Improving rural business development, one firm at a time: A look at the effects of the USDA's Value-Added Producer Grant on firm survival

Abstract

Economic studies of firm survival suggest that capital acquisition and asset fixity are some of the biggest challenges facing start-up firms today, especially in rural areas. The Value-Added Producer Grant (VAPG) program was established by USDA’s Rural Business-Cooperative Service in 2001 to help independent producers and similar organizations develop value-added agricultural businesses, many of which are located in rural areas. Utilizing information on Value-Added Producer Grant recipients from 2001 to 2011 in Iowa and North Carolina coupled with National Establishment Time-Series data from 1990 to 2011, we use survival analysis to estimate the effects of a VAPG on firm survival. Recipients are matched with firms in the same industry and state, starting in the same year, who did not receive VAPG funding to estimate the effect of the grant on firm survival. Preliminary results suggest that, after controlling for other characteristics than affect firms survival, receiving a VAPG had a positive and significant impact on firm survival length. For start-up firms, preliminary estimates suggest that survival times are nearly doubled. For more established firms (those that were in business at least three years before receiving a grant), the effects are larger, with survival times increasing 6 times for recipient firms.