predictable stages of growth. At some point, a successM entrepreneur or sm.ail business owner eventually becomes a manager, often at the time in which his company increases its products, equipment and personnel. Although the pursuit of growth is critical to the longevity of the business, the pursuit of profit appears to be the more popular goal. Drucker suggests that a business’ concentration on profit is what can lead to its downfall—that, instead, the business should concentrate on its cash flow. Further, he suggests that concentrating on cash flow means the owner wdll be ready with the financing, equipment and persormel when the next order comes in. On the other hand, he believes that too much concentration on profit takes the owner’s eyes off of the real growth objective—filling orders that eventually lead to growth. A small business must inaintain a stream of orders, i.e., consistent contracting and subcontracting opportunities in order to keep its cash flowing. When its business’ resources are limited, it cannot afford to acquire the needed managerial assistance to help in good decision making or to prevent bad decisions. Mentoring and other alliances that bring various resources to a protege or partner can help a small business owner make good decisions without a strain on its cash flow. Profit is the reward for satisfying the demand for a product or service, above its cost, and for taking such risks as investing funds in an untried business and an 50 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. uncertaiii market. Profit margins are critical as they are the indicators of eifeetiveness. Generally, siirvlyal accompanieci by profit is the best indicator of business success. A decline in profit margin should trigger a search for the cause. While the ultimate indicator is that of survival .and profit, many times, other measures often are desirable and substituted. Such measures relate to volume indicators of the growth of the business, e.g.., increase in orders placed with the company. When, businesses get more customers, sales clerks, and additional lines of merchandise or service, they are ail indicators of the growth of the business. A rise in certain expenses, e.g., an increase in its outlay for employees, can signal an increase in sales and, subsequently, in profit. Due to the inability to obtain data on the profitability of DOD-PMPP participants and control group, this study utilizes two other indicators—an increase in employee base and revenues or receipts. The second notable theorist is really a pair of theorists, who are not as famous as Drucker but are scholars who have espoused theories pertaining to small business success. Although it is impossible to determine precisely what leads to success in small business, Jacqueline N. Hood and John E. Y oung,believe that there are primary areas in which successful entrepreneurs must be developed. Hood and Young suggest that the successful small business owner must develop in several areas of creative knowledge, i.e., content knowledge, knowledge leading to specific skills ^®Jacqueline N. Hood and John E. Young, “Entrepreneurship’s Requisite areas of Development: A Survey o f Top Executives in Successful Entrepreneurial Firms,” Journal o f Business Venturing (1993). 51 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. and behaviors, unique mentalities or a world view, and certain personality characteristics. These four areas include business functions, e.g., innovation, marketing, staffing, and knowledge of business, technical and environmental factors affecting the business. This inentoriiig study suggests that the average small business owner starts a business with limited training, particularly in certain teclmical and business areas. The requisite areas of knowledge outlined in the Hood and Young study are applied to this study. It is easy to think of small businesses as firms that are not as capable as the large firms. However, we forget that most of the well-known large businesses were once small businesses. Both small and large businesses strive for growth. Growth is the reason Bill Gates, Ted Turner, and the late Sam Walton never seemed to get enough of the business—why they continued to buy new businesses and attempt to grow them. It is likely that these successful former entrepreneurs and small business owners proved the validity of several conceptual and theoretical frameworks pertaining to business growth, including those outlined in the Hood and Young study. Sam Walton of Wal-Mart is a classic example of a small businessman who succeeded. It would be difficult to overstate the success the corporation has enjoyed in its four decades of existence. It began with a single store in Rogers, Arkansas, that he opened in 1962. The company expanded to include nearly 3,000 stores in nearly 50 states.^^ Wal-Mart became a success by developing a great marketing strateg}', ^®Leon C. Megginson, Charles R. Scott, Jr., Lyle R. Trueblood and William L. Megginson, Successful Small Busimss Management (Dallas, TX: Business Publications, 1998). 52 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. findieg optimal locations, providing a product that many members of the community songht, and listening to Ms customers. Other well-known examples of small business growth are: (1) Fred DeLuca who borrowed $1,000 from a friend and started SUBWAY Restaurants; (2) Paul Orfalea, without business experience or start-up money, leased a garage, rented a copy machine and launched Kinko’s; and (3) Mike Hitch, who left pro baseball after a broken ankle, started making pizzas at two pies at a time, and created Little Caesar’ Since business mentoring is a fairly new concept in terms of its general application, how then did these highly successful businesses become giants in their areas of operation? Well, the historical account of how most of these businesses succeeded did not involve formal mentoring. Most of the businesses succeeded through trial, error, and luck. However, some became engaged in formal and informal business alliances at various points in their climb up the ladder. Jim Schell, a modem author of articles and books on business phenomenon, ran a successfiil business for over 22 years. He was asked: “If you had it to do it over again, what would you do differently.” His answer was: “Fd get a mentor.”^ * Schell believes that the number one reason for small business failure is “small business *Fred DeLuca, Start Small-Fimsh Big: Fifteen Key Lessons to Start and Run Your Own Successful Business (New York: Warner, 2000). '“Jim Schell, The Small Business Answer Book: Solutions to the 101 Most Common Small Business Problems, The Enterprise Magazine (1996). 53 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. isolation.” Mentors are in the experience position, and that experience is the best teacher of them all. The ultimate goal is to develop strategic advantage by pooling resources and gaining access to markets and/or technical information, and achieving economies of scale. After intensive inquiry, we still know relatively little about the small business owner and factors that consistently predict small business performance. However, we know that nearly all theorists, business data recorders, and business publishers declare that small businesses have an apparently poor chance for success. Despite this proclamation by the experts, thousands of small businesses are started each year. Small businesses exist in the shadow of big business, and many of the techniques of effectiveness and profitability come from large businesses. Well, of course, small business owners aspire to become bigger business owners. Small businesses want to enjoy the kind of success their large business counterparts have enjoyed. iJiisiii ess-to-B«siness Alliances A strategy utilized by many small firms to achieve their growth objectives is one of partnering with larger firms. This approach, which is particularly well-suited for new firms that have not penetrated the market, involves the small firm determining its own information and capacity needs. Information is a key resource for decision making in all businesses, and especially in the new venture. Smalt businesses with higher levels of initial confidence may search less for information based on their own 54 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. needs for additional information.'*^ Research suggests that small business owners engage in a high level of search activity, using a variety of information sources. While most small businesses tend to rely on more informal and personal sources of infomiation, today’s small businesses, particularly those doing business with the federal government, are forced to make choices that might involve formally joining a team of other businesses in order to qualify for contracting opportunities. The small business owner’s need for information leads to the purpose of this portion of the study which is to address the second stream of literature linked with the study topic, i.e., business mentoring programs. Business mentoring is one of several types of business alliances available to small business concerns. A small business seeks mentoring alliances to obtain from presumed experts, information and training that leads to the most effective ways to operate its business. Besides mentoring, these alliances include; consortia, joint ventures, mergers, business incubators, and networking alliances. The concept of mentoring is not new. It is believed that the first known reference to mentoring was with Odysseus, who sent Ms son Telemachus to be tutored and cared for by a wise man named Mentor. This union is believed to have started the early discussions of mentoring that have evolved over time. Whether that incident started the mentoring concept is unknown. However, it is a fact that the mentoring phenomenon has become entrenched in our culture. A mentor has been *Mmo!d C. Cooper, Timothy B. Foita, and Carolyn Woo, “Entrepreneurial tnformation Search,” Journal o f Business Venturing (1995). 55 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. traditionally defined as a teacher, a tutor, or a coach. Our parents, teachers, bosses, and even some friends, have been mentors for most of us. Many organizations have a mentoring program for individuals. Even the federal government conducts mentoring programs at almost every agency, pairing top govemment executives with entry-level employees and middle-ievel managers. Just about every modern-day youth program has had a mentoring component to it. The seemingly widespread support for mentoring reflects an assumption by its champions that the mentor-protege relationsMp is a positive and rewarding one. Why, then, would this pheBomenon not be a success in busiiiess-to-busmess arrangements? Whether the protege is a student or a business, it seeks information that its older, wiser, mentor is believed to have knowledge of through its experiences. The small business owner expects to utilize the information to improve some area of its business life. Vernon D. MilleT^ and E. Morrison,'” theorists who study mentoring relationships, propose that newcomers to organizations have certain information- seeking needs, when faced with learning the requirements of their roles in the organization. Small business executives, and entrepreneurs in particular, seek information from mentors to master their roles as managers of the firms and become more competitive. Mentoring combines both the information and training aspects of ^Vemon D. Miller, “Information Seeking During Organizational Entry; Influences, Tactics, and a Model of the Process,” Academy o f Management Review ( 1991): 92-120. '*^E . Morrison, “Newcomer Information Seeking: Exploring Types, Modes, Sources, and Outcomes,” Academy o f Management Journal (1993); 557-589. 56 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. learning, as well as the “learning by doing” method. Morrison W Tites that the purposes of mentor-protege relationships are to: (1) gain technical information about how to perform required job tasks; (2) gain normative information about expected behavior and attitudes; and (3) gain referent information about role demands and expectations. This dimension of mentoring is referred to as “psychosocial” ftmction and is analogous to counseling, role modeling, and friendships. Similar expected outcomes can be applied to business-to-business mentoring relationships, which can be a role modeling experience for the small business. For most small businesses, especially for those firms that are not doing business with the Federal government, the concept of mentoring remains foreign. The number one method for entrepreneurs, outside of government contracting, to leam their craft is by doing, i.e., trial and error, instead of learning from an experienced business in a mentoring relationship. Despite the low numbers of small businesses overall that have been introduced to business mentoring, the biggest difference in yesterday’s and today’s federal small business contractor, besides the tools they use, i.e., computers and sophisticated methods of business analyses, is that yesterday’s small business owner was more likely to work alone. Today’s federal small business contractor is more likely to seek and participate in a business alliance, e.g., a prime- subcontract or joint venture relationship with a large business. When a business chooses to mentor a protege, the goals are to further the protege firm’s skills in one or more areas. A well-structured mentoring agreement 57 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. can provide a “win-win” situation for both the mentor and protege firm. The role of the mentor is to help the protege hone its business, m^arketing, and technical skills. The mentor may assist the protege firm in preparing lucrative contract bids and award subcontracts on federal jobs to the protege firms on a non-competitive basis. Some mentors assist their proteges in obtaining loans, and still others may invest in the protege’s companies. Small business concerns form partnerships for the purpose of achieving goals that individual businesses could not attain easily. A business mentor can be a meaningful partner because a mentor can show the protege the right way to operate a business in a free enterprise system that is filled with too many failed businesses that went the wrong way. Accordingly, the best mentors are seasoned firms that know what it takes to win. Despite the absence of extensive literature on business-to-business mentoring, a modem day theorist stands out for his research on business collaborations and their potential for increasing and improving the two-way information flow, competitiveness, and business growth. James W. Botkin'^^ theorizes that business collaborations, e.g., mergers, joint ventures, mentor-protege relationships, consortia, and other partnerships, are knowledge communities that can revolutionize a business and improve its chances for growth. His research explored successful businesses that sought and obtained critical business information through forming alliances with other ■*T am es W. Botkin, Winning Combinations: The Coming Wave o f Entrepreneurial Partnerships Between Large and Small Companies (New York: Wiley, Inc., 1992). 58 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. businesses. Botkin refers to four strategies for entrepreneurial success. One strategy proposes large to small business alliances that are formed on a iong-term basis for the mutual benefit of each partner. He notes that more and more large companies have begun to team with small entrpreneurial firms, often in mentoring relationships, in order to develop their own fiiture supplier. Botkin supports strategic alliances and notes that American corporations partner as an investment tool to enhance their entrepreBeurial capabilities and loiig-run competitiveness. The federal governmen t^ requisite amual small business goals initiative, for each Federal agency, encourages large and small businesses to form alliances to take advantage of govemment business opportunities mandated to be set-aside or reserved for small businesses. While large businesses may not have the opportunity to bid or propose on their own, they still can receive a lucrative portion of a contract by partnering with a small business. The DOD-P^/fPP was authorized by Congress in 1991 and was inspired by “The Stempel Plan,” a Model Mentor-Protege Program, which was developed for the construction industry. Mr. Ron Stempel was a Contracts and Procurement Manager for the Port of Portland from 1989 until Ms death in 1996. In consultation, with the Associated General Contractors of America (AGC), Mr. Stempel developed “The Stempel Pian.”^ ® (The plan was in effect years before the AGC actually published it in 1996.) Mr. Stempel found that programs directed at encouraging growth and ■ ’ ® “The Stempel Plan: A Model Mentor-Protege Program for the Construction .Industry, a study by The Associated General Contractors of America, Alexandria, Virginia, 19%. 59 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. development of minority, women and other disadvantaged businesses actually were having little effect on the small firms that they were designed to assist. The competitive base of these firms remained small, and their turnover rate was high. Therefore, Mr. Stempel, with the backing of the AGC, developed a Model Mentor- Protege Plan to assist in the developmeiit of emerging businesses into the construction industry. The model has heavy community involvement to assist the mentor and protege firms in developing a flexible mentoring agreement. It requires two mentors for each protege. It stipulates monthly meetings among the three participants. The mentors and protege firms develop the steps necessary to implement the plan. A professional service provider is assigned to assist the mentors and protege firms. The model does not prohibit mentors from subcontracting to their proteges or from forming joint ventures. Verbal feedback from the AGC, and the members of the construction industry, indicate that the mode! has been successful in developing a broad base of high quality firms. Several federal mentor-protege programs are available to promote small business growth and proficiency. They are administered through a variety of agencies, including the United States Department of Defense (DOD), National Aeronautics and Space Administration (NASA), Department of Energy (DOE), Department of Treasury (Treasury), Environmental Protection Agency (EPA), and the Small Business Administration (SB A). Many of the programs allow both the 60 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. young and tlie seasoned small business firm to become either a mentor or a protege. The protege gains technical or business expertise, and the mentor firm gains a new competent, trusted subcontractor. Foster Wheeler Environmental Corporation is a DOD mentor. It praises the DOD-PMPP and its benefits because, in addition to helping the small companies develop, Foster ^fiieeler developed four new suppliers and awarded more than $3 million in subcontracts to its protege firms.''’ Another formal business mentoring program wdth a national tlirast is the BusinessLINC initiative.''* These intermediaries are go-between organizations for the commuiiity and businesses, businesses within an industry, businesses within a geographic area, businesses within state and local governments, and for potential business-to-business relationships or mentor-protege partnerships. The BusinessLINC was announced in 1998 to encourage more private sector large to small business linkages that enhance the economic vitality and competitive capacity of small businesses, especially for those firms located in economically distressed urban and rural areas. LMC stands for “Learning, Information, Networking, Collaboration.” According to its Web site, http://businesslinc.sba.gov, the Mentor Network component of BusinessLINC is composed of large businesses that have created specialized programs that advance strategic relationships with small businesses. These programs range from classroom teaching to one-on-one technical ‘ ‘^Don Rogers, “Get the Most Out of Mentor-Protege Programs,” Chemical Engineering (April 1997). '“ 'Available at: httpi/TbusinessIinc.sba.gov. 61 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. assistance, to peer groups and advisor}' boards, to supplier development programs. Research, on the BusinessLINC network identified an information teclinology small business protege that accessed BusinessLINC to develop a mentor-protege relationship with the private sector. Absent of a M l intemew, the protege fkm indicated through a brief telephone conversation that participating in the BusinessLINC initiative w'as a rewarding experience. The firm believes that having a mentor opened new avenues for business. Often these programs provide an opportiiiiity for the development of business relationships that may lead to fature subcontracting opportunities or other business opportunities for the protege firm. These types of strategic alliances are becoming an increasingly pervasive mode of conducting business. More and more businesses engage in various forms of cooperative activities with other firms, e.g., joint ventures, because these arrangements include cost sharing, technology transfer, sharing of critical information, and the expansion of their products, services and market reach. Small businesses recognize the cost savings and flexibility associated with such arrangements. In the Federal government, business arrangements, e.g., joint ventures and limited liability companies, are becoming as common as mergers, as they offer the business a non- permanent way of taking advantage of business opportunities without creating fixed business positions. On the subject of iimovation, Bodkin notes that alliances may enhance the innovative capabilities of corporations by promoting opportunities for shared learning, transfer of technical knowledge, legitimacy, and resource exchange. 62 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Additional advantages, which are especially important for small business, are the improved ability to compete against a stronger competitor, easier entry into new markets, and access to resources. Other alliances, i.e., business incubators and networks, share certain administrative costs, such as personnel training, marketing, advertising, or distribution costs. An alliance, whether it is a merger, joint venture, or other networking linkage, can help a small business to remain competitive in the emerging global economy. Corporate strategies in the 1990s and 2000s, and recent developments in world technologies, produced a deluge in strategic alliances and mergers to gain a competitive advantage in the marketplace. More and more, companies must believe that cooperation among business entities is the best new form of competition. Some business partnerships are horizontal (between suppliers), and others are vertical (between suppliers and buyers). The nature of the business mentoring programs is that they fimction vertically or horizontally, depending on whether it is a mentor-protege or joint-venture relationship. There are occasions when the large business and small business are both suppliers to the government. In this study, sometimes the mentor and protege are competitors and other times their products or services compliment each other. Often, the mentor and protege firm begin with a vertical relationship wherein the firms are supplier and buyer, a prime and subcontractor. Then, it is not uncommon for the mentor and protege to form an alliance in which they are partners in a venture. Several types of legal instruments and 63 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. agreements may result from these partnerships. They are: long-term purchasing agreements, limited liability companies, joint marketing programs, shared research and development programs, and even some negotiated equity-based relationsMps. The literature indicates that the theoretical framework for joint ventures was developed primarily in the shipping and oil industry. Joint ventures were used in the United States for large-scale projects in mining and the railroads in the 1800s. This type of venture continued in the 1900s in shipping, oil exploration, and gold. Probably the best known and largest joint venture in this period was the formation of ARAMCO by four oil companies to develop crude oil reserves in the Middle East."^^ By 1959, about 345 joint ventures were being operated in the United States by some of the largest U.S. corporations.^® The increase in the number of joint ventures particularly by smaller entrepreneurial firms has been substantial since the beginning of the late 1980s. Regardless of the size and type of business, entrepreneurs are using joint ventures more and more frequently to grow and expand their ventures. Formal and informal networking linkages are another type of business alliance. With these linkages, which are more often informal, small businesses can develop contacts and exchange information with other business owners to compliment and leverage their own experiences by taking advantage of someone eise’s experiences. When a small business develops a networking strategy that encourages it to build a '’ ’Kathryn Rudie Hanigan, Strategies for Joint Ventures (Lexington, MA: Lexington Books, 1985). '®lbid. 64 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. dose collaborative alliance with its suppliers and customers, such an alliance probably would enable each of the partners to be more flexible and responsive to a changing market and federal requirements. A business can obtain the expertise it requires without having to develop it all by themselves. The development of strategic alliances should be an objective of every motivated small business owner in order to purposefully position the firm for future opportunities. It is a standard element in a large business’ strategic plaimmg process. An important element of survival and growtli is the development of the film’s distinctive competence. Sometimes, a mentor can help a small business weather an economic downturn and move toward profitability. A mentor should be able to help its protege identify and highlight its strengths, diminish its weaknesses, and focus its product or service on its best asset. As an example of how a company’s strengths can be highlighted, in Peters and Waterman’s book entitled, In Search o f Excellence, the authors cite the success of Delta Airlines’ creation of a “Family Atmosphere” and Disney Productions’ “Service Through People.”* ^ These companies know how to direct the customers’ focus to the company’s strengths, and the potential sources of the company’s competitive advantage, i.e., its employees and family of customers. There will probably always be an ongoing debate in academia as to whether students can be taught to be entrepreneurs. Some theorists argue that we should develop more refined, cumulative theories and teach them to students in a way that ’‘Thomas Peters, and Robert H. Waterman, In Search o f Excellence (New York: Warner Books, 1988). 65 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. emphasizes learning by doing in a classroom setting. Isn’t “learning by doing” a key aspect o f a mentoring program? No one would argue that it is preferable that the small business owner take pertinent management and business courses. However, getting hands-on experience probably is more valuable than any degree or credential that the business o^vner can earn through course work. Dracker emphasizes that, when you consider going into business, remember that having wisdom and experience is important to decision making— and that formal education alone gives you n eith er.T h ere is no substitute for the real live experience in marketing to and interacting with customers, grappling with financial statements, and dealing with competitive threats. Despite being a champion for formal education, it is obvious that a small business requires substantial inputs o f information and training from various sources in order to effectively run the business. Almost all business theorists agree that the entrepreneur and the smal! business owner should partner! partner! partner! There is no debate about whether mentor-based training is a good “leaming- by-doing” model. In fact, it probably is good “apprenticeship” training for teaching certain business school programs on how to network. Obviously, research in “leaming by doing” contributes to ped^ogical theoiy as it will at least recommend to students, or prospective entrepreneurs, some success stories for future business decisions. ^^Gendron, 2003. 66 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Governmental and Congressional interests, as well as public opinion, favor small business development. Whether small businesses participate in business to business alliances or “wing it” on their own, self-employment is so popular that many people are leatdng large corporations to start their owm small businesses. That makes this a challenging and rew^arding time to be studying small business, because the area is growing and is expected to continue growing for the foreseeable future. 67 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. CHAPTER III RESEARCH DESIGN AND METHODOLOGY Conceptual Framework This chapter addresses the research design and methodology of the study. It outlines the conceptual framework of the study, research questions, hypotheses, method of data collection, and the intended statistical analyses to be performed in the study. The findings and analyses of the findings are covered in Chapter 4. Prospective entrepreneurs and small businesses are concerned about their chances of business success. The complexity and uncertainty of operating a successful business makes the small business owner critically dependent upon acquiring information and training, and “using his/her know-how to solve business problems.” Business information, of almost any kind, is a key resource to the small business owner. Much of the process of venture formation involves seeking and interpreting information needed for decision making. It might also be viewed as a process of learning and acquiring information in order to overcome the early years, which is typically the period in which survival is often questionable. Small businesses typically gather information in an informal process that helps them identify 6 8 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. opportiiiiities and assemble their resources in order to respond to business opportunities. Despite their need for information on various business functions, few small business owners actually obtain the needed information, or know where to obtain business information that is crucial for business success. Moreover, few studies exist that examine the effectiveness of the available types and chamiels of information, e.g., how to train prospective entrepreneurs and small business owners to operate a business. Mentoring is one w'ay for a business to obtain the information it requires to succeed, along with the training on how to use the information. The DOD-PMPP is a formal way of helping the small business obtain information and receive training on how to use the information. Therefore, it is not surprising that small business advocates were quick to latch onto a mentoring arrangement for business which had proven success in social science. If entrepreneurs’ success .and failure could be predicted with some measure of accuracy, those individuals who are likely to succeed in business could be encouraged and counseled on business operations. The DOD-PMPP has been perceived as the success model for business mentoring in the federal government. This study may validate, or invalidate, timt model. Should the hypotheses be confirmed, the program could be the official model for govemment agencies and the mentoring program of choice for small biisinesses and their advocates. In testing the hypotheses, this study endeavors to identify a set of variables associated with 69 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. siiccessM small businesses and federal mentoring programs. Nevertheless, this study will underscore the role of entrepreiieursMp education and training in developing both the behavioral and the manageriai skills in the owner and manager. There is virtually unanimous agreement with respect to the proposition that the success of the small business segment is crucial to the stability of the economy of the United States. This study’s findings can add one small piece of the puzzle on how to grow small businesses through publicly-administered programs. Program Operation Although the operation of the DOD mentoring program was addressed in Chapter 1, portions of the information imparted in that chapter will be recapitulated here in order to set forth the design for the study. The authorities governing this study of the DOD-PMPP reflect the guidelines in effect during the program period covered by the study. Any recent amendments to the guidelines are not covered by the scope of this study. A small business meeting the eligibility criteria, i.e., a small disadvantaged business concern that meets the size standard and is eligible for award of Federal contracts, an Indian Tribal business, or a qualified organization employing the severely disabled, as outlined in the DOD-PMPP guidelines, would contact a pre approved DOD prime contractor or mentor, usually a large business, participating in the program to begin the process of becoming a protege. Typically, the mentor will have several meetings with the small business or prospective protege in an effort to determine if there is a match for entering into an agreement. With the compietion of a 70 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. few details, i.e., how the mentor wii! be reimbursed for its time and effort, the mentoring begins with the mentor providing developmental assistance, which shall be referred to hereafter as “training,” to the protege in one or more business and/or technical areas. The protege is often awarded a contract during its program tenure which typically lasts two to three years. The mentor can have more than one protege; however, the protege can have only one mentor. When the protege completes its training, it is expected to have enhanced its business operations, often placing it in a new competitive position. It also is anticipated that greater future opportunities for growth will become available to the protege because of training received from the mentor and because of its relationship wdth the mentor. Accordingly, protege firms are expected to enjoy longevity and growth long into the future primarily because they were trained by a highly successful company. This researcher believes that these expectations of growth in the DOD-PMPP are intuitively reasonable and theoretically defensible. Thus, this two-dimensional framework proposes to sharpen the reader’s understanding of the effectiveness of the program in growing small businesses into viable firms. It would appear that a mento.rmg program that fostered growth and survival of its participants would be deemed a success. Further, if that success could be related to certain inputs, it would be a success model for business mentoring 71 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. programs. These are the premises upon which this study and research questions were developed. The research questions are: Research Questions Survivai/Noii”Siirviyal 1. Did DOD-PMPP graduates sur\ive through the year 2001? 2. Did members of the control group survive through the year 2001? 3. Are there any significant differences in the survivai rate of the DOD- PMPP graduates and members of the control group? Growdh/Non-Growth 4. Did DOD-PMPP graduates experience growth during program participation? 5. Did members of the control group experience growth during the same period (1991 through 1997)? 6. Are there any significant differences between the growth experience of DOD-PMPP graduates and members of the control group? Training and Growth 7. Is there a relationship between growth and the training received? These research questions have been formulated into three hypotheses which are addressed in detai! below. 72 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Hyp ff thesis 1— Survivai Hypothesis 1 pertains to survival of the protege firms and control group members. Survival of the small business sector of our economy is extremely critical if we are to continue to grow as a technologically advanced nation. However, even well-conceived business ventures can fail because of numerous factors related to the owner’s management and technical skills, the firm’s undercapitalization, or even environmental factors. Both large and small businesses fail or do not survive. The reasons given for failure are often numerous, although the most obvious reason to the failing entrepreneur is generally thought to be the lack of capital or contracts. Some small businesses expect that owning their own business will be a once-in-a-Iifetime activity. However, when some businesses fail, the owner often becomes the owner of another business, sometimes in the same industry. The relevant issue for this phase of the research is how many of the proteges survived. For purposes of this study, survival refers to a protege firm that is still operating its business, whether profitable or not, by the year 2001. A protege firm that did not survive is one that experienced termination, dissolution, closure, discontinuance, failure, transfer, or any other type of separation or action that altered the status or form of the business from program inception. Firms that formally filed for bankruptcy also are included with these non-survivors. In the case of a sale or merger of a firm due to its success or company goals, there were no firms identified 73 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. that experienced a sale or merger. Also, it is important to note that some firms in the study survived to the year 2001 but did not survive thereafter. These firms are still survivors in this study as they meet the criterion of HI. Although Hypothesis 1 (HI), measures the numbers of protege firms that survived through the year 2001, each of the proteges in the study actually completed the program by 1997. There is a reason for examining the status of the proteges four years after graduation. During the 1980s, the SBA stated in a Congressional hearing that many of its section 8(a) program graduates were believed to have failed within a few years following their section 8(a) program graduation. Subsequently, it required its section 8(a) businesses to maintain a certain percentage of private sector business in their portfolios, believing that failure was due to too much dependence on govemment business prior to graduation. A confirmation of HI might suggest that the type of assistance provided in the DOD-PMPP, or a similar business mentoring arrangement, should be considered for the firms in the section 8(a) program. Furthermore, past studies of business survivai suggest that new businesses are poor prospects for long-term survival, with the exception of high-technology firms, which appear to have a much higher likelihood for longevity. Protege firms were both new (within two years of start-up) and seasoned small businesses. In order to validate the findings in this model, a similar comparison group of businesses was analyzed. The control group is designed to replicate the protege firms. The control group members include 8(a) businesses, and other SDBs, including 74 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. women-owned businesses, that had contracts with tliree of the DOD sendees during the same period. The program, participatioe period for protege firms was 1991 through 1997, although few firms entered the program before 1993. Therefore, meinbers of the control group W 'ere extracted from DOD services contracts .awarded from 1993 through 1997. The instances of protege firm survival are compared to the instances of control group survival for the same period. Thus, HI is stated: HI: Proteges graduating from the DOD-PMPP are more likely to survive than similar firms not mentored in a mentoring program. The proteges are clustered in a range of certain industries primarily in the service and engineering fields. The control group members were chosen primarily by their industry designation. Small firms doing business with the federal government tend to operate in certain service-related businesses. Demographic Characteristics of the Groups In order to gain a sense of the t}pes of fkms in both groups, several Ixequency tables are presented in Chapter 4 to illustrate the findings. First, a table will compare the number of respondents and non-respondents for the protege firms and control group members. Responses on all of the variables will be compared between both groups. The variables include the following categories: Age of Company ® Type of Business Age of CEO Gender 75 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. » Education » Program Duration • Name of Service • Other Teclmical or Managerial Assistance Received ® Financial Assistance Received Participation in other MPPs • Type of Training Received (from mentor) ® Type of Training Most Helpful • Type of Training Least Helpful ® Prior Business Experience • Employee Base Increase/Decrease ® Revenue Increase/Decrease ® Opinion on the need to change the program Neither list (protege firms or control group members) obtained from DOD and the services included the industrial classification or SIC codes of the firms. Therefore, the survey questions queried respondents about their industrial classifications. Once the respondent identified its industry through the survey instrument, it was verified by the SBA PRO-Net and other databases. These databases also helped to confirm if the firms were still in business, and if they had changed the business name or moved to a different location. The industrial classifications of most of the non-respondents were not identifiable. 76 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Initially, the protege sample contained 278 names and the control group sample contained 224 names. After deleting duplicate and seemingly duplicate names of firms, firms that indicated they were not in the mentoring program., firms appearing in both samples, and the same with no identifying data, e.g., the address, the protege sample size was reduced to 247 firms and the control group members were reduced to 207 firms. In regard to the survivors, 152 of the 247 sample protege firms survived compared to 78 of the 207 control group sample. This equates to 62 percent survival for the protege firms and 38 percent survival of the control group firms. As noted in Table 3, the firms that appeared in both samples and had recognizable duplications in the names or addresses of the firms were deleted from both samples. These firms had contracts with DOD, or its services, that were in effect prior to becoming a protege to a DOD prime contractor and after the program period. In order to further improve reliability of the samples, the control group survey asked respondents to verify that they did not participate in a mentoring program. The frustrating process of collecting data for the control group sample will be addressed later in this section. The results of data received from the DOD services for the control group sample also appears in Table 3. 77 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Table J Comparison of Original Samples of Protege Firms and Control Group Members r ............. Protege Firms Control Group Firms in the original sample 278 224 Duplicate firms in the list 11 4* Firms appearing on both lists 9 9 Firms without addresses/other ID 6** Firms on list but did not participate in the program 5 - Survivors 152 78 Non-Survivors 95 129 Total Fim s in the Sample 247 207 ^Duplicates contained contract modifications. **Names contained no addresses or identifying infomation. Statistical Analyses for HI To determine the statistical significance of survival between the treatment (proteges) and control group, the CM Square test is used to test the relationsMp through cross-tabulation. The CM-square test assumes that there is no relationsMp between the two variables, i.e., survival of the protege and control groups, and it can determine whether any apparent relationsHp obtained in the two samples are attributable to chance. A finding of 0.05 or less will confirm that there is a statistically significant relationsMp for survival in the protege firms and control group. 78 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Hypothesis 2— Growth The relevant issue for Hypothesis 2 (H2) of the study is how many protege firms experienced growth during the program participation period. Probably no other subject is studied, analyzed, and written about in business literature as much as ‘'business growth.” Obviously, HI and H2 axe related propositions. A business cannot grow unless it also survives. Survival, in many instances, is dependent upon growth. Note the depiction of tills study’s model of business success (Figure 4) that utilizes business mentoring. The findings from earlier studies revealed that business theorists believe that there are certain requisites for business success. Among these are: (1) the ability to manage the business operations; (2) strategic planning; (3) financial management; and (4) having a winning product or service, to name a few. Hood and Young have taken these and other business functions and grouped them into broad categories of requisite knowledge and training. They developed these requisite areas from responses to their survey of top executives that were highlighted in Inc. Magazine P The Hood and Young study was used as a source for developing the training questions for this mentoring survey. In addition, consultation with small business firms also provided additional survey questions. Figure 4 shows the success that a business can have if it possesses requisite knowledge and training for operating a business, and the categories in which the requisite knowledge fails, i.e., the Hood and ^Hood and Young, !993. 79 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Youag requisite trainmg categories. As depicted ia Figure 4, as growth expands, so too does the firm’s chances for survival. Both growth and survival are enhanced by the inputs, i.e., information and training received by the protege firms. The requisite knowledge and traieiiig quadrants developed by Hood and Young will be addressed later in this chapter. Insofar as this study is concerned, “how to measure growth” was one of the most important considerations in developing the design for this study. The first inclination was to measure growth by the amount or percentage of profits reported by the protege and control group members. However, data on profits will most likely be difficult to obtain, particularly in the case of privately held firms, such as the ones in the study. Both the employee base and revenues are good secondary indicators of growth, and therefore, are appropriate variables to use in this study. A protege firm that experienced either an increase in its employee base or an increase in revenues from program commencement to program end is considered to have grown. 8 0 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. CD ■ D O Q . C o CD Q . ■ D CD C /) ( / ) O O ■ D c q ' Model; Business Mentoring Beads to G-rowth that Expands to Success and Survival CD ■ D O Q . C a o ■ o o CD Q . ■ D CD C /) C /) Traimst^ ■ Creative Knowledge Skills & B e h a v io r T rai ji-ing M e n ta lity T r a in in g P e r s o n a l i ’ fty G-row#i Figure 4. M uddt Biisiness Mentoring Leads to Growth that Expands to Sueeess and Survival oc Demographic Characteristics of the Two Groups As mentioned under HI, Chapter 4 displays the frequency tables that compare the characteristics of both groups. The comparison tables also reflect the similarities and differences in growth and survival between the two groups. Protege firms and control group members that experienced an increase in either their employee base or revenues during the study period are considered to have grown. Data reflecting the increase (or decline) in the employee base, as well as sales or revenue figures, was collected directly from the respondents. The data was corroborated, in some cases, with repetition of the questions in a telephone or in an in-person interview. Frequency tables constructed for HI contain results applicable to H2 as well. An identical control group sample is used for both HI and H2. Growth in this study is based on the perspectives of the businesses that participated in the program. In fact, it is believed to be the only major sampling of proteges in a federal business mentoring program. Hypothesis 2 states: H2: Proteges graduating from the DOD-PMFP are more likely to experience growth than similar firms not mentored in a mentoring program. Statistical Analyses for H2 The CM Square test is used to determine if there is a statistically significant relationship between growth and participation in the mentoring program. A finding of 0.05 or less would confirm the hypothesis and demonstrate a statistically significant relationship between growth and participation in the mentoring program. 82 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. A logistic regression modei was constructed to determine whetlier growth was related to three duminy variables: (1) AGE of the protege—^whether the firm was a or “Old” firm. “New Firms” represent fiims that were in business 1-5 years. “Old firms” represent firms that were in business 6 or more years; (2) TYPE of protege—-whether the firm was a “Technical” or “Consulting” firm. Technical firms” are firms in SIC codes 15, H , 33, 36, 39 and 87. “Consulting firms” operate in SIC codes 73 and 89; and (3) a variable representing the interaction of AGE and TYPE. Each dependent variable, i.e., survival and growth, is as dichotomous as success and failure. To be considered a success in this study, a business had to have both survived and grown. It could not have grown without surviving, and if it survived but did not grow, it is not a success (in this study). Protege firms and control group members that survived were asked directly about their growth experiences or reasons for the non-growth experience of the firm. Myp&tkesis 3— Tmimimg Hypothesis 3 (H3) proposes that growth, the dependent variable, is associated with the type of developmental assistance or training received from the mentor. It states: H3: There is a relationship between the type o f assistance received by the DOD-PMPP graduates and growth. The frequencies of training received by the protege firms are addressed in Chapter 4. 83 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Training Received by Protege Firms The challenging task in developing the survey was to identify, prior to obtaining the surv^ey responses, the types of training the protege firms received. Several methods were used to develop that portion of the survey. First, small business concerns and advocates reviewed the survey and provided their input on the critical business functions that are typically inadequate in small businesses, e.g., bid and proposal preparation. The types of training were further augmented by the inclusion of the requisite business knowledge and training outlined in the Hood and Young study. Finally, the researcher’s experience with small business development aided in expanding the list of training that would most likely be received by the protege firms. The survey contained 18 categories of training available for selection by the protege firm. Twelve (12) were provided in the questionnaire and an additional six were offered by the respondents. Frequency tables were developed to highlight the training that was most common among the protege firms. Statistical Analyses for M3 Two logistic regression models were used to test whether growth was related to the type of training received as well as to other protege characteristics. Logistic regression attempts to build a regression model that best describes group membership on the basis of success or failure. The parameters of the model are estimated using 84 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. the maxiimiiB likeIih,ood method. The significance level (0.05 or less) indicates whether there is a statistically significant relationship among the variables. The first logistic regression modei was constructed in order to examine the training received by protege fimis and to determine if there is a significant relationship between the training received and protege firm growth. The 10 types of training received by the protege firms were tested in this model. A second logistic regression mode! was constructed to test the relationship that the requisite training categories (Figure 5), outlined by Hood and Young, had on the categories of training received by the protege firms (Figure 6). These categories were three of four categories from the study: Creative and Content Knowledge (CATEGORY 1), Skills and Behavior (CATEGORY 2), and the Mentality capability (CATEGORY 3). In addition, the model tested the relationship these categories have to protege firm growth, and to the three dummy variables originally introduced under H2, i.e., AGE; TYPE; and a variable representing the interaction of AGE and TYPE. In addition, a Chi Square test was constructed to determine whether the likelihood of a protege’s growth was related to two other dummy variables that represent whether the protege firm received “Less Training” (two or fewer types of training) or “More training,” (three or more types of training). 85 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. CD ■ D O Q . C o CD Q . ■ D CD C /) ( / ) O O ■ D c q ' p. CD ■ D O Q . C a o ■ o o CD Q . ■ D CD C /) C /) Requisite Areas of Development for Successful Entrepreneurship Creative Knowledge Content —functional areas of business —venture creation —profit & growth in early stages —ethical assessment Mentality —opportunistic questioning —resourcefulness —divergent thinking —convergent thinking Skills and Behavior —oral presentation skills —interpersonal skills —business planning skills P ersonality Characteristics —need for achievement —internal locus of control —high tolerance for ambiguity and novelty —high need for autonomy, dominance and independence Figure 5. Requisite Areas of Development for Successful Entrepreneurship c x ) o\ Source: Hood, Jacqueline N., and John E. Young. ‘‘Entrepreneurship’s Requisite Areas of Development: A Survey of Top Executives in Successful Entrepreneurial Firms.” Journal o f Business Venturing (1993). CD ■ D O Q . C o CD Q . ■ D CD C /) ( / ) O O ■ D c q ' O ’ Q CD ■ D O Q . C a o ■ o o CD Q . ■ D CD ( / ) ( / ) Prescriptive Mentoring (Training) for Successful Entrepreneurship For Development of Protege Survey Creative Knowledge Content —finance/budget management —marketing & advertising strategy —business legal form —staffing —-inventory management Mentality —^new product/service-innovation —improving product/service —new process Personality Characteristics —competitiveness —risk-taldng —level of motivation Skills and Behavior —oral presentation ability —management guidance ■ —business planning —proposal writing —office management Figure 6. Prescriptive Mentoring (Training) for Successful Entrepreneurship O © < 1 Data Collection Tlie methodological approach employed here is a cross-sectional survey of small businesses that are doing business w th DOD and DOD prime contractors. The businesses surveyed were either participants in the DOD-PMPP or contracted directly v/ith DOD. Preliminary evidence suggested that protege firms have ver}' definite ideas about what they learned or should have learned from participation in the program. Therefore, the study was accomplished through feedback from protege firms and control group members. The names of the protege firms were provided by the DOD Office of Small and Disadvantaged Business Utilization (OSDBU). The names of the control group members were provided by the DOD military services. A survey questionnaire was used to collect data. It was conducted with a written questionnaire and telephone and in-person interviews. It was performed in three stages for both the protege firms and the control group in an effort to obtain accurate data, especially since it had been quite some time since the protege firms completed the program. Data collection included gathering and compiling information from numerous sources in an attempt to locate noii-respoiisive protege firms and control group members, and to corroborate the responses provided by both groups. The secondary sources included: Dun and Bradstreef s Reference Book of Corporate Managements, which listed companies in diiferent industries; Standard & Poors Corporate Records, which listed corporations and their earnings; and Moody’s Industrial Manual, which listed large 88 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. iadustrial corporations and their standings in the industry. A iiinited search was made of public records of U.S. Baiikruptcy Court filings in an attempt to match non- responsive protege and control group firms with Chapters 7 and 11 filings. All data were collected maniially, coded or classified, and verified by the researcher. The three primary stages of the sun^ey are described below. The Survey Stage 1—^The Sample The (DOD-PMPP) Protege Firms The first stage of conducting the survey was to obtain the sample for analysis. The sample protege firms were obtained from the DOD-OSDBU through their contractor, Madentech, Inc. As will be discussed in the conclusion of this study, it was fortunate that these names were obtained in an earlier yearn (1994-1997) when portions of the study began. The list of protege firms provided by DOD paired each protege with its mentor. The mentor-protege partners were classified by the categor}^ ill which the mentor had been placed for reimbursement purposes. The categories were: (1) “Major Programs,” indicating that the mentors on these pages received reimbursement for the developmental assistance given the protegd through appropriated fon'diiig for the program; (2) “Credit Agreements,” denoting that the mentor received credit toward its small business goals in exchange for the mentoring experience; and (3) “Cooperative Agreements,” in which the mentor was provided assistance under a DOD cooperative agreement. This study makes no distinction 89 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. between the protege fi,niis that participated in these programs or the categories of reimbursement for the mentors. The list of protege frans was easily obtained. The initial sample of protege firms contained the names of 278 firms which were sabseqaentiy reduced to a sample of 247 protege firms. Table 3 provides the details of how the reductions of the sample occurred. These firms were considered representative of some of the nation’s leading small business federal contractors. Five (5) questionnaires were returned because the respondents indicated they had not participated in the program. Eleven (11) of the firms were duplications on the list. Nine (9) of the protege firms also appeared on the list of control group members and were subsequently removed from both lists. In sorting through the names from both lists, the researcher encountered several instances in which it appeared that firms had similar names but different addresses. It was discovered in a few instances that the firms were the same company, only with different locations. Data on non-survivors could not be obtained in most cases, but was obtained and corroborated in some cases. Initially, more than 90 percent of the questionnaires were returned due to incorrect addresses or because the companies no longer existed. This caused great concern because DOD had stated to GAO (addressed in Chapter 1) that it had 90 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. difficulty locating many of the protege firms after program compietion. So, this researcher went to great lengths to locate the firms on the list. Successive mailings (at least 2-3) were made to each protege in which a retijjiied survey instrament was received. In order to generate reliability, telephone calls were made to a small sample of protege firms, along with phone calls to county administratioiis to seek information on local businesses. The SBA database, “PRO- Net,” was the most helpful, as many of the names of the firms appeared in “FRO-Nef' with either a new address or a new business name. Most of the data collection was peiformed during 1998 through 2002. It was assumed that most of the respondents had returned their surveys by that date. Some data collection, including verification of data, was performed in 2003. As stated earlier, most of the protege firms operated in the Standard Industrial Classification (SIC) codes. The codes were: 87-Engineering; 73-Business Services and Computers; 15 & 17-construction; and 89-Other business services, with a few operating in 33-Primary Metal Industries; 36-Electronic and Other Electrical Equipment and Components; and 39-Radio and Apparatus, Broadcasting and Communications. The North American Industrial Classification System (NAICS) codes are now used in lieu of the SIC codes. The Control Group Although the collection of the control group sample was begun later in the survey process (4 months to 1 year), it nevertheless replicated the protege sample. 91 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Obtainieg the control group sample was a time-consiiming and arduous process. First, the sample could not be requested until the industries of the protege firms were identified. (The original list of protege iimis obtained from DOD did not conlaiii the industries of the firms.) Most of the protege firms were mentored by large prime contractors that had contracts with the three major sendees, i.e.. Army, Navy, and Air Force. Working with three separate militaiy services, through their bases and offices, to obtain data on a control group, was a challenge. The initial request for data from each of the three services required follow-up requests. The lapse of time between the request and receipt of the data, in some cases, sometimes took up to 2 months. Moreover, in one request for the control group sample, the sample that was finally received contained the names of many (approximately 40 percent) protege firms from the protege list. Later, it was teamed that the instroctions were interpreted as a request to intentionally include protege firms in the sample, no doubt because the letter of request indicated the study to be about the mentoring program. That sample was thrown out and replaced by a random sample of SDBs that were awarded contracts with DOD between the years 1993 through 1997. In regard to the industries of the protege firms and control group meinbers, often due to the differing growth rates of the industries, businesses in various industries may grow at a different pace. This study does not consider the differences in industiy growth rates, nor does it compare growth rates of fim s in the same 92 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. industry. Each business is judged on the basis of its ow i expressed growth or lack of growth. It would have been impossible to replicate other characteristics of the protege firms, e.g., size and age, before receiving their survey responses. Therefore, the protege firms* industries, socioeconomic categoiy (SDB), and periods of performance w'ere the only characteristics required for the sample. Since statistical analyses would reveal if there are any significant differences in the age and type of business among surviving and growth firms, no further attempt w ^as made to stratify the sample before data collection. To the extent possible, the control group members are a broad cross- section of SDB contractors with the services, and are representative of the treatment popuiation. As mentioned earlier, data is uaavaiiabie for non-respondents. Each of the three services was asked to provide 85-90 firms, in order for the controi gi’ oup sample to have at least 255 firms. Once the modifications to existing contracts were purged from the list, thereby eliminating duplicates, another request for additional names of firms was made. Subsequently, the control group sample size resulted in a total of 207 firms. (See Table 3 for breakdown of sample.) Stage 2—^Devetopment ©f the Survey lustmraent The (DOD-PMP) Protege Firm Questionnaire To increase the reliability of the study, the questionnaire w-as carefully developed through a mini pilot or pretest which utilized internal and external sources. One of the major concerns of the study was the response rate. Accordingly, a three- 93 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. step process was used in adiiiinisteiing the survey. The first step consisted of developing a questiomaire based on the types of data to be collected. Then, in the second step, the questionnaire was reviewed by tw'o small business advocates working in federal small business programs. Two DOE advocates also reviewed the test questioimaire. After discussing the questionnaire with the advocates, subsequent changes were made. In step three, the preliminary version of the questionnaire was tested with tw ^o protege firms. Their returned surveys were used to refine the instrument. The proteges provided feedback on certain portions of the questionnaire, particularly in the areas of revenues and training. Again, changes were made to the questionnaire. Protege firms suggested that the written questionnaire contain levels of revenue rather than an open-ended question. Also, additional types of training were added to the list of developmental assistance received. This process resulted in an instrument that included 21 questions covering 12 areas of training that would allow for additional areas to be added by the respondent. The protege firm survey instrument can be found in Appendix B. A lengthy and detailed questionnaire, consisting of three pages of 21 open- ended and closed-ended questions, was mailed to the key officer of each protege firm. The questions were designed to collect data on the three categories of knowledge and a fourth category of personality traits. Hard business data included measures of employee and revenue growdh. The respondents were given ample space to permit submission of more than one reply to certain questions, thereby allowing the 94 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. utilization of a multiple response technique. This technique is useful when the focus of the research is on building a consensus for terminologies, perceptions and practices. In order to elicit the proteges’ attitudes and experiences, the questionnaire was designed to test the protege tlrms’ overall satisfaction with the program. For example, the questionnaire posed: “If you could, would you change anything about the DOD-PMPP?” Open-ended questions were included to avoid imposing limitations on the perceptions of the respondents about the program. The propositions outlined by the theorists Hood and Young (1997), were used as one guide for the development of the “training” questions in the survey instrument. The successful entrepreneur must develop in four critical areas of knowledge and training: creative and content knowledge, skills and behaviors, and the mentality capability. The fourth area of requisite development is in the owner’s personality traits. Components of the four areas of development repeatedly arise in academic literature as the primary determinants for entrepreneurial success. In “creative and content” knowledge, the small business owner must have certain information about the domains of business and commerce. This area represents the primary focus of traditional management education, i.e., the basic knowledge required of a business to grow and profit. The Hood and Young requisite categories of knowledge and training are depicted in Figure 5. 95 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. The various types of training received by protege firms were grouped into the Hood and Young quadrants of knowledge and training. As in the Hood and Young study, these quadrants were labeled: (1) creative and content knowledge; (2) skills and behavior; (3) mentality capability; and (4) personality traits. Examples of the protege firms’ training variables that fit into the Hood and Young model are: * Creative and content knowledge: finance/budget management, marketing and advertising strategy, business legal form, staffing, inventor}^ management, and knowledge about the product or service. Skills and behavior are represented in the DOD-PMPP questionnaire as “management and leadership guidance.” Strategic planning, the skill required to prepare a business plan, and management and oral presentation skills are requisite skills and behavior. ® Mentality refers to creative thinking, e.g., innovation and development of a new product, or improvement upon an existing product or service. The requirement that the small business owner have vision and positive thinking can be considered having “opportunistic” thinking about the business. Finally, numerous studies have proposed that the personality characteristics of the manager or leader affects the firm’s performance. These characteristics include self-motivation, risk-taking, competitiveness, self-confidence and just plan 96 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. common sense measures in business functions, e.g., financial management. The literature conflicts as to which personality traits are critical for success. Moreover, identifying these traits in the owner with just one in-person interview is difficult. However, to the extent possible, the in-person interviews attempted to capture information about the owner, and his/her feelings and thoughts, as wet! as corroborate responses to the questionnaire. The protege firm training was placed in a similar model as the Hood and Young requisite knowledge and training model as depicted in Figure 6. Nearly all of the listed protege addresses had changed since they exited the program. Consequently, numerous mailings and telephone calls were required to attempt to locate the firms. A considerable number of firms were apparently out of business, as evidenced by returned mail and/or disconnected telephones. As stated earlier, the most valuable resource in locating these firms w ^as the SBA database, “PRO-Net.” As a “last effort,” the protege firm’s local Business Bureau, Chamber of Commerce, and the taxing or county assessor’s office were contacted. One hundred fifty-two (152) protege firm questionnaires were returned from a sample of 247, yielding a response rate of approximately 62%. Although this is a favorable response rate, i.e., when compared to the standard response rates normally obtained from respondents several years after their period of performance, the reality is that information on a significant portion of the population, i.e., nearly 40 percent, is iinimown. 97 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. To have received responses to the questionnaires from more than half of the protege firms, is believed to be due to this researcher’s position as the manager of the DOE’s Mentor-Protege Program. During the early years of the survey period, this researcher consulted with the predecessor manager of the DOE program. Subsequently, the researcher became the manager of the agency’s program. A deliberate effort was made to ensure that each survey package contained information about the researcher’s position as manager of the DOE program. Most small business owners seek opportunities to become proteges. Therefore, it was reasonable to assume that the owners of the protege and control group firms had similar desires. (Firms participating in one agency’s mentor-protege program often become proteges in other agencies’ programs.) Of course, firms that expressed an interest in becoming a protege with a DOE prime contractor were counseled on how to seek protege status. The Control Group Questionnaire In regard to the survey of control group members (Appendix C), the questionnaire closely replicated the protege firm questionnaire. The primary purpose of the control group questionnaire was to ascertain the extent to which the control group members grew and survived during an identical period, and to compare their statistics to the protege firms. Nine (9) of the original list of control group members (224) also appeared on the protege firms list. The firms were removed from both lists in order to compare mentored versus non-mentored firms. (See Table 3.) 98 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ObtainiBg responses to the controi group survey instrument was as difficult as obtaining the control group sample. There were numerous unopened, returned questionnaires and non-responses. The control group had a 38% response rate, which is not a good rate of return. Had the survey taken place during the program participation period or closer to the dates of the program participation period, the response rate might have been higher. However, given the high incidence of failure in small firms, this response rate is not at all surprising. As in the protege survey, in order to increase the response rate, the same procedures were replicated from the protege firms’ survey. Several mailings and telephone calls were made to members of the control group, and a search was performed using the SBA PRO-Net database. Additional data was sought through county offices and records. Stage 3—Interviews The (DOD-PMPP) Protege Firms Data collection was supplemented with telephone and in-person interviews. Detailed interviews with owners and managers generally were conducted primarily over a period of six months to nearly 2 years. Most of the companies interviewed had contacted the researcher from a business card enclosed in the survey. Many were interested in becoming a protege with a DOE prime contractor. In addition to seeking clarification of the responses to the questionnaire, the interview had a 99 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. secoJidar3 - " purpose to elicit feelings and thoughts that were not expressed in the written response. Responses to interviews were verified by forwarding the respondent a copy of their responses. Approximately 6 percent (13) of the surviving protege firms and control group members were Interviewed, either by telephone or in-person interviews. A personal friend was the assistant who set up the telephone and in-person interviews. Most of the telephone interviews were approximately 10-15 minutes and in-person interviews were longer. Many in-person interviews were followed by a discussion of the DOE mentoring program. All but one of the in-person interviews took place in the researcher’s office. A copy of the interview questions can be found in Appendix D. The Control Group Data collection for the control group also was supplemented by interviews. The interviews with owners and managers generally were conducted over a two- month period. As stated above, approximately 6 percent of the surviving protege firms and control group members were interviewed. The completed interviews also were validated by forwarding the respondent a copy of their responses to ascertain con'ectness. A significant percentage of controi group survey questionnaires also were returned unanswered. Similar attempts were made to locate control group members. The control group survivors totaled 78, or 38 percent, of the sample. As with the 100 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. protege firms’ responses, the control groap response to the survey instrument were coded and recorded on a Microsoft Excel spreadsheet. The survey instrument (questionnaire) contained questions related to the characteristics and experiences of the firms in the two groups. (See Appendices B and C for Protege and Control Group Surveys.) A firm’s survival equated to the researcher’s ability to contact the firm by mail or phone, and thus verifying that it was still in business. Responses to the survey questions provided additional information about the protege firms and control group which helps the reader to draw some conclusions about the similarities and differences in the groups. Interviews were conducted with two former DOD-PMPP managers who had oversight of the program through the year 2001. During the period covered by this study, the two program managers were the ranking, knowledgeable officials on the DOD-PMPP. A Case Study An information technology protege firm will be presented in Chapter 4, as an example of a successful company that participated in the program and continued to grow. This firm is a small disadvantaged and women-owned business that is representative of many of the survivors. This firm appears to exemplify the intended results of the mentoring program. 101 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. CHAPTER IV FINDINGS AND ANALYSES This chapter outlines, analyzes, and interprets the findings from the statistical analyses used to test the hypotheses. This chapter will begin with a summary of the characteristics of the proteges and the controi group members, the design, and the findings from the study. The remainder of the chapter will address the details of the statistical analyses. Chapter 5 summarizes the study and draws conclusions about the study, as they pertain to “lessons learned,” benefits of program participation, and implications for future research. The general presumption is that the DOD-PMPP is a vehicle through which a small business can survive and gxow. This research tests that presumption and allows the reader to observe other phenomenon about the protege firms and comparison group. Summary of the Stady’s Design and Findings In order to examine the data obtained from the survey responses, several comparisons and statistical analyses are presented. A snapshot of the results of the statistical analyses performed in this study is found in Table 4. 1 0 2 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Table 4 Outline of Statistical Analysis Used in the Study (Federal Mentor-Protege Programs: a Pilot Study on Protege Survival and Growth) Hypothesis Data Manipulations of Demographic Characteristics Statistical Analyses Performed HI; Proteges graduating from the DO D -PM PP are m ore likely to survive than similar firms not m entored in a m entoring program 1. Calculated the num ber and percentage o f surviving respondents and the number o f non-survivors in both protege firms and control group; 2. Compared the num ber and percentage (above) o f the surviving respondents in both groups in frequency tables. The Chi Square test deteraiined that there is a statistically significant relationship between survival for the protege firm s and survival for the control group. H2: Proteges graduating from the DOD-PM P are more likely to experience growth than sim ilar firms not m entored in a mentoring program. 1. Calculated the number and percentage o f respondents reporting growth and non-growth in both groups; 2. Compared the num ber and percentage (above) o f growth firms in both groups in frequency tables. The Chi Square test determ ined that there is a statistically significant relationship between growth and the protege firms. The Logistic Regression model tested whether growth was related to participation in the mentoring program as well as three dummy variables: (1) AGE: new or old firms; (2) TYPE: technical or consulting firms; and (3) a variable representing te interaction o f AGE and TYPE. The test determ ined that there is an interaction between AGE and TYPE. 103 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Table 4 (continued) Hypothesis D ata M anipiilations o f Demographic Characteristics Statistical Analyses Performed H3; There is a reiatioaship between the type of assistance received by the DOD-PMPP graduates and growth. 1. Recorded and calculated the num ber and types o f trainiog received to each respondent; 2. Identified the types o f training taken by growth respondents and displayed in a frequency table. The first Logistic Regression m odel was constructed to determ ine if there is a significant relationship to protege firm growth. The results revealed that there is not a significant relationship between th e type o f training received and protege growth. The second Logistic Regression model was constructed to test the relationship o f growth to three categories: CATEGORY 1: Creative and content knowledge; CATEGORY 2: Skills and behavior; and CATEGORY 3: Mentality capability. Further, the model tested the three categories o f training to the three dummy variables tested in H2. The test results revealed no relationship between the categories and no interaction effect between the dummy variables. The Chi Square test was used to analyze the significance o f two new configurations for training: (a) two or fewer types o f training; and (b) three or more types o f training. The results revealed a significant relationship in growth and firms that received three types o f trainmg.___________ 104 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. The following hypotheses are postulated in this study: HI: Proteges graduating from the DOD-PMPP are more likely to survive than similar firms not mentored in a mentoring program. H2: Proteges graduating from the DOD-PMPP are more likely to experience growth than similar firms not mentored in a mentoring program. H3: There is a relationship between the type o f assistance received by the DOD-PMPP graduates and growth. As evident, the dependent variables in the study are siirvival and growth. Hypothesis 1 and 2 (HI and H2) pertain to survival and gro-wth of the protege firms and control group members. Hypothesis 3 (H3) pertains to growth, as it relates to training received from the mentors. A frequency table was constructed to display the demographic characteristics of the protege firms and control group members, including survival, growth, and other variables, e.g., the age of company, age of the CEO, education, industry, and prior business experience. The independent variables in this study pertain to both the individual (small business owner) and the institution (small business). Both the individual and business variables have been cited in numerous studies as contributors to survival (or failure) and growth. The variables that pertain to the business are: (1) age of business; (2) type of business; (3) revenues; (4) employee base; (5) survival; (6) financial assistance; and (7) technical or managerial assistance. The age of the business was tested in this study for its statistical significance and found to 105 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. be significant and related to survival and growth of the protege firms and the comparison group. Variables that pertain to the characteristics of the small business owner are: (1) age of CEO; (2) gender; and (3) education of CEO. It is often difficult to separate the variables that pertain to the company and those that pertain to the owner, especially since many small business sole proprietorships are one in the same. Many studies have linked the owner’s characteristics, e.g., age, gender, and education, with business success or failure. For example, some studies have indicated that success is more likely when the owner is young versus an older business owner. However, no one has succeeded in producing a model that is consistent at predicting which personality traits are most linked with success. The capabilities of the company are the variables that are considered when evaluating a business’ potential to perform a contract or subcontract. Some of the owner’s personal attributes and skills contribute to the status and position of the company, and as indicated, are often impossible to separate from the business. This study uses different configurations of the variables to analyze the data. In addition to examining the eight types of businesses represented by the protege firms and control group members, the study also separates the firms by technical and consulting business types and analyzes whether there is a relationship between growth in the two new categories of business types. Also, the study examines the ages of the 106 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. companies and analyzes the reiatioaship that the new firms (5 or few^er years old) have to oid firms (6 or more years old) and to survival and growth. Two types of probability statistics were used to analyze the survey results: the Chi Square test and logistic regression models. Each of the hypotheses was tested to determine the relationship the variables had to survival, growth and training. First, the Chi Square test was used to test HI and H2 to determine whether there is a statistically significant difference in the survival of the protege firms and control group members. Also, it was used to determine whether there was a significant difference in the likelihood of growth among the two groups. Later in the study, the CM Square test was used to determine whether a significant relationship exists between growth and protege firms that received two (2) or fewer types of training or those that received three (3) or more types of training. The Chi Square test confirmed HI and H2 as it showed a statistically significant relationship between participation in the mentoring program and survival (HI); and to growth (HI). It also showed a significant difference in protege firms that received three or more types of training (H3). A logistic regression model was constructed for H2 to test the odds that growth experienced by each group was related to three dum m y variables involving the (1) AGE of the firm; (2) TYPE of firm; and (3) a variable representing the interaction of the AGE and TYPE of firm. The results showed an interaction effect between the AGE and TYPE variables. 107 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. In regard to H3, the first logistic regression model was constructed to test the relationsMp of groMh protege firms to the types of training received from tlie mentor. The model determined that there was not a statistically significant relationship between the types of training received by the protege firms and growth. A second logistic regression model tested three of the four Hood and Young categories of requisite knowledge and training to determined whether these categories were significant to the growth of the protege firm. CATEGORY 1 represented “Creative and Content Knowledge;” CATEGORY 2 represented “Skills and Behavior;” and CATEGORY 3 represented the “Mentality” capability. The model also tested the three dummy variables outlined above-AGE, TYPE, and AGE/TYPE (or AGE* TYPE), to determine if a relationship existed between the variables and the three categories above. There was not statistically significant relationship or interaction effect among the variables as they relate to training. Confirmation of hypotheses HI and H2 would indicate that the DOD-PMPP is a successful mentoring model. Confirmation of H3 would reflect a finding that training received by the protege firms contributed to their growth. Findings This section will provide details of the findings which w^ere summarized in the beginning of this chapter. 108 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. H I—Survival o f the Protege Firms and Control Group Members First, this portion of the research wili address the data collected on the t\¥0 groups in regard to survival. Survival is the dependent variable in H I. As stated in Chapter 3, survival constitutes the absence of all manner of dissolution, inciiiding mergers, sales, and bankruptcies. It is presumed that firms involved in mergers and sales, even for positive purposes, would be a matter of public record, e.g., recorded in the county records, in PRO-Net, or some other public databases. No mergers or sales were found. Four topics are covered in this section: (1) demographic characteristics of protege firms; (2) demographic characteristics of the control group; (3) comparison of the survival rate between the two groups; and (4) the Chi Square test on survival. Demographic Characteristics of the Protege Firms A total of 152 protege firms were determined to have survived, as presented in Table 5. This equates to 62 percent of the sample size of 247 firms. Survivors were contacted by mail and/or phone. If no evidence was found of the firm’s existence, the firm was declared a non-survivor. Ninety-five (95) firms, or 38 percent of the protege firms, were declared non-survivors. The protege firms tended to be clustered in certain industries. The description of the industries (below) from the SIC code manual, published by the Office of Management and Budget, and replaced by a new system, the “North American Industrial Classification System” codes. 109 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Table 5 Demographic Characteristics of Protege Firms (Sample Size—247) Responses to Survey Questions # % Survivors 152 62% Non-Survivors 95* 38% Growth firms 122 49% Non-Growth 125** 51% Prior Business Experience 26 10% No Prior Business Experience 126 51% Prior Technical Experience 16 6% No Prior Technical Experience 136 55% Prior Financial Assistance 32 12% No Prior Financial Assistance 120 48% Would you change the program? Yes-92 37% No-60 24% Mentor Agency Navy-67 27% Armv-51 20% AF-22 8% DIS-9 3% DLA-3 1% Business type J 5 -li 4% 17-26 10% 33-14 5% 39-15 6% 73-33 13% 87-35 14% 89-17 6% Age of the CEO 63 (41-52 years) 25% Education (Undergraduate degree) 101 40% Age of Company (at start of program) 2-18 vears ^Non-respondents are non-survivors. **Includes 95 non-respondents designated as non-survivors. Legend: Industries/Business types: 15-Building Construction-General Contractor 17-Constniction-Special Trade 33-Primary Metal industries 39-Radio and Apparatus Technician 73-Business sem ces 87-Engineering Services 89-Services not elsewhere classified 110 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. The acronym is NAICS. However, this study v/ill apply the codes that were in use during the program participation period. The SIC codes of the firms in the sample are listed below; 15-Building Construction-General Contractors and Operative Builders, commercial and residential 17-Constniction-Speciai Trade Contractors-Plumbing, Heating and Air Conditioning; carpentry; masonry; electrical; roofing; and concrete glass, and excavation ^ 33-Primary Metal Industries-Primary products of aluminum; primary smelting and refining cape; Iron and Steel Foundries; Steel Pipes and Tubes 36-Electronic and Other Electrical Equipment and Components, except computer equipment-Semiconductors; Electrical Industrial Apparatus; Telephone and telegraph « 39-Radio and Apparatus Technician; Broadcasting and Communications 73-Businesses Services-Advertising; Photocopy; commercial graphics and photography; building cleaning and maintenance; computer programming services; prepackaged software; computer integrated system design; computer maintenance and repair; detective guard and armor car services; computer programming, data processing and other business ii; Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. services; computer facilities management services; infomation retrieval services; security systems; and misceilaneous business seraces * 87-Engiiieering, accounting, research management and related services; engineering arcMtectui-ai and surveying services; accounting, auditing and bookkeeping; commercial physical and biological research and testing laboratories; and business consulting services and public relations ® 89-Services not elsewhere classified; chemists; physicists; and nuclear consultants For purposes of analyses, the study also separated these business types into two categories of companies: (1) technical firms and (2) consulting firms. (See Table 6.) Technical firms, which total 102 protege firms and 45 control group members, are those firms that have expertise in areas, e.g., engineering, electronics, technicians, special trades and metal industries. Consulting firms, which total 50 protege firms and 33 control group members, are firms engaged in business services and services not elsewhere classified. 112 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Table 6 Technical and Consulting Protege and Control Group Firms Type of Firm SIC Codes Number of Protege Firms Number of Control Group Firms 1. Technical Firms 15 11 24 17 26 7 33 14 0 36 0 2 39 15 0 87 36 12 Total Technical Firms 102 45 2. Consulting Firms 73 33 23 89 17 10 Total Consulting Firms 50 33 1 Legend: Industries/Business types: 15-Building Constraction-General Contractor 17-Construction-Special Trade 33-Primary Metal Industries 36-Other Electronic Components 39-Radio Apparatus Technician 73-Business Services 87-Engineering Services 89-Services Not Elsewhere Classified Generally, it takes several years before it can be said that a firm will experience longevity and perhaps some measure of success. In fact, five (5) years is often the benchmark for predicting a firm’s longevity. Since it is presumed that 113 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. “new” firms (within 5 years of startup) are less successful than “old” firms (6 or more years old), this study divides the protege firms and control group into “new” and “old” firms and analyzes the relationship, if any, that a company's age may have had on its survival and growth. Table 7 illustrates the number of “new” and “old” firms in both groups. Table 7 New and Old Protege and Control Group Firms New/Old Firm Age of Firm Number of Protege Firms ........................... Number of Contr« Group Firms (207) New Firms 1-5 years 24 41 Old Firms 6 or more years 128 37 Total Firms 152 78 Non-Survivors* 95 129 *Data on fiim “age” unavailable for non-survivors. Demographic Characteristics of the Control Group The response rate of the control group members was considerably less than the response rate for the protege firms. Table 8 illustrates that seventy-eight (78) control group members responded (and therefore survived), which is 38 percent of the 207 sample size. That leaves 129 (or 62 percent) non-responses, which are non- survivors. 114 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Table 8 Demographic Characteristics of the Control Group (Sample Size-207 Responses to Survey Questions # % Survivors 78 38% Non-Survivors 129* 62% Growth firms 57 28% Non-Growth 150** 72% Prior Business Experience 4 1% No Prior Business Experience 74 35% Prior Technical Experience 2 0% No Prior Technical Experience 76 35% Prior Financial Assistance 9 4% No Prior Financial Assistance 69 33% Have other DOD contracts 74 35% Control Group Agency Navy-31 14% Army-27 13% AF-20 9% Business type 15-24 11% 17-7 3% I 33-0 0% 36-2 0% 39-0 0% 73-23 11% 87-12 5% 89-iO 4% Age of the CEO 41 (41-52 years) 19% Education (High School) 49 23% Age of Company (at start of program) 2-14 years | *Non-respondents are non-survivors. ’ **Includes 129 non-respondents designated as non-surrdvors. Legend: Industries/Business tjpes: 15-BuiMing Construction-General Contractor i7-Constraction-Special Trade 33-Primaiy Metal Industries 36-Dther Electronic Components 73-Business Services 87-Engineering Services 89-Services Not Elsewhere Classified 115 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Comparison of the Survival Rate between Both Groups There is a substantial difference in survival among the two groups. While the protege firms enjoyed a 62 percent survival rate, only 38 percent of the control group members survived. In drawing conclusions to explain tMs phenomenon, there may be several reasons: (1) the connection with a mentor may have helped the protege firms receive contracts from other large firms, and therefore, become successful; (2) some protege firms continued long-term relationships with their mentors which may have increased the protege’s ability to eani future income; or (3) sufficient data on the control group was not included in the agency’s database to the extent that data was maintained on the mentoring program. Typically, data on specific contractors, some of which is proprietary, is maintained with the contract file and not published in databases available to the public. However, the survival rate in both groups is problematic and particularly low in the control group. A comparison of other characteristics of the two groups will be addressed under the section covering “growth.” Table 9 displays the responses to a survey question on financial assistance. 16 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Table 9 Comparison of Leading Demographic Characteristics of the Protege Firms and the Control Group (Sample Size Protege Firms—^247; Control Group—^207) Protege Firms Control Group # % # % Survivors 152 62% 78 38% Non-Survivora 95* 38% 129* 62% Growth Firms 122 49% 57 28% Non-Growth Firms 125** 51% 150*** 72% M o r Business Experience 26 10% 4 1% No Prior Business Experience 126 51% 74 35% Prior Technical Assistance 16 6% 2 0% No Prior Technical Assistance 136 55% 73 35% Prior Financial Assistance 32 12% 9 4% No Prior Financial Assistance 120 48% 69 33% Mentor/Control Group Agency Navy-67 firms (27%) Navy-31 firms (14%) Age of Company (at start of program) 2-18 years 2-14 years Business type Engineering Services Business Services Age of the CEO 4 i-52 years of age 41-52 years of age Education Undergraduate degree High School *Non-respondents are non-survivors. ♦^Includes 95 non-respondents designated as non-survivors. '= * “*'Includes 129 non-respondents designated as non-survivors. The respondents were asked to indicate if they had received financial assistance prior to entering the mentoring program. As the research revealed, firms that receive 117 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. financial assistance often have an advao.tage over their counterparts not receiving financial assistance. Financial assistance can provide a means by which a business grows, i.e., it enables the firm to purchase new' equipment and inventory, hire staff, invest in new opportunities, pay its creditors, and generally expand the business. As noted in Table 10, only 32 protege firms and 9 control group members received fmancia! assistance prior to or during program participation. Table 1§ Financial Assistance Received by Growth and Non-Growth Firms Protege Firms Control Group Growth (122) Non-Growth (30-Survived) Growth (57) Non-Growth (21-Survived) Financial Assistance Received 24 10% 8 3% 9 5% 0 0% Received No Financial Assistance 98 40% 22 9% 48 23% 21 10% Non- Respondents 95 38% 129 62“ Total Firms 247 207 Table 10 further separates the financial assistance recipients into growth and non-growth firms. Of the 32 protege firms that received financial assistance, 24 were growth firms and 8 were non-growth firms. The nine (9) control group members that received financial assistance were growth firms. Since only 10 percent of the protege 118 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. firms and 5 percent of the control groap members that received prior financial assistance grew daring the period, one may presame that financial assistance had little impact on growth for the firms in this study. The Chi Square Test of Significance for Both Groups This approach was used to deteimkie statistical significance of survival among the two groups. The computer program, the Statistical Analyses System (SAS), by SAS Institute, Inc., was used for the analysis. The results of the CM Square test are recorded in Table 11. Table 11 The Chi Square Test of Significance on Survival of the Two Groups Protege Firms Control Group Total Survivors 152 (62%) 78 (38%) 230 Non- Survivors 95 (38%) 129 (62%) 224 Total 247 207 454 Chi-Square-25.6442 and the p-value is <0 .0001). Table 11 depicts the frequencies associated with the survivors and non-survivors in both groups. The p- value indicates that survival is significantly related to its participation in the mentoring program. Accordingly, the CM Square test confirms the first hypothesis (HI) which states: 119 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Proteges graduating from the DOD-PMPP are more likely to survive than similar firms not mentored in a mentoring program. TMs finding suggests that utilization of federal business mentoring programs, e.g., DOD-PMPP, can have a substantia! impact on small business development. Further discussion about the significance of this finding will be addressed in Chapter 5, in the sammaty of the research. H2— Growth o f the Protege Firms and Control Group Members The extent to which the protege firms grew over the control group members could be an important prediction model for small businesses seeking to rapidly grow their firms. So too would small business advocates and Congressional policy makers be interested in such a model. The second part of the analysis addresses the growth experience between the two groups. Growth is the dependent variable in H2. Three topics are covered under this section: (1) demographic characteristics of the protege firms; (2) the CM Square test for growth; and (3) a logistic regression model using three dummy variables to compare the business ages and types to growth as explained in the “Summary of the Study’s Design and Findings” at the beginning of this chapter. To restate the definition of growth in tMs study, based on the perceptions of the protege firms and control group members, a firm is considered to have grown during the program participation period if its employee base or revenues increased during the period. The program participation period was 1991-1997. 1 2 0 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Growth Rate and Demographic Characteristics of the Protege Firms A total of 122 protege firms grew during the period. This equates to 49 percent of the 247 protege firms. Growth statistics were obtained from the survey instrament that posed questions about the level of the firm’s employee base and revenues before and after the program participation period. The survey asked the firms to provide their revenues and employees by selecting a range of values. In order to increase reliability of the survey results, a follow-up phone interview was placed to most respondents. The interview attempted to obtain a more precise value for the employee and revenue base than the survey required. When the phone interview did not occur, the median value in the range selected by the firm was used. Fifty-one (51) percent of the protege firms did not grow. The results of survival in the protege firms are more favorable, as the 122 growth statistic for protege firms appears more substantial when it is considered against the number of respondents (152). A similar type of analysis was developed from the responses to the control group survey and recorded in Tables 8 and 9. The Clil Square Test This approach was employed to determine the statistical significance of growth, as it relates to the protege firm and to the control group (H2). Table 12 presents the Chi Square test results for the growth variable. The value of the CM Square statistic is 22.5267, and the p-value is <0.0001. 121 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Table 12 The Chi S q u a r e Test of Significance o n Growth Between the Two Groups Protege Firms Control Group Total Growth Firms 122 (49%) 57 (28%) 179 Non-Growth Firms 125 (51%) 150 (72%) 275 Total 247 207 454 Since the p-value is <0.0001, which is less than 0.05, the result is that participation, as a protege, in a mentoring program has a significant relationship to growth of the firm. Therefore, the CM Square test, confirms H2 wMch states: Proteges graduating from the DOD-PMPP experience greater growth than similar firms not mentored in a mentoring program. A finding that confirms the hypothesis would suggest that utilization of federal business mentoring programs can have a substantia! impact on small business development. A Logistic Regression Model This model was constructed to test whether growth was related to participation in the mentoring program as well as any of three new dummy variables: (1) AGE: whether the firm was a new or “old” firm. In this analysis, “new” firm is defined as 1 to 5 years old. “Old” firm is defined as 6 or more years old. (2) TYPE: whether the firm was a “technical” or “consulting” firm. In this analysis, a “technical” 122 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. firm operates in SIC codes 15, 17, 33, 36, 39 and 87. A “consulting” firm operates in SIC codes 73 and 89. (3) A third variable represents the interaction of AGE and TYPE (or AGE*TYPE). The new variables are displayed in Tables 6 and 7 were and the results of the logistic regression analysis are depicted in Table 13. Table 13 Analysis of Growth in Protege Firms and Control Group Relative to Business Types and Company Ages Parameter Estimate/ Coefficient Standard Error Chi-Square Pr> CM Sq. Intercept 1.7549 0.3858 20.6872 <0.0001 Treat. FMPP 0.0604 0.3693 0.0268 0.8700 AGE New -0.5221 0.5563 0.8807 0.3480 TYPE Cons -0.6733 0.4346 2.4000 0.1213 AGE* TYPE New Cons -0.3721 0.7143 0.2713 0.6024 The computer-generated logistic regression model for H2 determined the p- value for the intercept to be <0.0001. There is an interaction effect between AGE and TYPE. The equation is: Log (p /l-p )-a + bFMPP + CAGE + dTYPE + eAGETYPE Where AGE, TYPE, and AGETYPE are the new dummy variables tested with the variable on whether protege growth was related to participation in the mentoring program. 123 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Log (p/l-p) = 1.7549 + 0.0604FMPP + (-0.5221)AGE + (-0.6733)TYPE + (- 0.3721)AGE^TYPE H3— ^Training (Developmental Assistance) Received by the Protege Finns The key element of the mentoring experience is the training that the protege firm receives from the mentor. According to the responses, many of the firms received similar types of training. Table 14 lists the areas of training contained in the survey, as well as the numbers of respondents that received the training. Many of the protege firms are clustered into certain training cells while other types of training were not received by any firm. All training occurred in the coded areas of; 1, 2, 4, 5, 7,11, 15,16, 17, and 18. The coded training translates to: • Proposal writing/bidding (1) Improve product/service (2) • Finance/Budget management (4) • Marketing strategy (5) Office management (7) • Staffing (11) • Managerial Guidance (15) • Strategic planning (16) 124 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. CD ■ D O Q . C o CD Q . ■ D CD C /) ( / ) Table 14 O O ■ D c q ' rraining (Developmental Assistance) Received by Protege Firms from Their Mentors* (Sample Size Protege Firms—247; Control Group—207) 3 - 3 " ? CD T 3 O Q . C a o 3 T 3 O CD Q . T 3 CD (/) (/) Training 1 Training 2 Training 3 Training 4 Training 5 Training 6 Training 7 Training 8 Training 9 Number of Firms 103 24 0 12 7 0 33 0 0 Training Training Training Training Training Training Training Training Training 1 __________________ 10 11 12 13 14 15 16 17 ____i l J 1 Number of Firms 0 32 0 0 l a a a . .'; 0 4 78 98 2 3 1 *Areas of training and developmental assistance in Protege Survey-Appendix B. 1-Proposal Writing/Bidding 2-Improve Product/Service 3-Investment Portfolio Guidance 4-Finance/Budget Management 5-Mai-keting Strategy 6-New Product/Service Innovation 7“ Office Management 8-Inventory Management 9-Business Location 10-Business Legal Form 11-Staffing 12-Tax Management 13-Advertising Strategy 14-Company Organization Structure 15-Managerial Guidance 16-Planniiig 17-Marketing Other company Work (Subcontracting) 18-Oral Presentation Skills to Marketing other company work (Subcontracting) (17) Oral presentation skills (marketing to government agencies and companies (18). The highest frequencies of training occurred in “1 "-Proposal writing/bidding; “17"-Mai-keting other company work (subcontracting); and “16"-Strategic planning. The ten types of training received by the proteges comprise the knowledge and training inputs required for success or growth as noted in Figures 4, 5 and 6. For example, Figure 4 depicts the model of business mentoring that leads to growth. The Hood and Young study of requisite areas of knowledge and training, shown in Figure 5, lists the four categories of knowledge and training or inputs required for a successful business venture. They are “Creative or Content Knowledge,” “Skills and Behavior,” “Mentality capability,” and “Personality Traits.” When the types of training received by the proteges are placed within the Hood and Young training categories, we find that the proteges received the requisite types of training to be successful. The training in the areas of financial management, marketing strategy, marketing other company work for subcontracting, and staffing fall within the “Creative or Content Knowledge” quadrant. The training in the areas of proposal writing, office management, strategic planning, managerial guidance and oral presentations, fail within the “Skills and Behavior” quadrant. The third quadrant in which the proteges received training was in the “Mentality” quadrant. Two proteges were mentored in “product improvement,” or developing the “Mentality” capability of 126 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. the busiBcss. The fourth quadrant “Personalit}' Traits” was not included in the training received by the protege firms. However, it is noted that most studies suggest that certain personalit}' traits are required of the small business owner for success. This portion of the research is designed to statistically analyze the factors that may have contributed to the growth of protege firms. Specifically, the types of training received will be examined to determine if there is a relationship to grovrth. Thus, this portion of the research sets out to test the third hypothesis: There is a relationship between the type o f assistance received by the DOD- PMPP graduates and growth. The First Logistic Regression Model TMs model was constructed to examine the training received by protege firms to determine if there is a statistical relationship to protege firm growth. The 10 types of training received by the protege firms were entered into SAS and the results are reflected in Table 15. The range of coefficients and the p-values for the types of training are depicted below. The results revealed that there is not a significant relationship between the training type and protege growth. Accordingly, the results indicate that H3, wMch proposes that there is a relationship between the type of training received and protege firm growth, is unconfirmed. 127 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Table 15 Analysis of the Relationship of Protege Firm Growth to Training Received Parameter Estimate/ Coefficient Standard Error Chi- Square Pr> Chi Sq. Intercept 1.4283 0.2978 23.0021 <.0001 Training Type 1 0.00675 0.5304 0.0002 0.9899 Training Type 2 0.6511 0.9817 0.4399 0.5072 Training Type 4 0.1811 1.0110 0.0321 0.8578 Training Type 5 -0.3297 1.0610 0.0966 0.7560 Training Type 7 -0.8687 0.6279 1.9142 0.1665 Training Type 11 0.1811 1.0110 0.0321 0.8578 Training Type 15 0.2341 1.0210 0.3210 0.7440 Training Type 16 0.0757 0.5713 0.0176 0.8945 Training Type 17 -0.0784 0.4781 0.0269 0.8697 The Second Logistic Regression Model This model was constructed to test the relationship of growth to three of the four training categories (CATEGORY 1, 2, and 3) from the Hood and Young study. The categories are: (1) CATEGORY 1-Creative and Content Knowledge; (2) CATEGORY 2-Skil!s and Behavior; and (3) CATEGORY 3-Mentality area. Then test the relationship of the three categories of training received by the proteges to the three dummy variables used in the logistic regression analysis for H2: (1) AGE; (2) TYPE; and (3) a variable representing the interaction of AGE and TYPE. The 128 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. computer-generated analysis of the categories and dummy variables are displayed in Table 16. Table 16 Analysis of Protege Firm Growth Relative to Three Hood and Young Requisite Categories of Training Parameter Estimate/ Coefficient Standard Error Chi-Square Pr> Chi Sq. Intercept 2.9244 0.7684 14.4835 0.0001 Category 1 -1.7143 0.7720 4.9314 0.0264 Category 2 -0.9374 0.7709 1.4787 0.2240 I AGE New -0.1057 0.5909 0.0320 0.8581 .......... TYPE Cons -0.9037 0.2928 9.5296 0.0020 1 AGE*TYPE ..... New Cons -0.3359 0.6966 0.2326 0.6296 1 The regression model is; - Log (p/1 -p) = a + bCATEGORYl + cCATEG0RY2 + dCATEGORYS - eAGE + fFYPE + gAGETYPE where Category 1 is the “Creative or Content Knowledge” quadrant; Category 2 is the “Skills and Behavior” quadrant; and Category 3 is the “Mentality” quadrant. The “Personality Traits” quadrant was not a selected area of training. • Log (p/l-p) = 2.9244+ (-!.' r-0.9374)CATEGQRY2+ (-0.1057)AGE + (-0.9037)TYPE + (0.3359)AGE!IYPE 129 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. The computer-generated analysis drops the third (Category 3) category in analyzing the vaiiables. There is not an interaction effect between the AGE and TYPE variables as they relate to training. The Chi Square Test This test was used to analyze the significance of two new configurations for training. Training received by the protege firms was divided into two categories: (a) Two (2) or fewer types of training; and (b) Three (three) or more types of training. The CM Square test is depicted in Table 17. Table 17 The Chi Square Test of Significance of Protege Firm Growth Relative to the Amount of Training Received Growth Uo to Two Types of Training Three or more Types of Training Total Yes 75 (99%) 47 (62%) 122 No 1 (1%) 29 (38%) 30 Total 76 76 152 The Chi Square test determined that 99 percent of the growth firms received two or fewer tjqjes of training while 62 percent of the growth firms received three or more types of training. Both levels of training were more favorable to growth firms. There is a greater difference in the growth and non-growth firms that received up to 130 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. types of traiiiing than among the growth and non-growth firms tliat received three or more types of training. The CM Square test resulted in a probability statistic of <0.0001, indicating that there is a significant difference in growth in the protege firms that received three or mors types of training. These results suggest that protege firms participating in a mentoring program may be more successful if they received training in multiple technical and business areas. A Case Study in Business Mentoring Thirteen (13) protege firms and control group members were interviewed. This study will highlight a woman-owned, small disadvantaged business that participated and potentially benefitted from the mentoring program. The firm, which prefers to remain anonymous, will be referred to as “ROL.” ROL is a firm that stands out as representative of the positive impact that business mentoring has on the protege firm. Since then, the firm has continued to grow and compete with new firms. It attributes some of its success to participation in the mentoring program. The Firm Over Time and Its Industry ROL officially started in 1987 and is basically an information technology frnn, operating in SIC code 73. It also has capabilities in other SIC codes. There are four features of this business that made it suitable for the purposes of this study. First, it has experienced unstable development with marked swings from rapid growth to 131 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. equally rapid decline, which were interspersed with some phases of stability'. Second, it has always been owned by the same person and has never changed size through acquiring another business or by divesting any operating imit. Third, it has always operated in the same industry. Finally, it continues to grow and believes that that growth is supported by its participation in the mentoring program. Ms. Rollins, the President and CEO of ROL started the same business in 1984 but was unsuccessful in keeping it operating. After a 3-year hiatus, she decided to try it again. This time she was successful because she brought more morning and business information to the business. Over the years, there has been considerable variation in employment size, and at times had to lay off staff. The staff is currently at 110 persons, about a third of them are part-time and temporary staff. This includes consultants working for the company. The size profile of this firm is similar to that experienced by many small firms. There were periods of rapid growth and abrupt decline interspersed with plateaus of stability. ROL recently received a design integration contract from a federal agency. Of course, this required adding staff to meet the needs of the contract. Considering that ROL is located in the Washington, DC, metropolitan area and that the area is saturated with information technology firms, it is doing well. The company has struggled with its financial bottom line since its beginnings and accepts that that is how it is for a small business. In the company's financial 132 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. history, it has pursued financial assistance at least twdce but subsequently decided against it. One key feature of the company’s financial history is that its revenues from contracts has fluctuated in relation to the expense of maintaining staff. Ms. Rollins believes that the company been fairly stable financially for the last few years primarily because of the contacts it engaged as a result of its mentoring experience. It has shown a profit for the last several years. When ROL was selected for the program, it believed that it would not have many future worries regarding obtaining contracts. However, ROL received a contract with its mentor during program participation. Its mentor provided assistance in the areas of (1) bid and proposal preparation, (2) finance and budget management, and (3) general managerial guidance. While the experience was rewarding inasmuch as Ms. Rollins believes that it taught her how to operate her company to maintain a positive cash flow, it was more valuable in the contacts it encouraged. During the program, due to ROL’s associated with its mentor, ROL obtained additional work from other large prime contractors that continues to this day. In fact, in one year, the work received from the mentor and other large prime contractors has almost doubled the amount of work received over a IVz-jQW period. Prior to participation in the program, ROL was not profitable and there were many periods of instability. A concern that ROL has is in the possible decline of the industry as the “DOT Corns” had a severe decline a few years ago. That concern is made worse by the 133 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. nuniber of information technology firms in the local area. ROL is glad that it entered the industry years ago instead of the recent years. Although the mentoring experience was a rewarding one, the changes that Ms. Rollins would make in the program are: • Increase the amount of time protege firms stay in the program in order to give them an opportunity to consume more infomation; • Ensure that the mentors keep a regular schedule with protege firms to provide developmental assistance; and • Ensure that assistance includes improvement in the technologies. Overall, the protege firms’ thoughts about their mentoring experiences were consistent throughout the interviews. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. CHAPTEEV ANALYSIS AND CONCLUSIONS This chapter presents and synthesizes the results of the tests of the hypotheses. It will address the concepts and results of similar studies, “lessons learned,” benefits of the study, recommendations, and implications for future research. The purpose of this research is to identify and test a DOD small business development mentoring model that purports to predict small business success. In this study, it was hypothesized that firms participating in the DOD-PMPP, initiated on their own volition, allows small businesses to operate in a somewhat controlled business environment that enables them to develop the knowledge, skills and behavior to achieve greater success than firms not participating in the program. Before discussing the contributions and implications of the study’s findings, its limitations must be acknowledged. Limitations of the Study When this study was proposed, potential limitations were identified. After reviewing the results of the survey and testing the hypotheses, some of the limitations proposed were retained, some were eliminated, and still others were added. First, there are limitations inherent in the design of the study. A survey design with its 135 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. concomitant reliance on self-report data, particularly when limited corroborating data is available, would potentially provide the opportunity for recall of events to be exaggerated. However, since the protege firms examined in this study primariiy are the survivors, one would presume that these firms achieved some measure of success in order to survive four years past graduation. Therefore, any exaggeration on their part would be minimal. Since some of the material upon which the study is drawn is more than 5 years old, it was sometimes very difficult to triangulate the data obtained from respondents wdth other sources. Due to the lapse of time from program graduation (4 years) to the year 2001, stakeholders may have forgotten some information. Again, as pertains to exaggeration, even if specific data on performance is not recalled, the protege firms in this study have surpassed their non-surviving counterparts in both groups. The unit of measurement for success in this study, i.e., employment and revenues, instead of profit, may be considered a limitation. As mentioned in Chapters 3 and 4, obtaining data on the profits of privately-held firms, indicative of most small companies, is difficult. An increase in revenues can mean an increase in profits as long as costs are managed. When a business hires staff, it is generally to increase productivity and fill orders for which previous staff was insufficient. Either an increase in the employee base or revenues can be a positive sign of increased orders that will eventually lead to profits. Certainly, there is no doubt that a firm is experiencing some degree of success if it is attracting new customers and orders. 136 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Therefore, considering both the increase in the employment base and revenaes as a success measure is a reasonable substitute for the profit variable. No adjustment was made for upward and downward cyclical business spirals as finns in both groups operate in virtually tlie same industries and states. Firms in the control group would have been exposed to the same business spirals depending on their geographic location. There are no known studies that reviewed the quality of assistance received from the DOD mentors. However, the fact that several mentors had more than one protege indicates that many protege firms conceivably were exposed to similar mentoring techniques. In regard to managerial and technical assistance, managerial skills have been identified in numerous studies as key success factors in small business development. Further, this study presumes that firms selected for the mentoring and graduated from the program, possess, at least, a moderate level of competence in their key disciplines. In addition, the survey instruments asked the firms if they received managerial or technical assistance outside of the mentoring program. According to survey responses, few firms received any type of formal management or technical assistance. Finally, one might consider not faiowirig the motivation of the protege firms and control group members as a limitation. The motivation level of the firms are not considered a potential limitation in this study. The researcher realizes that motivation and other personality traits of the key officials(s) of the firm are crucial to the success 137 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. of aiiy business veature, and presumes a minimum level of motivation is required to seek a mentor-protege relationship. Nonetheless, this researcher is comfortable that the potential limitation does not inhibit the usefulness of the research. The next portion of this chapter examines whether the study accomplished the objectives it sought. A set of research questions were developed at the beginning of the study. Now, the questions can be answered. The questions and answers are grouped by hypothesis and subject. Responses to the R^earch Questions H I—Survival/Non-Survival 1. Did DOD-PMPP graduates survive through the year 2001? Yes, one hundred fifty-two (152) protege firms, or 62 percent of a sample of 247 firms, survived. 2. Did members of the control group survive through the year 2001 ? Yes, seventy-eight (78) control group members, or 38 percent of a sample of 207 firms, survived. 3. Are there any significant differences in the survival rate of the DOD graduates and members of the control group? Yes, there are significant differences. The control group’s survival rate was slightly more than one-half of the protege firm survival rate. The results and conclusions to the statistical analyses is addressed below. 138 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. H2—Growth/'Non-Gro'wth 4. Did DOD-PMPP graduates experience growth during program participatioii? Yes, one himdred-twenty-two (122) protege firms, or 49 percent of the sample of 247 firms, experience growth during program participation period. 5. Did members of the control group experience growth during the same period (1991 through 1997)? Yes, fifty-seven (57) control group members, or 28 percent of the sample of 207 firms, experience growth during the participation period. 6. Are there any significant differences between the growth experience of DOD-PMPP graduates and members of the control group? Yes, there are significant differences. The percentage of protege firms that grew is nearly twice that of control group members. HS-Training and Growth 7. Is there a relationship between growth and the training received? No, there is not a significant relationship between growth and the types of training received. Other configurations of the training variables were analyzed. The results from a logistic regression model showed that there is not a significant relationship between growth, training received in three of the four Hood and Young categories, the age of the firm (new or old firms), and 139 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. the type of firm (technical and consulting firms). “New” firms are defined as 5 or less years in business while “Old” firms are defined as having 6 or more years in business. “Technical” firms operate in SIC codes 15, 17, 33, 36, 39 and 87; “Consulting” firms operate in SIC codes 73 and §9. These research questions were formulated into three hypotheses for which the findings are summarized below. Findings for H I—Survival In this section, the researcher tries to stand back somewhat from the details of the study to observe the findings from a broad perspective. This requires an in-depth analysis of how the results of this study fit into the large scheme of small business development. It also involved some immersion into the details of the experiences of the protege firms. HI states: Protege graduating from the DOD-PMPP are more likely to survive than similar firms not mentored in a mentoring program. Although small business plays a vital role in the economy, relatively little research is reported on business mentoring, as it is still somewhat of an uncommon phenomenon in the business world. Literature regarding federal business mentoring is virtually non-existent. On the theoretical level, it is hoped that this pilot study will provide some support for the development of a conceptual framework for studying business mentoring programs and other small business development programs. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Two of the propositions set forth in the hypotheses were supported by the findings, as the findings were consistent with the preponderance of literature on the survival and growth of small businesses. The dependent variables in this study are survival and growth. The task is to place the findings from this study into real world perspective. As shown in Table 5, 152 protege firms (or 62 percent) survived four years past program graduation. This statistic is slightly over one-half of the sample and on the surface would not appear to be a favorable finding. A 62 percent result means that little is known about nearly 40 percent of the non-surviving protege firms. The number of unknown non-survivors is important to the reliability of the study and presents recommendations for changes in the program to document non-survivors. In regard to this study, the protege firms survived at nearly twice the rate of the control group. This would suggest that participation in the DOD-PMPP has a significant advantage over firms not participating in a mentoring program. Comparison o f Results from Other Studies The percentage of small firms that survive past five years is generally lower than 50 percent. As an example, the SBA, State o f Small Business (1999-2000), records small business in all industries survived 49.6 percent after four years in business and 39.5 percent after six years in business. In another example of small business survival outside the mentoring program, the SBA study on the analysis of 141 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. business dissolutions by demographic categories'"^ examined the survival prospects of businesses started in 1992 and found that 47 percent survived until at least 1996. Of the socioeconoHiic categories tested, the survival rate for African, Asian and Hispanic American-owned businesses (which are the groups included in the SDB proteges of this study) ranged from 34.7 to 50.4 percent. '%Tien measuring the finding of 62 percent survival rate in this study for the protege firms (primarily SDBs) against the 50.4 percent (highest) survival rate expressed in SBA and other studies, the finding for this mentoring study is a favorable one. In another study by the SBA (Skolnik and Chmelynski, 1993), patterns in business survival rates and factors influencing those business survival rates were addressed. Two findings emerged from the study: (1) the older a business is at a given point in time, the more likely it is to survive over some finite time interval; and (2) the larger a business is at a given point in time, the more likely it is to survive over some finite time interval. There was no discemable relationship between geographic location and business survival rates, and no relationship between industry and survival rates. All of the protege firms in this study were in business at least 2 years before becoming a protege. Their years in business ranged from 2-18, with at least 2-3 years added during participation in the mentoring program, and an additional 4 years of ^ ‘ ‘ Richard J. Boden, Jr., Establishment Employment Change and Survival, 1992-1996: A nalyses Based on a New, Longitudinal Data Base with Special Focus on Information Technology’ Industries (Washington, DC: United States Small Business Administration, September 2000.) 142 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. survival to the year 2001. The median age of the protege finn was 6 years in business. Many of these firms already had reached the age (5 years) in which small businesses fail according to prior Dun and Bradstreet reports. Given these statistics^ the DOD-PMPP participants are ahead of the “pack.” As indicated in an earlier chapter, several years ago, the SBA found that its 8(a) Program graduates were surviving only 4-5 years past graduation. If the 8(a) program is one yardstick against which SDB performance can be measured, the DOD-PMPP compares favorably as a significant number of protege firms were still in business four years past graduation. In still another study, Robert N. Lussier studied small firms in research entitled, “A Nonfinancial Business Success Versus Failure Prediction Model for Young Firms” (1995). Lussier researched 20 journal articles to identify the most common variables cited as contributing to business success versus failure. The Lussier article contains some of the same variables addressed in this study, e.g., financial assistance (capital); business/industry types and experience (industry experience); technical and managerial assistance (management experience); education of the CEO (education); and age of the CEO (age). The Lussier model also emphasizes “partnering” as a greater chance for success. The actual variables Lussier tested are: (1) Capita!—-businesses that start undercapitalized have a greater chance of failure than those that start with adequate capital; 143 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. (2) Record keeping and financial control—^businesses that do not keep updated and accurate records and do not use adequate financial controls have a greater chance of failure than firms that do; (3) Industry experience—^businesses in certain industries that are managed by people with prior industry experience have a greater chance of failure than firms managed by people with prior industry experience; (4) Management experience—businesses managed by people without prior management experience have a greater chance of failure than firms that are managed by people with prior management experience; (5) Planning—businesses that do not develop specific business plans have a greater chance of failure than firms that do; (6) Professional advisors—^businesses that do not use professional advisors have a greater chance of failure than firms using professional advisors; (7) Education—people without any college education who start a business have a greater chance of failure than people with one or more years of college education; (8) Staffing—businesses that cannot attract and retain quality employees have a greater chance of failure than firms that can; (9) Product/service timing—businesses that select products/services that are too new or too old have a greater chance of failure than firms that select products/services that are in the growth stage; 144 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. (10) Economic timing—^businesses that start during a recession have a greater chance of failure than firms that start during expansion periods; (11) Age-—^younger people who start a business have a greater chance of failure than older people starting a business; (12) Partners—a business started by one person has a greater chance of failure than one started by more than one person; (13) Parents—business O Avners whose parents did not own a business have a greater chance of failure than owners whose parents did own a business. (14) Minority—minority firms have a greater chance of failure than other firms due to the lack of the presence of some of these variables; (15) Marketing—business owners without marketing skills have a greater chance of failure than owners with marketing skills. A comparison of the articles reflect that most authors suggested that these variables, i.e., undercapitalization, record keeping and finance, industry or business type, planning, professional advisors, and product/service timing, contribute to business failure. Of the 15 variables in the multivariate test, four were significant at the 0.05 level. The significant variables were planning, professional advisors, education and staffing. The category, “Parents owning a business” was not significant (p=.0550). The variables in this study on the DOD-PMPP closely resemble the Lussier variables and fall within the mainstream of theories on business survival, success, and 145 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. failure. For example, finance (or capitalization), business type (or industry), management and technical training (management experience), education of the CEO (education), and age of the CEO (age), were almost identical variables. Other variables in the Lussier study, “planning, staffing, product or service, and marketing” were included in the DOD-PMPP study as types of training received by the protege firms. The case study presented in Chapter 4 is an excellent example of business sundval. Identifying a successful small business is the first step to examining why protege firms, and other firms, succeed. Practitioners are encouraged to review and track the progress of successful firms in order to duplicate their ‘‘winning ways.” In this case, ROL, a woman-owned, small disadvantaged protege survivor, is a testament to the perseverance of the types of firms that participate in the mentoring program. ROL is a successful information technology and business consulting firm that has been in business for roughly 15 years. Ms Rollins, the President and CEO, is an ambitious person with a drive to succeed. ROL has gone through many upward and downward spirals in her business. She once sought a loan from the SBA and advice from the Service Core of Retired Executives (SCORE). Although she decided against the loan, she still sought advice from other businesses when she believed she would not stay afloat. 146 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Just at the point when the mentor for the Army accepted her as a protege, the business was in jeopardy of dissolution. She was thankful that the mentoring program helped to regenerate ROL. Results o f the H I Statistical Tests Hypothesis 1 (HI) posits that graduating protege firms are more likely to survive than similar firms not mentored in a mentoring program. Therefore, the 62 percent survival rate of the protege firms must be compared to the 38 percent survival rate of the control group members. The CM Square test was constructed to determine if a statistically significant relationship exists between survival in the two groups. The test showed a significant relationsMp between the protege firm and survival. For purposes of tMs study which tests the survivability of protege firms against similar counterparts, the Chi Square test results favor small business participation in a mentoring program. The findings of 62 percent survival for the protege firms are advantageous when compared to the results of the survival rate (nearly twice) of the control group. However, when the statistical results are compared to the broader view of survival of small businesses, the results appear to be congruent with previous studies that indicate survival of a small business for any significant period is tenuous at best. 147 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Findings for H2—Growth Growth is the second dependent variable in this study. To start a business, prospective business owners must overcome startup costs and various barriers associated with starting a business. To stay in business and to grow^ requires even more knowledge and skills to overcome the uncertainties of business cycles. Growth is important to all businesses but not easily attained. Is growth possible in a somewhat structured context, e.g., a mentoring program? The researcher believes that growth is not only possible, but probable, in a federal mentoring program. Thus, Hypothesis 2 (H2) states: Proteges graduating from the DOD-PMPP experience greater growth than similar firms not mentored in a mentoring program. Analysis of growth and various demographic characteristics of the protege firms and control group members provide some indication of the growth of the protege firms in relation to the comparison group. As shown in Table 7, 122 firms, or 49 percent of the sample of 247 protege firms, grew from program entry to the study’s end to the program (by 1997). This growth is slightly less than one-half of the sample, and on the surface, would appear to be a favorable finding. Since very little is known about the non-surviving firms in both groups, growth (and other comparisons in the study) measures only survivors. Forty-nine (49) percent growth reported by surviving protege firms means that 51 percent of the remaining proteges, 30 survivors and 95 non-survivors, did not grow. 148 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. (In this study, non-survivors are counted with non-grov.1;h firms.) Further, since the research did not uncover any sales or mergers of firms in either group, it can be presumed that 51 percent of the 247 sample of protege firms failed to grow. Therefore, a question for future research is: “Why didn’t the other 51 percent of protege firms grow?” Since protege firms in a mentoring program are expected to grow at a greater rate than the rest of the small business universe, the questions surrounding non-growth protege firms and non-survivors in this study provide prime areas for follow-on research. Comparison o f Growth Statistics from Other SDBs When the protege firm’s experience is compared to the growth of other small businesses, and SDBs in particular, the data (“The State of Small Business, 1999- 2000") shows that small business earnings in federal contracts increased 7.9 percent from 1997 to 1998, to a total of $71.3 billion. Of this total, $11.9 billion went to SDBs in 1998, an increase over the 1997 SDB achievement of $10.4 billion. The number of SDBs starting businesses continued to increase from 1992 through 1997 from 26 to 30 percent. The average percent of SDBs experiencing growth over the same period increased from 42.3 to 42.5 percent.^^ A small subset of SDBs, 8(a) firms, received $6.3 billion in revenues in 1997, an increase over 1996 performance of $6.2 billion. The percentage of protege firms whose revenues increased during the mentoring experience was 49 percent. A similar pattern of growth appears with Tbid. 149 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. SDBs and 8(a) firms expanding their share of federal contracts (ranging from 42.5 and 46.8). Results o f the H2 Statistical Tests The Chi Square test of significance (Table 12 in Chapter 4) was constructed in order to determine if there were significant differences in growth between the two groups. The Chi Square test confirmed H2, which posited that there is statistical significance in growth between the protege firms and the control group. The p-value equals <0.0001. This means that in terms of growth, becoming a participant in a mentoring program, has a significant advantage over a non-mentored firm. A logistic regression model also used for H2 to test the relationship of growth to protege firms and three dummy variables: (1) AGE: whether growth was related to participation in the mentoring program as well as the age of the firm. Age, in this instance, is defined as “New” firms that have been in business 1 to 5 years, and “Old” firms that have been in business 6 or more years. (2) TYPE: whether growth was related to participation in the mentoring program and the type of firm. In this analysis, “TYPE” refers to “Technical” firms that operate in SIC codes 15, 17, 33, 36, 39, and 87, and “Consulting” firms that operate in SIC codes 73 and 89. The third dummy variable represents the interaction of AGE and TYPE. The model tested showed an interaction effect between AGE and TYPE. Although H2 was confirmed, i.e., that firms in a mentoring program experience greater growth than firms not mentored in a mentoring program, the 150 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. number and percentage of protege firms and control group members that did not grow should not be ignored. The task for small business advocates is to identify the reasons other firms failed to survive and grow, and to work toward resolving the deficiencies of small businesses and erasing barriers they might face. Findings for H3—Training The informational and training needs of small businesses regarding the operation of a business are critical to their success. Accordingly, small firms seek information, and training, from formal and informal sources to meet their training needs. The types of information that businesses need to succeed can be imparted with training through a mentoring relationship. Any study of a mentoring program and how it affects growth must consider the training and assistance received from the mentor. Therefore, H3 posits: There is a relationship between the type o f assistance received by the DOD- PMPP graduates and growth. Responses to the protege survey instrument showed that protege firms received training in 10 of 18 areas of training available for selection on the survey. Protege firms were not limited by the types of training that could be received from the mentor. In actuality, the DOD-PMPP allows the mentor to provide other types of assistance, e.g., financial, credit, etc., to the protege firm. However, this study’s focus is only on training only. The protege firms received assistance in the following areas: 151 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. -Proposal Writing/Bidding -Staffing -Improve Product/Service -Managerial Guidance -Finance/Budget Management -Planning -Marketing Strategy -Marketing Other Company Work -Office Management -Oral Presentation Skills Table 18 presents the number of growth protege firms that received each type of training. In relating these areas of training to Figure 6 in Chapter 3, “Prescriptive Mentoring for Successful Entrepreneurship,” most of the training received from the mentor fell in the “Creative and Content Knowledge” and “Skills and Behavior” quadrants of the Hood and Young model. Two were in the “Mentality” quadrant. The “Mentality” quadrant refers to creation, development, and expansion of the firm’s products and services. The “Personality Traits” quadrant was not covered in the survey on training in this study. It pertains to personality characteristics of the small business owner in areas, e.g., motivation and risk-taking. Since motivation and risk- taking are generally not traits that are taught, and there was no evidence that the mentors addressed personality traits with their proteges, this researcher can only account for perceptions of the protege personalities from the interviews. It is assumed that the owner’s motivation level would be high because of his/her aggressiveness in pursuit of business and improvement through a mentoring relationship. Further, it can also be presumed, with a high degree of confidence, that, there is some risk-taking in being self-employed. 152 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Table 18 Training Received by Growth Protege Firms Types of Training Growth Protege Firms Receiving Training 1 -Proposal Writing/Bidding 67 2— Improve Product/Service 21 4-Finance/Budget Management 5-Marketing Strategy 1 7-Office Management 22 11-Staffing 16 1 15-Managerial Guidance 4 1 16-Plaiming 64 1 17-Marketing Other Company Work (Subcontracting with Other Large Prime Contractors) 71 118-Oral Presentation Skills 71 Results q f M3 Statistical Test The first logistic regression model was used to determine if there is a statistically significant relationship betw^een the type(s) of training received by the protege firms and growth. The 10 types of training received by the protege firms were tested to make this determination. The result of the model was that none of the training had a statistically significant relationsMp to growth, as the p-values fell between p-0.1397 and p-0.9530. TMs means that the relationship between training 153 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. and growth did not reach the level of statistical significance and therefore, H3 was imconfinned. A second logistic regression model was constructed to test the relationsMp that the Hood and Young categories of training received by the proteges have on protege growth. These categories were: (!) CATEGORY 1-Creative and Content Knowledge; (2) CATEGORY 2-Skills and Behavior; and (3) CATEGORY 3-Mentality capability. In addition, it tested whether a significant relationship exists among any of three dummy variables introduced for H2: (1) AGE; (2) TYPE; and (3) a variable representing the interaction of AGE and TYPE. The results revealed that there is not a significant relationship between the training that fell witMn the three categories and the interaction of the two dummy variables of AGE and TYPE. There is not an interaction effect between the AGE and TYPE variables as they relate to training. The CM Square test determined that 99 percent of the growth firms received two or fewer types of training while 62 percent of the growth firms received three or more t>pes of training. It resulted in a probability statistic of <0.0001, indicating that there is a significant difference in growth in the protege firms that received three or more types of training. The results of this test would lead to an obvious conclusion-the more training a small business owner receives, the more successful it is relative to its growth. This result is an encouraging finding because it supports many studies that indicate small businesses need enormous amounts of information 154 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. and training in order to succeed. Additional research is required to integrate tliese findings into mentoring programs. Conclusion This study, hopefully, has presented a portrait of the type of protege firm that participated in the DOD-PMPP during the years 1991 through 1997. The protege firm is highly driven to succeed, a motivation that is also connected with a higher propensity for risk-taking. This type of firm participates in mentoring programs and other business alliances in order to obtain information and training critical to its business success. Although the survival rate of all small businesses is problematic, the protege firms’ survival rate exceeds that of similar small businesses in the U.S. business enterprise system. Notwithstanding the nearly 40 percent non-survivors in the study, and speculation as to what might have caused it, the protege firm’s survival rate is still better than the national small business survival rate. Insofar as growth is concerned, the protege firm would have a 50-50 chance of experiencing growth as 49 percent of the firms grew during the period, but 51 percent of the firms did not grow. While this result is better than national results on the growth of SBs, it warrants further research to identify the cause for such a high rate of non-growth in protege firms. Based on the survey responses, statistical tests, and insights obtained through interviews of both groups, there appears to be an advantage to participating as a protege in a mentoring program. 155 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. The protege firm receives traiaieg in the areas in which it and the mentor have diagnosed inadequacies or problems. The findings did not support H3 which postulates that a relationship exists between the type of training received and gro’ ivth. Each ty'pe of training is exclusive unto itself and not necessarily related to any other type of training received (or not received) by protege firms. Despite the mixed findings on training in this study, interviews with protege firms generally revealed that the firms believe the mentor-protege relationship was a successful one and are confident that they will succeed. When asked, “What are the odds of your business succeeding?” The response was generally, “It is difficult but Fm sure I will succeed.” Similarly, when asked, “Is formation of a business a financially risky endeavor?” The response generally was, “Yes, it can be but others have done it and succeeded.” The results of this study reinforced the conceptualization of the entrepreneur or small business owner as a confident achiever and risk-taker. Most of the firms indicated that they had worked for a similar firm, before they decided to start their own business, although most of them did not own a prior business. Accordingly, they were optimistic about their perceived chances for success and acknowledged that it would be difficult, but not impossible, to achieve long-term success. Perhaps the most encouraging fmdings of this research are that successful small businesses, e.g., protege firms, believe that the vast majority of the 156 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. knowledge required for successful entrepreneurship can be taught in a one-on-one mentoring program by a large successful company. Lessons Learned In almost any endeavor, resulting in a positive or negative outcome, there are lessons to be learned. In the case of this study, there are several lessons. First, in regard to the study itself, the survey of protege firms and control group members should take place closer to the program participation period in order to obtain a better rate of response. Mentors might be surveyed to obtain feedback on their perceptions of the program. Practitioners should maintain full and complete data and files on the characteristics of each protege firm upon entering and during the program, in order to closely monitor changes in the protege firms’ status. Most important, practitioners and small business advocates should monitor former protege firms’ survival and growth after the mentoring program ends to determine if program goals of long-term viability were met. Periodic program evaluations should occur in order to ensure that objectives are being met. Benefits of this Study One of the most important aspects of any study is defining the study’s usefulness in accomplishing the intended goals. The overall goal of this research was to examine the successes of the protege firms participating in the DOD-PMPP, in order to extend those types of successes to other federal mentoring programs. 157 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Several groups can benefit from this research. Entrepreneurs, investors, lenders, suppliers, educators, consultants, and public policy makers all can benefit from using a similar small business mentoring model or by working with small businesses that have participated in a similar mentoring programs. Small businesses can benefit from research on a successful mentoring model. They can seek large business mentors and mentoring programs in order to develop and improve their business lines and technical expertise. Since a mentor-protege relationship can be financially favorable to a small business, investors and lenders may be encouraged to work with small firms that are in some form of partnership with a large company, particularly a “Fortune 500" company. Suppliers might be less reluctant to extend credit to protege firms in mentor-protege relationships. Research of this type can be of substantial benefit to those who are designing entrepreneurship pedagogy at the university level. These preliminary findings and additional research may add to their understanding of entrepreneurship and small business development. Small business consultants can recommend and establish programs and networks to assist small businesses in identifying mentors. Public policy makers always are seeking information on successM small business models in order to legislate new programs that will encourage small business growth. Recommendations This study is a preliminary look at a very difficult area and a unique program. Based on the research performed for this study, the following recommendations are 158 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. made to managers of business mentoring programs and other practitioners of small business development: 1 Ensure that internal controls are developed to maintain data on protege firms in the following areas: ® profits, revenues, and employees; ® growth and non-growth; ® sur\dval and non-sundval, along with reasons for non-survival; ® comparison to other similar small businesses in the universe; ® types of training received; ® quality or amount of training received; ® consistency of training received by protege firms; and ® various statistics about the characteristics of protege firms, e.g., age of the firms in relation to growth, experience of CEO in relation to growth, etc. 2. Frequent conduct of surveys and studies on the benefits of the program; 3. Success stories should be made available to other agencies; and 4. Encourage small businesses to seek mentoring programs. This pilot study provides a starting point for future research on business mentoring in federal contracting. While the theoretical propositions and methodological measures used in the study represent significant progress toward 159 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. testing the assumptions in the mentoring program, other areas warrant additional consideration. Implications for Future Research To the best of this researcher’s knowledge, there has been no systematic previous examination of the DOD-PMPP or federal business mentoring programs, with the exception of the GAO reviews addressed in Chapter 1. Accordingly, the results of this study suggest a host of implications for additional research. The areas requiring additional research also are areas in which practitioners should maintain records and conduct studies. If the individual entrepreneur and small business owner is the key puzzle piece in comprehending the small business role in the business enterprise system, then a more complete understanding of the entrepreneur and small business owner is a necessary condition for understanding entrepreneurship. The more small business owners’ needs are understood, along with their areas of successful operation, the more likely it is that their needs can be addressed. What are the implications of these findings? Further research is needed to establish a success path in order to expand the business mentoring program to into more sophisticated areas of business enterprising, as well as to other federal agencies. Future research could seek to examine various aspects of the mentoring relationship. Some potential areas for examination include: 160 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. » What t>'pes of information do businesses seek? ® What are the mentoring program cost and how to improve them? How does iie decision st}de of the entrepreneur affect success? • What should be the prerequisites to entering a mentoring program? What are the most suitable operational requirements for the protege and does it vary depending on the industry, business cycles, etc.? • How is the quality of assistance or training different among mentors and how does it affect protege success? • What are the types and regularity of assistance provided by the mentor? What evaluation and follow-up is needed in the mentoring relationship? Researchers can ask themselves certain questions that can lead to future research: “Do other agencies have successful mentoring programs?” “Do successful small businesses start with the same resources as failed small businesses?” and “How does the mentor help the protege develop entrepreneurial and managerial skills?” Discovering the requisite knowledge for entrepreneurial success is a vital step for promoting economic growth and competitiveness for the firm and the nation. Accordingly, research examining predictors of small business performance, even in a mentoring program, clearly should be of interest to the small firms, and to those who provide advice and funds for small enterprises. Going into business for oneself requires both preparation and a leap of faith. A business success versus failure mentoring prediction model can assist in the preparation part. 161 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. SELECTED BIBLIOGRAPHY Becherer, Richard C., and John G. Maurer. ‘ ‘Moderating Effect of Environmental Variables on the Entrepreneurial and Marketing Orientation of Entrepreneur- Led Finns.” Entrepreneurship, Theory and Practice 1997): 47-56. Boden, Richard J. Jr. Establishment Employment Change and Survival, 1992-1996: Analyses Based on a New, Longitudinal Data Base with Special Focus on Information Technology Industries. Washington, DC: United States Small Business Administration, September 2000. Boden, Richard I. Jr. Analyses o f Business Dissolution by Demographic Category o f Business Ownership. Washington, DC: United States Small Business Administration, 2001. Botkin, James W. Smart Business: How Knowledge Communities Can Revolutionize Your Company. New York: Free Press, 1999. Botkin, James W., and Dan Dimancescu. Global Stakes: The Future o f High Technology in America. New York; Penguin Books, 1984. Botkin, James W., and Dan Dimancescu. The Innovators: Rediscovering America’ s Creative Energy. Philadelphia: University of Pennsylvania Press, 1986. Botkin, James W., and Jana B. Matthews. Winning Combinations: The Coming Wave o f Entrepreneurial Partnerships Between Large and Small Companies. New York; John Wiley & Sons, 1998. Botsch, Robert E. Seeking Models for Change. New York: Economic Enterprise Institute of USCA, October 20,1989. Brooks, Patricia A. “The Pilot Mentor-Protege Program.” Workshop sponsored by the National Contract Management Association, Vienna, VA, 1991. Bygrave, William D. “Theory Building in the Entrepreneurship Paradigm.” Journal o f Business Venturing (1993): 255-279. 162 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Bygrave, William D., and Charles W. Hofer. “Tlieorizing About Entrepreneurship.” Entrepreneurship, Theory and Practice (Winter 1991): 13-22. Carter, Nancy M., Maiy Williams, and Paul D. Reynolds. “DiscontiBuance Among New Firms in Retail: The Influence of Initial Resources, Strategy and Gender.” Journal of Business Venturing {199T). Chaston, Ian, and Terry Mangles. “Core Capabilities as Predictors of Growth Potential in Small Manufacturing Firms.” Journal o f Small Business Management (1997): 47-57. CMsman, James J., and W. Edward McMulIan. “Some Additional Comments on the Sources and Measurement of the Benefits of Small Business Assistance Programs.” Journal o f Small Business Management (2002). Clute, Ronald C., and George B. Gaxman. “The Effect of U.S. Economic Policies on the Rate of Business Failure.” American Journal o f Small Business (1980). Cooper, Arnold C. “The Role of Incubator Organizations in the Founding of Growth-Oriented Firms.” Journal o f Business Venturing (1995): 75-86. Cooper, Arnold C., Carolyn Y. Woo, and William C. Dunkelberg. “Entrepreneurs’ Perceived Chances for Success.” Journal o f Business Venturing (1988): 97- 109. Cooper, Arnold C., Timothy B. Folta, and Carolyn Woo. “Entrepreneurial Information Search.” Journal o f Business Venturing (1995): 107-120. Creswell, John W. Research Design: Qualitative & Quantitative Approaches. Thousand Oaks, CA: Sage, 1994. Dandridge, Thomas C. “Children are Not ‘Little Grown-Ups’: Small Business Needs Its Own Organizational Theory.” Journal o f Small Business Management (1988): 53-57. Davidsson, Per. “Entrepreneurship: Ability, Need, and Opportunity as Determinants of Small Firm Growth.” Journal o f Business Venturing (1991): 405-429. . “Continued Entrepreneurship: Ability, Need and Opportunity as Determinants of Small Firm Growth.” Journal o f Business Venturing (1991): 405-429. 163 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Davis, Stanley M., and James W. Botkin. The Monster Under the Bed: How Business is Mastering the Opportunity o f Knowledge for Profit. New York: Simon & Schuster, 1994. DeCarlo, James F., and Paul R. Lyons. “Toward A Contingency Theory of Entrepreneurship.” Journal o f Small Business Management (1991): 37-43. DeLuca, Fred. Start Small Finish Big: Fifteen Key Lessons to Start and Run Your Own Successful Business. New York: Warner Books, 2000. Dennis, William J., and Lioyd W. FemaM, Jr. “The Chances of Financial Success (and Loss) from Small Business Ownership.” Entrepreneurship, Theory and Practice (Fall 2001): 75-82. DeNoble, Alex, and Donald M. Moliver. “The Small Business Dilemma; Can Cooperation Help?” American Journal o f Small Business (1983): 51-59. Department of Defense. Policy, Procedures, and Regulations Governing the DOD Pilot Mentor-Protege Program. Washington, DC: DOD, 1992. Dickinson, Roger A. “Business Failure Rate.” American Journal o f Small Business (1981). Dickinson, Roger A., Charles R. Ferguson, and Sircar Sumit. “Critical Success Factors and Small Business.” American Journal o f Small Business (1984). Dimancescu, Dan, and James W. Botkin. The New Alliance: America’ s R&D Consortia. Cambridge, MA; Ballinger Publishing Company, 1986. Dingle, Derek. Titans o f the B.E. 100s. New York: John Wiley & Sons, Inc., 1999. Dubini, Paoa, and Howard Aldrich. “Personal and Extended Networks are Central to the Entrepreneurial Process.” Journal o f Business Venturing (1991): 305- 313. ________ . Excerpts from Studies of Small Business Finance-A Report to Congress. American Journal o f Small Business (1982). Fairfield-Sonn, James W. “A Strategic Process Model for Small Business Training and Development.” Journal o f Small Business Management (January 1987): 11-18. 164 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Fairiie, Robert W. “Earnings Growth Among Disadvantaged Business Owners.” Study by the U.S. Small Business Administration, September 14, 2001. Federal Procurement Data System Report. Washington, DC: United States General Services Administration, 1999-2001. Ferguson, George A. Statistical Analysis in Psychology & Education. New York: McGraw-Hill Book Company, 1976. Fiet, James O. “The Theoretical Side of Teaching E ntrepreneurshipJournal o f Business Venturing (2000); 1-21. Fischer, Eileen, A. Rebecca Reuber, Moez Hababou, William Johnson, and Steven Lee. “The Role of Socially Constructed Temporal Perspectives in the Emergence of Rapid-Growth Firms.” Entrepreneurship, Theory and Practice (Winter 1997); 13-30. Fleming, Michael C., and Joseph G. Nellis. The Essence o f Statistics for Business. New York: Prentice Hall, 1996. Fontenot, Renee J., and Elizabeth J. Wilson. “Relational Exchange: A Review of Selected Models for a Prediction Matrix of Relationship Activities.” Journal o f Business Research (1997): 1-21. Franklin, Carl M. “Improved Productivity Means Increased Profitability.” American Journal o f Small Business (1980). Fullenbaum, Richard F., and Mariana A. McNeill. Impact o f Federal Procurement on Small Business Development. Washington, DC: M&R Associates, United States Small Business Administration, January 1993. Fullenbaum, Richard F., and Mariana A. McNeill. The Function o f Failure. Washington, DC; M&R Associates, United States Small Business Administration, 1994. Gadiesh, Orit, Robin Buchanan, Mark Daniel!, and Charles Ormiston. “The Leadership Testing Ground.” Journal o f Business Strategy (2002): 12-17. Gartner, William B., and Jennifer A. Starr. “Predicting New Venture Survival; An Analysis of ‘Anatomy of a Start-Up.’” Cases from INC. Magazine. Journal o f Business Venturing (1998); 215-233. 165 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Geiidron, George. ‘'Flashes o f Genius. ” Inc. Magazine. New York: Inc., 2003. General Accounting Office. Defense Contracting: Interim Report on Mentor-Protege Program for Small Disadvantaged Firms, GAO/NSIAD-92-135. Washington, DC: GAO, 1992. ________ . Defense Contracting: Implementation o f the Pilot Mentor-Protege Program, GAO/NSIAD-98-92. Washington, DC: GAO, 1994. ________ . Defense Contracting: Sufficient, Reliable Information on DOD’ s Mentor-Protege Program is Unavailable, GAO/NSIAD-98-92. Washington, DC: GAO, 1998. ________ . Defense Contract Management: Benefits o f the DOD Mentor-Protege Program are Not Conclusive, GAO-01-767. Washington, DC: GAO, 2001. Gulezian, R. C. Statistics for Decision Making. Pennsylvania; W. B. Saunders Company, 1979. Hambrick, Donald C., and Lynn M. Crozier. “Stumblers and Stars in the Management of Rapid Growth.” Journal o f Business Venturing (Winter 1985): 31-45. Hamburg, Morris. Statistical Analysis for Decision Making. New York: Harcourt Brace Jovanovich, Inc., 1983. Handel, Judith D. Introductory Statistics for Sociology. New Jersey: Prentice Hall, Inc., 1978. Hannagan, Tim. The Effective Use o f Statistics: A Practical Guide for Managers. London: Kogan Page Limited, 1999. Harrigan, Kathryn Rudie. Strategies for Joint Ventures. Lexington, MA; Lexington Books, 1985. Haynes, George W. Wealth and Income: How Did Small Businesses Fare from 1989 to 1998? Washington, DC: United States Small Business Administration, 2001. Herron, Lanny, and Richard B. Robinson. “A Structural Model of the Effects of Entrepreneurial Characteristics on Venture Performance.” Journal o f Business Venturing (1993): 281-289. 166 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Herron, Lanny, Harry J. Sapienza, and Deborah Smith-Cook. " ‘Entrepreneurship Theory from An Interdiscipiinary Perspective.” Entrepreneurship, Theory and Practice (Spring 1992): 5-11. Hillstrom, Kevin, and Laurie Collier Hillstrom. Encyclopedia o f Small Business. Detroit, MI: Gale, 1998. Hisrich, Robert D., and Michael P. Peters. Entrepreneurship: Starting, Developing, and Managing a New Enterprise. Chicago, IL: Irwin, 1995. Hofer, Charles W., and William D. Bygrave. “Researching Entrepreneurship.” Entrepreneurship, Theory and Practice (Spring 1992): 91-100. Holoviak, Stephen J., and Robert Ackeisberg. “Small Business Management Assistance; A University Experience in a Rural Environment.” Journal o f Small Business (1983). Hood, Jacqueline N., and John E. Young. “Entrepreneurship’s Requisite Areas of Development: A Survey of Top Executives in Successful Entrepreneurial Firms.” Journal o f Business Venturing (1993): 115-135. Ibrahim, A. B., and J. R. Goodwin. “Perceived Causes of Success in Small Business.’ American Journal o f Small Business Management (Fall 1986): 41-49. Keats, Barbara W., and Jeffrey S. Bracker. “Toward a Theory of Small Firm Performance: A Conceptual Model.” American Journal o f Small Business (Spring 1988): 41-58. Khan, M. Riaz, and Joseph R. Rocha, Jr. “Recurring Managerial Problems in Small Business.” American Journal o f Small Business (1982). Larson, Andrea. “Partner Networks: Leveraging External Ties to Improve Entrepreneurial Performance.” Journal o f Business Venturing (1991): 173- 188. Lewis, Gareth. Understanding Business Statistics. Great Britain: Barron’s Educational Series, Inc., 1997. Litz, Reginald. “Lilliputian Strategies: Small Business Responses to Big Business Entry.” Study by the U.S. Small Business Administration, 1996. 167 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Livesay, Harold C. “Entrepreneurship and the Growth of Fim s.” The International Library o f Critical Writings in Business History (Vol. I). Brookfield, Massachusetts: Talor Publisher, 1995. Long, Wayne. “The Meaning of EntrepreneursMp.” American Journal o f Small Business (1983). Lussier, Robert N. “A Nonfinancial Business Success Versus Failure Prediction Model for Young Firms.” Journal o f Small Business Management (January 1995); 849. Lussier, Robert N., and Sanja Pfeifer. “A Cross-Sectional Prediction Model for Business Success.” Journal o f Small Business Management (2001): 228-239. McGuire, Joseph W. Theories o f Business Behavior. Englewood Cliffs, NJ: Prentice Hall, Inc., 1964. Meier, Kenneth J., and Jeffrey L. Brudney. Applied Statistics for Public Administration. Belmont, California: Danbury Press, 1981. Megginson, Leon C., Charles R. Scott, Jr., Lyle R. Trueblood, and William L. Megginson. Successful Small Business Management. Dallas, XX: Business Publications, Inc., 1988. Merriam, Sharan. “Mentors and Proteges: A Critical Review of the Literature.” Adult Education (1983): 161-174. Miller, Alex, and Bill Camp. “Exploring Determinants of Success in Corporate Ventures.” Journal o f Business Venturing (1985): 87-93. Miller, Delbert C. Handbook o f Research Design and Social Measurement. Newberry Park, CA: Sage Publications, Inc., 1991. Miller, Vernon D., and Fredric M. Jablin. “Information Seeking During Organizational Entry: Influences, Tactics, and A Model of the Process.” Academy o f Management Review (1991): 92-111. Miner, John B. “Entrepreneurs, High Growth Entrepreneurs, and Managers: Contrasting and Overlapping Motivational Patterns.” Journal o f Business Venturing (1990): 221-235. 168 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Minniti, Maria, and William Bygrave. “A Dynamic Model of Entrepreneurial Learning.” Entrepreneurship, Theory and Practice {Spring IQQl): 5-15. Netter, John, Wiiliam Wasserman, and G. A. Whitmore. Applied Statistics. Massachusetts: Allyn and Bacon, Inc., 1978. Noe, Raymond A. “Investigation of the Determinants of Successful Assigned Mentoring Relationships.” Personnel Psychology {1992): 457-479. O’Sullivan, Elizabethann, and Gary R. Rassel. Research Methods fo r Public Administrators. New York: Longman, 1995. Park, Seiing Ho, and Dongcheol Kim. “Market Valuation of Joint Ventures: Joint Venture Characteristics and Wealth Gains.” Journal o f Business Venturing (1997): 83-107. Peters, Thomas, and Robert H. Waterman. In Search o f Excellence. New York: Warner Books, 1988. Pineda, Rodley C., Linda D. Lemer, M. Christine Miller, and Stanley J. Phillips. “An Investigation of Factors Affecting the Information-Search Activities of Small Business Managers.” Journal o f Small Business Management (January 1998): 61-71. Popkin, Joel and Company. Business Survival Rates o f Age Cohort o f Business. Washington, DC: United States Small Business Administration, April 1991. Popkin, Joel. Small Business Share o f Private, Nonfarm Gross Domestic Product. Washington, DC: United States Small Business Administration, October 1997. ________ . Small Business Share o f Economic Growth. Washington, DC: United States Small Business Administration, January 2002. Raffe, Sydelle, Eric Sloan, and Mary Vencill. How Small Businesses Learn. Washington, DC: United States Small Business Administration, 1994. Rue, Leslie W., and Nabil A. Ibrabim. “The Relationship Between Planning Sophistication and Performance in Small Businesses.” Journal o f Small Business Management (October 1998): 24-32. 169 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Runyon, Richard P., and Audrey Hober. Business Statistics. Illinois: Richard D. Irwin, Inc., 1982. Sandberg, William R. “Strategic Management’s Potential Contributions to A Theory of Entrepreneurship.” Entrepreneurship, Theory and Practice {Spmig 1992): 73-89. Schell, Jim. The Entrepreneur Magazine Small Business Answer B o o t Solutions to the 101 Most Common Small Business Problems. New York: John Wiley & Sons, Inc., 1996. Schiller, Bradley R., and Philip Crewson. “ Entrepreneurial Origins: A Longitudinal Inquiry.” Washington, DC: United States Small Business Administration, 1994. Schwartz, Robert G., and Richard D. Teach. “Research Note: Entrepreneurship Research: An Empirical Perspective.” Entrepreneurship, Theory and Practice (2000). Sexton, Donald L., Philip M. Van Auken, and R. Duane Ireland. “Directions for Future Research in Entrepreneurship. ” American Journal o f Small Business (1981). Sexton, Donald L., and Nancy Bowman Upton. “Evaluation of An Innovative Approach to Teaching Entrepreneurship.” Journal o f Small Business Management (January 1987): 35-42. Sexton, Donald L., Nancy B. Upton, A. Wacholtz, and Patricia P. McDougall. “Learning Needs of Growth-Oriented Entrepreneurs.” Journal o f Business Venturing (1997): 3-7. Siegel, Robin, Eric Siegel, and Ian C. MacMillan. “Characteristics Distinguishing High-Growth Ventures.” Journal o f Business Venturing (1993): 169-189. Sirkin, R. Mark. Statistics for the Social Sciences. Thousand Oaks, CA: Sage, 1995. Skolnik, Jonathan, and Harry J. Chmelynski. “Pattern of Federal Procurement from Minority and Women-Owned Small Businesses.” Study by the U.S. Small Business Administration, April 1993. 170 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Slevin, Dennis P., and Jeffrey G, Covin. “Strategy Formation Patterns, Performance, and the Signitlcance of Context.” Journal o f Management (1997): 41-54. Small Business Indicators for 2001: A Reference Guide to the Latest Data on Small Business Activity, Including State and Industry Data. Washington, DC: United States Small Business Administration, February 2003. Smilor, Raymond W. “Executive Fonun Entrepreneurship Reflections on A Subversive Activity.” Journal o f Business Venturing (1997): 342-401. Smith, Ken G., Martin J. Gannon, and Harry J. Sapienza. “Selecting Methodologies for Entrepreneurial Research: Trade-Offs and Guidelines.” Entrepreneurship Theory and Practice (Fall 1989): 40-49. Solomon, George T., and Lloyd W. FemaM. “Trends in Small Business Management and Entrepreneurship Education in the United States.” Entrepreneurship Theory and Practice (Spring 1991): 25-39. The State o f Small Business: A Report o f the President. Washington, DC: United States Government Printing Office, 1999-2000. Stemple, Ron. “The Mentor-Protege Program in the Constraction Industry.” Study by Associated General Contractors, Inc., 1996. Stewart, Wayne H., and Warren E. Watson. “A Proclivity for Entrepreneurship; A Comparison of Entrepreneurs, Small Business Owners, and Corporate Managers.” Journal o f Business Venturing. (1998): 189-213. Stuart, Robert W., and Pier A. Abetti. “Impact of Entrepreneurial and Management Experience on Early Performance.” Journal o f Business Venturing (1990): 151-163. Sullivan, Teresa, Elizabeth Warren, and Jay Westbrook. Financial Difficulties o f Small Businesses and Reasons for Their Failure. Washington, DC; United States Small Business Administration, March 1999. Tyson, Eric, and Jim Schell, Small Business for Dummies. New York: IGD Books Worldwide, Inc., 1998. Ulrich, Thomas A., and George S. Cole. “Toward More Effective Training of Future Entrepreneurs.” Journal o f Small Business Management (October 1987): 33- 39. 171 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Van Coiiie, Shimon-Craig. “Moving Up Tlirough Mentoring.” Worh^brce (March 1998): 36»42. Vesper, Karl H., and Wiiliam B. Gartner. “Measuring Progress in Entrepreneurship Education.” Journal o f Business Venturing {1991). Viimeil, Reuben, and R. T. Hamilton. “A Historical Perspective on Small Firm Development.” Entrepreneurship, Theory and Practice (Summer 1999): 5- 18. Watson, John, and Jim E. Everett. “Do Small Businesses Have High Failure Rates?” Journal o f Small Business Management (1996). Wayne, Stewart, Jr., Warren E. Watson, Joann C. Garland, and Janies W. Garland. “A Proclivity for Entrepreneurship: A Comparison of Entrepreneurs, Small Business Owners, and Corporate Managers.” Journal o f Business Venturing (1998): 189-207. Weinzimmer, Lawrence G. “Top Management Team Correlates of Organizational Growth in a Small Business Context; A Comparative Study.” Journal o f Small Business Management (July 1997): 89-99. Wholey, Joseph S., Harry P. Hatry, and Kathryn E. Newcomer. Handbook o f Practical Program Evaluation. San Francisco: Jossey-Bass, 1994. Wright, Mike, Ken Robbie, and Christine Ennew. “Venture Capitalists and Serial Entrepreneurs.” Journal o f Business Venturing (1997): 227-249. 172 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. APPENDIX A LETTER TO DOD-PMPP PARTICIPANTS 173 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Department of Energy WasH«gtOR. DC 20585 November 21,2001 Ms. Vita PickruiB Presideat Resource Network IntemationaJ 412 9* Street, NW WasluBgton, DC 20416 Dear Ms. Picknim; Tie Eteparteient of Energy (DOE) has been uiMe aware of your fiirn’s expertise and participation with Federal agency mentor-protege programs. Accoriiingly, we woiild like to apprize you of contracting aM sabcoatracting oppoitaiaities at DOE, as well as potential opporttmities with the Mentor-Protege Program. . First, DOE publishes a Forecast of Coatracting and Subcontracting Opportunities. The Forecast ciontaias more-than 500 opportnaitira aid can be accessed at www.iir.doe.gOY/ed/ostft)ii/osdbu.html click on Forecast. Die Dqjartaienfs major prime contractora offer the b « i cjppEHtuaities f«- doing biisiaess wife EOE. These coatractDis have rosmi saaU brainm goals and gaierally ^etid apjroxiinately 50 percent of feeir subcontracting dollars with small tesinesses. Yon m i^ t be into-ested in loiowiag feat most of th«e coDtractors conduct their own 8(a) program is wMch they seek 8(a) films for sabcoateacts. Their 8(a) piograni miniics the U.S. Small Business Aduunistratioa’s program. A list of these luajor prime contractors caa be fonnd on page 4 o f the Directoiy of Small Bnsiness Program Managera at www.br.doe.gov/ed/osdba/o$<lbii.h<ml. click on “Efeectoiy of Smail Business Manners. Fsialiy, the DqMiHasrt amducfe a Mmtor-Frotege Program la wMcfa prospective prot%es caa apply OK-Hae, as well as contect pmae coatodora directJy. DOE is cuiTmtly w<a-Jdng with its prime contractors to obtain additioiial meatois for the pro^am. If y«t desire aiiditianal MormatioE about the program, view the web page at wy».hr.doe.g;ov/gdfgsdbsVtBentoT.htiiil. click oa MhEiof-frotsge Program. I have reoeaiiy beea desigaatol manager of the program aad wsuM be plM«d to discuss opportanities available to paiticipafe ia flie prograin. I can bs reacljsd at (202) 586-4620 or hrmiia.dsgraffaEBid@lsq.doe.gov. ' Siacerdy, Brenda J. DcGraffearad Senior Proojreiaest Analyst 174 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. APPENDIX B DOD PILOT MENTOR-PROTEGE PROGRAM SURVEY 175 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. DOD PILOT MENTOR-PROTEGE PROGRAM SURVEY Please respond to the questions about your tenure in the DOD Pilot Mentor-Protege Program by placing an “y ” where appropriate. Use the reverse if you need additional space to respond. The responses will be used to determine the growth experience of program participants. 1. Company N am e____________________________________________________ Address_________________________________________________________ _ Cit}dState/Zip__________________________ Phone____________________ E-mail____________________Fax____________ Age of Company_______ _ 2. Owner/President/CEO Name Title Type of Business & Industrial Code _ 3. Age: [ ] 18-27 [ ] 28-40 4. Gender [ ] Male [ ] 41-52 [ ] 53 & over [ ] Female 5. Education: [ ] Less than high school [ ] High School [ ] Undergraduate [ ] Graduate [ ] Professional License 6. How long were you in the DOD Pilot Mentor-Protege Program? [ ] 4 or 5 years [ ] 3 years [ ] 2 years [ ] less than 1 year 7. What year did you start the DOD Pilot Mentor-Protege Program? What year did it end? 8. In which DOD military service’s Pilot Mentor-Protege Program did you participate, e.g.. Army, Navy, Air Force, etc.?______________________ 176 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 9. Name and Address of Mentor 10. Have you ever received technical/managerial assistance for your business before your participation in the DOD Pilot Mentor-Protege Program? [ ] Yes [ ] No 11. Have you ever received financial assistance for your business? [ ] Yes [ ] No 12. Have you participated in other agency Mentor-Protege Programs? [ ] No [ ] Yes WMch Agency?________ 13. For which business operations did you receive assistance from the mentor? Check all that apply. proposal writing/bidding improve product/service investmerit portfolio guidance fmance/budget management marketing strategy new product/service innovation office management inventory management other (list below) business location business legal form staffing tax management advertising strategy company org. structure managerial guidance planning 14. Rank the 3 areas of assistance checked that were most helpful to your firm, with “1" being most helpful._________________________________________ 14. Identify the 3 areas of assistance checked that were least helpful to your firm. 177 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 15. How many persons did your firm employ prior to its participation in the DOD Pilot Mentor-Protege Program?_________________________________ 16. How' many persons did your firm employ after its participation in the DOD Pilot Mentor-Protege Program? _____________________________________ 17. Choose the sales/receipts category that applies to your firm prior to the DOD Pilot Mentor-Protege Program. My firm’s annual sales/receipts w'ere: [ ] $200,000 or less [ ] $200,001 - $400,000 [ ] $400,001 - $700,000 [ ] $700,001 - $999,999 [ ] $1 Million or above 18. Choose the sales/receipts category that applies to your firm after the DOD Pilot Mentor-Protege Program? My firm’s annual sales/receipts were: [ ] $2000,000 or less [ ] $200,0001 - $400,000 [ ] $400,001 - $700,000 [ J $700,001 - $999,999 [ ] $1 Million or above 19. Did you own or manage a business prior to your current firm? [ ] Yes [ ] No 20. If you could, would you change anything about the DOD Pilot Mentor-Protege Program? [ ] Yes [ ] No [ ] Somewhat (Explain) 178 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 21. Other Comments 179 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. APPENDIX C DOD CONTROL GROUP SURVEY 180 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. DOD CONTROL GROUP SURVEY Please respond to the questions about your contracting experience at the Department of Defense. The purpose is to compare your growth experience with similar contractors participating in the Mentor-Protege Program during the same period. 1. Company Name _ Address City/State/Zip E-mail Fax Phone _ Age of Company _ 2. Owner/President/CEO Name Title Type of Business & Industrial Code 3. Age: [ ] 18-27 [ ] 28-40 [ ] 41-52 [ ] 53 & over 4. Gender [ ] Male [ ] Female 5. Education: [ ] Less than high school [ ] High School [ ] Undergraduate [ ] Graduate [ ] Professional License 6. How many contracts did you have with the Department of Defense between 1991 and 1997? 7. From which Department of Defense’s military service were the contracts awarded, i.e., Army, Navy, Air Force, etc.?________________________ 8. Have you ever received technical/managerial assistance for your business? [ ] No [ ] Yes If “Yes,” explain from whom the assistance was received. 181 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 9. Have you ever received fiaancial assistance for your business? i 0. How many persons did your company employ in 1991 ? _ 11. How many persons did your company employ in 1997?, 12. Choose the sales/receipts category that applied to your company in 1991. My company's annual sales/revenues or receipts in 1991 were: [ ] $200,000 or less [ ] $200,001 - $400,000 [ ] $400,001 - $700,000 [ ] $700,001 - $999,999 [ ] $1 Million or over 13. Choose the sales/receipts category that applied to your company in 1997. My company’s annual sales/revenues or receipts in 1997 were: [ ] $200,000 or less [ ] $200,001 - $400,000 [ ] $400,001 - $700,000 [ ] $700,001 - $999,999 [ ] $1 Million or over 14. Did you own or manage a business prior to your current company? [ ] Yes [ ] No 15. Other comments about your experience 182 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. APPENDIX D IN-PERSON AND TELEPHONE INTERVIEW QUESTIONS 183 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. IN-PERSON AND TELEPHONE INTERVIEW QUESTIONS Date 1. COMPANY NAME, ADDRESS, PHONE, E-MAIL, CEO, AND TITLE. 2. REVIEW RESPONSES TO ALL QUESTIONS. 3. DISCUSS THE INCREASE (OR LACK OF) IN EMPLOYEE BASE AND REVENUES. a. Focus on what they believe helped (hurt) them. b. Have the CEO restate employee base and revenues. c. Discuss employee and revenue base since graduating from the program. 4. DISCUSS THE MENTORING EXPERIENCE—WHAT TRAINING DID YOU RECEIVE? 5. HOW DID YOUR BUSINESS CHANGE? 6. WHAT ARE YOUR ODDS FOR LONG-TERM BUSINESS SUCCESS? 7. WAS FORMATION OF YOUR BUSINESS A FINANCIALLY RISKY ENDEAVOR? 8. WHAT DID THE EXPERIENCE MOTIVATE YOU TO DO RE: YOUR COMPANY? 9. WHAT WOULD YOU CHANGE ABOUT THE EXPERIENCE? 184 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.

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Educational reform for private state -approved schools in California

Asset Metadata

Creator DeGraffenreid, Brenda J. (author)

Core Title Federal mentor -protege programs: A pilot study on protege survival and growth

School School of Policy, Planning and Development

Degree Doctor of Public Administration

Degree Program Public Administration

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag business administration, general,OAI-PMH Harvest,Political Science, public administration

Language English

Contributor Digitized by ProQuest (provenance)

Advisor Wholey, Joseph (committee chair), Barkdoll, Jake (committee member), McLaughlin, John (committee member)

Permanent Link (DOI) https://doi.org/10.25549/usctheses-c16-509126

Unique identifier UC11335515

Identifier 3140463.pdf (filename),usctheses-c16-509126 (legacy record id)

Legacy Identifier 3140463.pdf

Dmrecord 509126

Document Type Dissertation

Rights DeGraffenreid, Brenda J.

Type texts

Source University of Southern California (contributing entity), University of Southern California Dissertations and Theses (collection)

Access Conditions The author retains rights to his/her dissertation, thesis or other graduate work according to U.S. copyright law. Electronic access is being provided by the USC Libraries in agreement with the au...

Repository Name University of Southern California Digital Library

Repository Location USC Digital Library, University of Southern California, University Park Campus, Los Angeles, California 90089, USA