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Can Small Businesses Make America Prosperous? :
October 31, 2011| The New Yorker | by James Surowiecki.

There's an ongoing veneration of small business...But the truth is that, from the perspective of the economy as a whole, small companies are not the real drivers of growth....small businesses are, on the whole, less productive than big businesses, and though they do create most jobs, they also destroy most jobs, since, while starting a business is easy, keeping it going is hard....in the U.S. the connection between size and productivity is, as a 2009 study showed, especially close. In part, this is because big businesses are able to enjoy economies of scale and scope. Big businesses are also better able to make investments in productivity-enhancing technologies and systems; in the U.S., for instance, big companies account for the vast majority of R. & D. spending....It’s harder for small businesses to innovate in these ways, particularly when credit is tight, as it is now. More important, most small businesses aren’t necessarily interested in expanding or innovating. A recent study by the economists Erik Hurst and Benjamin Pugsley shows that only a tiny fraction of small-business owners have any interest in becoming big-business owners, or even in bringing a new idea to market. Most are people who simply want to run a small company, do work they enjoy, and have some control over their own financial lives.

Those are admirable goals, but they’re not going to make companies more productive....greater productivity is the main driver of long-term economic growth and higher living standards.
small_business  James_Surowiecki  productivity  owners  myths  illusions  large_companies  economies_of_scale  economies_of_scope  managerial_preferences 
october 2011 by jerryking
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