Putting Small Business in Perspective

Last week, NPR interviewed Wharton School professor Justin Wolfer about the role that small businesses play in job creation and innovation in the US economy.  He argued that the role of small businesses (i.e., firms with 50 or fewer employees) is over-rated. One telling quote really makes his case:

If you actually look at the data, what we mean by small businesses, what they actually are, they’re things like real estate agents or my hairdresser. They’re lawyers; they’re doctors. You talk to these folks, do they have any interest in innovating or bringing new products to market or any of the things we think of as being the engine of economic growth? The answer is no. My dry cleaner likes to take my clothes and then give them to me four days later. Most small businesses don’t even have ambitions of being the engines of economic growth, or the engines of jobs.

Clearly there are some small businesses that are innovators and looking to grow rapidly.  But they are a small minority and you need to look for them carefully.  You can listen to or read the interview with Professor Wolfer here.

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