When discussing economic growth, many politicians talk about the importance of small businesses and their importance to the local region. This is particularly true in rural areas, especially ones that have lost major, large manufacturing employers over the last fifteen years. While this sounds right, and reflects the federal focus through the Small Business Administration and programs like the Small Business Development Centers and small business set-asides, it’s not actually true.
According to a forthcoming book by Robert D. Atkinson and Michael Lind
titled “Big is Beautiful: Rebutting the Mythology of Small Business” (MIT Press,
2018), on virtually every economic indicator, including wages, innovation, exports, and even job creation, large firms in the United States outperform small ones. Moreover, states with larger average firm sizes outperform states with smaller firms.
Furthermore, many small firms stay small, and that’s what their founders intend. They have no desire to grow; they just want to work for themselves. So small business lending and other preferences aimed at businesses just because of their size are not contributing to economic growth.
What matters is intent and execution. Does a new business want to grow? Does it bring outside money into an economy, rather than just from local clients? Does the business have a demonstrable and meaningfully unique advantage that will add value, increase productivity or solve a critical societal problem? These are the businesses to invest in and accelerate, regardless of their age or size.