Herbert Thweatt, D.B.A.

SMALL BUSINESS JOBS ACT OF 2010 CASE STUDY: CREATING AND

LAUNCHING BUSINESS AND WORKFORCE DEVELOPMENT IN

AMERICAN SAMOA

This project was initiated to provide a case study exploring and analyzing the

subject and methodology for successfully launching businesses and jobs-creation programs.

The project contributes to the ongoing practice of business and economic development and

studies the use of Jobs Act legislation enacted by US Congress to authorize the administrator

of the U.S. Small Business Administration (SBA) to disburse up to $50,000,000 to make

grants available to Small Business Development Centers.

Origin of Relationships

After Secretary of State John Hay concluded the signing of the Tripartite Convention, President

William McKinley, the 25 th President of the U.S., signed an Executive Order on February 19, 1900, that read,

“The Island of Tutuila, of the Samoan Group, and all other islands of the group east of longitude 171 degrees

west of Greenwich, are hereby placed under the control of the Department of the Navy for a naval station”

(Treaty of Berlin 1899, 2012).

Today, American Samoa is self-governing under a constitution that became effective July 1, 1967.

The U.S. Territory of American Samoa is on the United Nations list of Non-Self-Governing Territories – a listing

that is disputed by territorial government officials.

EXPLORING ENTREPRENEURSHIP AND ECONOMICS

American Samoa is a small developing economy that depends mainly upon two primary income

sources: the American Samoa Government (ASG) that receives income capital subsidies from the U.S., and

two fish canneries on Tutuila. These two primary income sources have given rise to a third source: a service

sector that is derived from and complements the other two.

American Samoa’s main export is canned tuna and tuna by-products. Other manufacturing and

industrial assembly is small today but is potentially an important source of income, especially if the

American Samoa Government can attract more businesses and investments; however, given the distances

involved and the current worldwide recession, this is proving to be a huge challenge to the government.

In response to a minimum wage increase, one of the two major tuna canning plants in

American Samoa, Chicken of the Sea, shut down in 2009, and 2,041 employees were laid off in the

process. Based in San Diego, California, the company markets a variety of other seafood items

under the Chicken of the Sea brand name, including clam, crab, mackerel, salmon, sardines and

tuna.

Both StarKist and Chicken of the Sea more than likely use the Kitchin cycle or short

business cycle of about 40 months. This cycle, discovered in the 1920s by Joseph Kitchin, is

believed to be accounted for by time lags in information movements affecting the decision making of

commercial firms (Cycles and Trends, 2012). Firms react to the improvement of commercial

situations using the increase in output through the full employment of the extent fixed capital assets.

As a result, within a certain period of time (ranging between

a few months and two years) the market gets ‘flooded’ with

commodities whose quantity becomes gradually excessive.

The demand declines, prices drop, and the produced commodities get

accumulated in inventories, which inform entrepreneurs of the necessity to reduce output.

However, this process takes some time. It takes time for the information that the supply

significantly exceeds the demand to get to the businessmen, and then it takes more time for

the entrepreneurs to check this information and make the decision to reduce production.

Some time is also necessary to put these decisions into effect. These are the time lags that

generate the Kitchin cycles.

STRATEGIC ENTREPRENEURSHIP

Strategic entrepreneurship is the means through which firms can exploit their

current competitive advantages while exploring future business opportunities. Achieving a

balance between exploitation and exploration consists of more than just allocating resources

evenly between the two processes. Exploitation and

exploration are operationally, structurally, and culturally

distinct processes.

To aid in the growth of small business and strategic entrepreneurship in American Samoa,

American Samoa Community College and the U.S. SBA officially established a Small Business

Development Center (SBDC) on June 28, 2000. In recognition of the many unique challenges and the

remote location, the SBA granted the new SBDC a cost-match waiver, provided that the annual grant

awards did not exceed a prescribed level.

The SBA district office in Hawaii and the SBDC has agreed upon the specific mix of services.

Services should give particular attention to the SBA’s priority and special emphasis groups, including

veterans, women, exporters, the disabled, and minorities.

The Statistics, gathered in 2006 concerning American Samoa and released by the local

Department of Commerce, indicated a stagnating decline in the overall economy.

FINANCING ENTREPRENEURIAL VENTURES

In the U.S. and U.S. Territories, the Community Development Banks (CDBs or

CDFI Banks) are commercial banks that operate with a mission to generate economic

development in low- to moderate-income geographical areas and to serve residents of these

communities. In the U.S., Community Development Banks are certified as such by the

Community Development Financial Institutions Fund, a department within the U.S.

Department of the Treasury.

The Development Bank of American Samoa (DBAS) was established in 1969 under

Public Law 11-40 (P.L. 11-40). The mission of the Bank is to serve the economic and developmental

needs of the community of American Samoa through affordable financial services.

Finance is a family of business activity that includes the origination, marketing, and

management of cash and money surrogates through a variety of capital accounts, instruments , and

markets created for transacting and trading assets, liabilities, and risks. Finance is conceptualized,

structured, and regulated by a complex system of power relations within political economies across

state and global markets.

To further assist entrepreneurs financially, U.S. President Barack Obama signed

into law the Small Business Jobs Act (Public Law 111-240), in September of 2010. This

business legislation launched new law that is providing critical resources to help small

businesses continue to drive economic recovery and create jobs. The law extended the

successful U.S. SBA enhanced loan provisions while offering billions more in lending support,

tax cuts, and other opportunities for entrepreneurs and small business owners” (Small

Business Jobs Act 2010, 2012).

The rationale for programs like the Small Business Jobs Act was from Keynesian

macroeconomic theory, which argues that during recessions, the government should offset the

decrease in private spending with an increase in public spending to save jobs and stop further

economic deterioration. Keynesian economics argues that private-sector decisions sometimes lead

to inefficient macroeconomic outcomes, therefore it advocates active policy responses by the public

sector, including monetary policy actions by the central bank and fiscal policy actions by the

government to stabilize output over the business cycle.

The theories forming the basis of Keynesian economics were first presented in

The General Theory of Employment, Interest and Money , published in 1936. The

interpretations of Keynes are contentious, and several schools of thought claim his legacy.

Keynesian economics advocates a mixed economy: predominantly private sector, but with a

significant role of government and the public sector. This served as the economic model

during the latter part of the Great Depression, World War II, and the post-war economic

expansion (1945–1973), though it lost some influence following the tax surcharge in 1968,

and the stagflation of the 1970s (What is Keynesian Economics? 2012). The advent of the

global financial crisis in 2008 caused resurgence in Keynesian thought.

Under the Small Business Act of 2010, SBA loans were enhanced to provide up to a 90

percent guarantee to strengthen access to capital for small businesses after credit froze in 2008.

Additionally, SBJA 2010 or Public Law 111-240 (PL 111-240)was enacted to authorize the administrator of

the U.S. SBA to disburse up to $50,000,000 to make grants to SBDC under Section 21 of the Small

Business Act (15 U. S. C. 648).

This funding was provided to SBDCs with a primary objective of supporting job creation and

retention within the business community through impactful, individualized, in-depth business advising of

entrepreneurs and small business owners. SBDCs are to use Jobs Act funding to

demonstrate increased innovation in areas such as delivery of their services, serving new or

additional markets not otherwise covered, and promoting programs that will

create the next generation of entrepreneurs.

GLOBAL ECONOMY

The Small Business Jobs Act grant awarded to American Samoa has aided the SBDC in

assisting client businesses in becoming more involved with the global economy via international trade

training and counseling designed to improve import and export skills and capabilities.

Training for Samoa firms explain that global economy is based on the world's countries

national economies. Also, the global economy can be seen as the economy of global society and national

economies – as economies of local societies, making the global one. It

can be evaluated in various ways. For instance, depending upon the

model used, the valuation arrived at can be represented in a certain

currency, such as 2006 U.S. dollars or 2005 Euros (Global Economy, 2012).

MANAGING INNOVATION

Managing innovation for the Small Business Center is the discipline of managing

processes in innovation, and it can be used to develop both product and organizational

revolution. Without proper processes, it is not possible for Research & Development (R&D) to

be efficient. Innovation management includes a set of tools that allows managers and

engineers to cooperate with a common understanding of goals and processes.

The focus of innovation management is to allow the businesses to respond to an

external or internal opportunity and to use their creative efforts for introducing new ideas,

processes, or products. Importantly, innovation management is not relegated to R&D; it involves

workers at every level in contributing creatively to a company's development, manufacturing, and

marketing.

Innovation processes can be pushed or pulled through development. A pushed process

is based on existing or newly invented technology that the organization has access to. It tries to find

profitable applications for this technology. A pulled process tries to find areas where consumer

needs are not met and then focuses development efforts on finding solutions for those needs.

To succeed with either method, an understanding of both the market and the technical

problems is needed. By creating multi-functional development teams that contain engineers and

marketers, both dimensions can be solved. The lifetime (or product lifecycle) of new products is

steadily getting shorter; increased competition tends to force companies to reduce their time to

market. Innovation managers must decrease development time without sacrificing quality or meeting

the needs of the market (Product Life Cycle, 2012).

For the purpose of implementing the Small Business Job Act, the American Samoa SBDC

offered a plan to the SBA that demonstrated increased innovation in the areas of delivery of services.

Additionally, several key considerations were addressed in the plan to ensure program viability and

sustainability and to maximize the funding impact.

RESEARCH METHODOLOGY

Organizations like the SBDC use research to collect data, especially market data. Market research and data are

used to identify potential markets in the following areas:

• the needs and wants of each;

• how those needs and wants can be met;

• how products and services could be packaged to be most accessible to customers and clients;

• the best pricing for those products and services;

• who the competitors are;

• how best to compete against each;

• who the potential collaborators are;

• how to collaborate with each and many other applications of research

(Market Research, 2012).

In this project, the following methods were used to conduct the research:

• Appreciative Inquiry

• Focus Groups

• Interview Design

• Listening

• Questioning (face to face)

• Questionnaires

During late summer of 2010, the SBDC reviewed and modified the unfunded mandate of

its original 1999 core funding budget, while maintaining the following original goals and objectives:

Goal 1: To support job creation and retention;

Goal 2: To enhance export assistance and expertise.

After a program review and a needs assessment of economic issues like the aftermath

of the 2009 Tsunami and food processing plant layoffs in 2009 and 2010 (through observation and

Interview), the SBDC applied for and received the Small Business Jobs Act of 2010 Grant Award for

$325,000.

To start a research aimed at providing business and job creation programs, understanding the profile of the

business and general communities that it will benefit is critical. American Samoa’s research was conducted using the

hourglass model structure of research. The hourglass model starts with a broad spectrum for research, focusing in on the

required information through the methodology of the project (like the neck of the hourglass), and then it expands the

research in the form of discussion and results. The major steps in the hour glass model of research are:

• Identification of research problem –

A researcher considers what caused the need to do research and exercise problem identification. The research

problem is a situation that causes a researcher to feel confused, apprehensive, or uneasy. It is the dividing line

of a problem area within a certain context involving who, what, when, where, and the why of a problem situation.

• Literature review –

A researcher conducts a literature review which is the process of reading, analyzing,

evaluating, and summarizing scholarly materials about their topic.

Major steps in the hour glass model of research – Continued:

• Specifying the purpose of research –

A researcher states explicitly the purpose and research questions or hypotheses.

• Determine specific research questions or hypotheses –

A researcher decides on a formal statement of the research question hypothesis, and the hypothesis

should be stated in a way so that a true or false answer from an experiment would support or not

support the hypothesis.

• Data collection –

A researcher builds or brings together information that has been systematically observed, recorded,

organized, categorized, and or defined in such a way that logical processing and inferences may

occur.

Major steps in the hour glass model of research – Continued:

• Analyzing and interpreting the data –

A researcher uses the process of assigning meaning to collected information and determines the

conclusions, significance, and implications.

• Reporting and evaluating research –

A researcher goes through the process of sharing research findings with the world and continues

evaluation of the project.

The business data indicates that entrepreneurs and managers have or should have many of

the same character traits as leaders, similar to the early great man theories of leadership and those

entrepreneurs are often contrasted with managers and administrators who are said to be more methodical

and less prone to risk-taking. Entrepreneurial activities are substantially different depending upon the type

of organization and creativity involved.

In Samoa, entrepreneurship ranges in scale from solo projects to major undertakings that

create many job opportunities. Many "high value" entrepreneurial ventures seek venture capital or angel

funding (seed money) to raise capital for building the business. Angel investors

generally seek annualized returns of 20-30% or more, as well as extensive

involvement in the business.

Businesses selected by the SBDC to participate in the Jobs Act Program exhibited management skills that

got people together to accomplish desired goals and objectives using available resources efficiently and effectively.

The firms selected used management techniques that comprised planning, organizing, staffing, leading or directing,

and controlling an organization (a group of one or more people or entities) or effort for the purpose of accomplishing a

goal.

Because of their pre-existing experience, talents, and business resources, the Center selected the

following three enterprises to launch pilot partnership programs designed to cultivate new businesses, create jobs,

and offer community outreach:

• American Samoa Culinary Academy (ASCA)

• Information and Communication Technology (ICT)

• Samoa Sports Center for Community Outreach

RESULTS AND DISCUSSION

The SBDC has incorporated qualitative research into the data collection and analysis of

the Small Business Jobs Act and its economic impact. The Center realizes that qualitative research

is a method of inquiry that is employed in many different academic disciplines, traditionally in the

social sciences but also in market research and other contexts.

The Center gathered and analyzed an in-depth collection of data and has developed an

understanding of human behavior and the reasons for business decision-making in the region. The

qualitative method was used because it investigates the why and how of decision making, not just

what, where, when. Therefore, smaller but focused data samples are more often needed than large

samples.

In the SBDC’s view, qualitative methods produce quality information only in

particular cases. However, quantitative methods can be used to seek empirical support for

such research hypotheses. Qualitative research often categorizes data into patterns as the

primary basis for organizing and reporting results. Qualitative researchers typically rely on the

following methods for gathering information: participant observation, non-participant

observation, field notes, reflexive journals, structured interviews, semi-structured interviews,

unstructured interviews, and analysis of documents and materials (Qualitative Research,

2012).

The SBDC found culture to be one of many factors that influence decision making in American

Samoa. In the SBJA 2010 Case Study for American Samoa, culture is defined as local client attitudes and

beliefs. As an individual growing up, a child is influenced by their parents, brothers, sisters and other family

members who may teach them what is wrong or right. They learn about their religion and culture, which helps

them develop these opinions, attitudes and beliefs. These factors influence behavior; however, other factors such

as groups of friends or people they look up to may also influence their choices of purchasing or getting involved

in a particular product or service.

In American Samoa, reference groups are particular groups of people some other people may look

up to, and they have an impact on behavior. Opinion leaders are those people who are looked up to because of

respect for their views and judgments, and these views may influence new ventures or job-search decisions. For

example, a friend who works with the IT trade may influence a client’s decision on what computer to buy.

ECONOMIC DATA AND STATUS AS OF 2010

• Population in American Samoa was estimated at 60,000

• Personal Tax Rate 4%

• Average minimum wage of $2.68 to $4.69 per hour that varied by industry.

• Average labor force was 17,630 with an unemployment rate estimated at 29.8 percent.

With local Government’s request and endorsement, on September 30, 2010, President Obama

signed legislation that delayed scheduled wage increases for 2010 and 2011. To gain ground after

2011, annual wage increases of $0.50 were scheduled to recommence on September 30, 2012.

Established goal-progress was tracked, recorded, and analyzed. Goals were

based on the following standards:

• Number of jobs created;

• Number of jobs retained;

• Number of single-year, long-term clients that received five hours

or more of counseling (including contact and prep time);

• Number of new businesses created;

• Dollar amount of capital infusion, which includes SBA loans, non-SBA loans, and equity

investment.

SMALL BUSINESS JOBS ACT DATA RESULTS AS OF YEAR END 2011

SBJA Statistics 2011

Client ID Name of Business Jobs created Jobs retained Capital Infusion

American Samoa Culinary Academy 40 40 $ 415,805.00

Samoa Mixed Martial Arts 9 9 $ 23,000.00

Lucky Dragon 5 5 $ 25,000.00

Field House 100 4 4 $ 12,000.00

Klub Oceans 5 5 $ 15,000.00

Climate Control 3 3 $ 9,000.00

Taps Lounge & Steak Bar 4 4 $ 20,000.00

I-Pacifica Amerika Samoa 4 4 $ 51,000.00

Tap-in Production 4 4 $ 13,500.00 Samoa Community Center 5 5 $ 30,000.00 Regina Meredith - Le Sina 1 1 $ 300.00

Total 84 84 $ 614,605.00

Summary:

Goal by 12/31/2013 Results As of 12/31/2011

1 28 11 Business Start-ups

2 100 84 Jobs Created

3 1,000,000.00 $ 614,605.00 Investment

CONCLUSIONS AND RECOMMENDATIONS

This project set out to establish that jobs-development programs could be successful via

business creation, retention, and enhancement opportunities. The purpose of this case study was to

explore and analyze the subject and methodology of implementing grant stimulus in a business setting

significantly influenced by past history and local culture.

From the very beginning, the origin of relationships between the United States of America and

the U.S. Territory of American Samoa has been firmly connected to global economics and strategic

entrepreneurship. In 1900, had President William McKinley not signed an executive order regarding

Tutuila of the Samoan Group, and the Secretary of the Navy not taken steps to establish the authority of

the U.S. to give to the islands the necessary protection, today only one Samoa may have existed as an

island group with a very different past, present, and future management and entrepreneurial circumstance.

Therefore, today’s practice of financing entrepreneurial ventures has strong roots in Keynesian

macroeconomic theory, which argues that during recessions, the government should offset the decrease in private

spending with an increase in public spending to save jobs and stop further economic deterioration. Keynesian economics

argues that private-sector decisions sometimes lead to inefficient macroeconomic outcomes; therefore, it advocates

active policy responses by the public sector, including monetary policy actions by the central bank and fiscal policy

actions by the government to stabilize output over the business cycle. Born out of this premise was the Small Business

Jobs Act of 2010 (SBJA 2010).

The SBA and the American Samoa SBDC were able to launch programs and start data collection during the

beginning of the second quarter of 2011. American Samoa SBDC research was conducted using the hourglass model

structure of research. The hourglass model starts with a broad spectrum for research before focusing in on the required

information through the methodology of the project (like the neck of the hourglass) and then expands the research in the

form of discussion and results. The study showed that in only a few months, with small expenditure (estimated $90,000);

the American Samoa SBDC was able to enhance job creation and small business start-up.

The research can offer the Small Business Administration and the Small Business Development

Center Network, data and a business model for successfully creating entrepreneurial and job opportunities. Also,

to expand further on this project in the future the American Samoa SBDC would study the influence of positive

motivation and resources beyond those monetary in the success of entrepreneurs and workforce creation.

Today, the work of the Small Business Development Center Network and the introduction of SBJA

2010 are ongoing and highly important in the U.S. and in its territories (Guam, U.S. Virgin Islands, and American

Samoa). Historically, because of isolated location, limited local resources, and language and culture differences,

U.S. territories tend to have had high unemployment rates. Recommendation is that the Small Business

Administration continue programs like the SBJA of 2010 and

that it enhances funding and other resources whenever possible.

REFERENCES

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Global Economy Retrieved in 2012 from http://www.economywatch.com/world_economy /

World-economic-indicators/global-economy/define-global-economy.html

Market Research. Retrieved in 2012 from http://export.gov/mrktresearch/

Product Life Cycle. Retrieved in 2012 from http://people.hofstra.edu/geotrans/eng/ch5en/conc5en/productlifecycle.html

Qualitative Research. Retrieved in 2012 from http://www.qsrinternational.com/what-is-qualitative-research.aspx

Small Business Jobs Act of 2010. Retrieved in 2012 from

http://www.sba.gov/content/small-business-jobs-act-2010

Treaty of Berlin,1899. Retrieved in 2012 from http://www.absoluteastronomy.com/topics/Treaty_of_Berlin

What is Keynesian Economics?. Retrieved in 2012 from http://www.wisegeek.com/what-is-keynesian-economics.htm

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