PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Small Business Week: A Reminder About Entrepreneurs, Small Firms and the Economy

By at 1 May, 2018, 8:00 am

by Raymond J. Keating-

With National Small Business Week upon us, it’s a great time for a reminder on the importance of entrepreneurship and small business to the U.S. economy.

Successful Big Businesses Started as a Small Business

First, let’s state the obvious because even the obvious somehow manages to elude many, including assorted so-called experts. That is, every big business started off as a small business, including such big players today as Amazon.com, Apple, Wal-Mart, Google, ExxonMobil, McDonald’s, Home Depot, General Motors, and so on.

Therefore, discussions about entrepreneurship and business are not – or should not be – about small business vs. big business, but instead, should be focused on establishing the best possible environment in which entrepreneurs can flourish, and businesses can compete, innovate and grow.

Startups and Small Businesses Drive Job Creation

Second, when talking jobs, we’re talking small business. The bulk of net new jobs in the U.S. economy are created by smaller enterprises (with less than 500 employees). As the SBA’s Office of Advocacy has reported:

“Small businesses accounted for 61.8% of net new jobs from the first quarter of 1993 until the third quarter of 2016…The small business share of net job change was strongly positive for most of this 24-year time span, except during two recessionary periods.” For good measure, 47.8 percent of private sector workers are employed by small businesses.

Most U.S. Businesses are Small Businesses

Third, small businesses account for most U.S. businesses. When looking at U.S. Census Bureau data on employer firms and nonemployer establishments (latest data from 2015), out of 30.2 million businesses in the U.S., 97.9 percent have fewer than 20 workers, 99.6 percent fewer than 100 employees, and 99.9 percent fewer than 500 employees.

Small Businesses Drive Innovation

Fourth, and finally, the role of small business in innovation must be noted. A study by Anthony Breitzman and Diana Hicks for the Office of Advocacy (“An Analysis of Small Business Patents by Industry and Firm Size”) found that “small firms are much more likely to develop emerging technologies than are large firms. This is perhaps intuitively reasonable given theories on small firms effecting technological change, but the quantitative data here support this assertion. Specifically, although small firms account for only 8 percent of patents granted, they account for 24 percent of the patents in the top 100 emerging clusters.”

So, there you have it. Small businesses are central to our economic well-being, and that’s why we celebrate National Small Business Week.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.

 

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