An additional point needs to be made about job creation and loss by small businesses in the context of overall economic conditions. Government data show that of the “net 1.5 million jobs lost in 2008, 64 percent were from small firms.” [21] However, the same study had some interesting results from the past two recessions. In the 2001 recession, small businesses with fewer than 20 employees experienced 7 percent of the total reduction in jobs, firms with between 20 and 500 employees were responsible for 43 percent of the job losses, and the rest of the job losses came from large firms. As the economy recovered in the following year, firms with fewer than 20 employees created jobs, while the other two groups continued to shed jobs. Following the 1991 recession, it was firms with 20 to 500 employees that were responsible for more than 56 percent of the jobs that were added.
Table 1.4 Job Creation by Firm Size
Years 1–4 5–9 10–19 20–99 100–499 500+
2002–2003 1,106,977 307,690 158,795 304,162 112,702 (994,667)
2003–2004 1,087,128 336,236 201,247 199,298 66,209 (214,233)
2004–2005 897,296 141,057 (11,959) (131,095) 83,803 262,326
2005–2006 1,001,960 295,521 292,065 590,139 345,925 1,072,710
Source: “Small Business Profile,” SBA Office of Advocacy, 2009,http://archive.sba.gov/advo/research/data.html.
One last area concerning the small business contribution to American employment is its role with respect to minority ownership and employment. During the last decade, there has been a remarkable increase in the number of self-employed individuals. From 2000 to 2007, the number of women who were self- employed increased by 9.7 percent. The number of African Americans who were self-employed increased by 36.6 percent for the same time range. However, the most remarkable number was an increase of nearly 110 percent for Hispanics. It is clear that small business has become an increasingly attractive option for minority groups. [22] Women and Hispanics are also employed by small businesses at a higher rate than the national average.
KEY TAKEAWAYS
• Small businesses have always played a key role in the US economy.
• Small businesses are responsible for more than half the employment in the United States.
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• Small businesses have a prominent role in innovation and minority employment.
EXERCISES
1. Throughout this text, you will be given several assignments. It would be useful if these assignments had some degree of consistency. Select a type of business that interests you and plan on using it throughout some of the chapter assignments. After selecting your business, go to www.sba.gov/content/table-small-business-size- standards and determine the size of the business.
2. In the United States, 50 percent of those employed are working for small businesses. There are considerable differences across states. Go to www.census.gov/econ/susb/ and compute the percentage for your state. What factors might account for the differences across states?
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[1] “Small Business by the Numbers,” National Small Business Administration, accessed October 7, 2011, www.nsba.biz/docs/bythenumbers.pdf.
[2] “A Definition of Entrepreneurship,” QuickMBA.com, accessed October 7, 2011,www.quickmba.com/entre/definition.
[3] Nick Leiber, “The Anatomy of an Entrepreneur,” Bloomberg BusinessWeek, July 8, 2009, accessed October 7, 2011, www.BusinessWeek.com/smallbiz/running_small _business/archives/2009/07/anatomy_of_an_e.html.
[4] “Entrepreneur vs. Small Business Owner: What’s the Difference?,” Mills Communication Group, July 22, 2009, accessed October 7, 2011,www.millscommgroup.com/blog/2009/06/entrepreneur-vs-small-business-owner-whats- the-difference.
[5] Dale Beermann, “Entrepreneur or Small Business Owner? Does It Matter?,”Brazen Careerist, January 30, 2009, accessed October 7, 2011,www.brazencareerist.com/2009/01/29/entrepreneur-or-small-business-owner-does-it- matter.
[6] Jack Beatty, The Age of Betrayal: The Triumph of Money in America 1865–1900 (New York: Alfred A. Knopf, 2007), 11.
[7] Ted Nace, The Gangs of America: The Rise of Corporate Power and the Disabling of Democracy (San Francisco: Berrett- Koehler Publishers, 2003), 44.
[8] Bob Higgins, “Like Lincoln, Jefferson, Madison—Americans Fear Corporate Control of Public Policy,” TPMCafe, February 17, 2011, accessed October 23, 2011,tpmcafe.talkingpointsmemo.com/talk/blogs/r/l/rlh974/2010/02/like- lincoln-jefferson -madison.php.
[9] Ted Nace, The Gangs of America: The Rise of Corporate Power and the Disabling of Democracy (San Francisco, Berrett- Koehler Publishers, 2003), 44.
[10] Mansel Blackford, The History of Small Business in America, 2nd ed. (Chapel Hill, NC: University of North Carolina Press, 2003), 4.
[11] “What We Do,” Small Business Administration, accessed October 7, 2011,www.sba.gov/about-sba-services/what- we-do.
[12] Christopher Conte, “Small Business in U.S. History,” America.gov, January 3, 2006, accessed October 7, 2011, www.america.gov/st/business-english/2008/July/20080814215602XJyrreP0.6187664.html.
[13] Mansel Blackford, The History of Small Business in America, 2nd ed. (Chapel Hill, NC: University of North Carolina Press, 2003), 4.
[14] Katherine Kobe, “The Small Business Share of GDP, 1998–2004,” Small Business Research Summary, April 2007, accessed October 7, 2011,http://archive.sba.gov/advo/research/rs299tot.pdf.
[15] Zoltan J. Acs and David B. Audretsch. “Innovation in Large and Small Firms: An Empirical Analysis,” American Economic Review 78, no. 4 (1988): 678–90.
[16] “Small Business by the Numbers,” National Small Business Administration, accessed October 7, 2011, www.nsba.biz/docs/bythenumbers.pdf.
[17] Jeff Cornwall, “Innovation in Small Business,” The Entrepreneurial Mind, March 16, 2009, accessed June 1, 2012,http://www.drjeffcornwall.com/2009/03/16/innovation _in_small_business/.
[18] “Small Business by the Numbers,” National Small Business Administration, accessed October 7, 2011, www.nsba.biz/docs/bythenumbers.pdf.
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[19] “Statistics of U.S. Businesses,” US Census Bureau, April 13, 2010, accessed October 7, 2011, www.census.gov/econ/susb.
[20] William J Dennis Jr., Bruce D. Phillips, and Edward Starr, “Small Business Job Creation: The Findings and Their Critics”, Business Economics 29, no. 3 (1994): 23–30.
[21] Brian Headd, “An Analysis of Small Business and Jobs,” Small Business Administration, March 2010, accessed October 7, 2011,www.sba.gov/advo/research/rs359tot.pdf (p. 10).
[22] “Statistics of U.S. Businesses,” US Census Bureau, April 13, 2010, accessed October 7, 2011, www.census.gov/econ/susb.
1.2 Success and Failure in Small Businesses
L E A R N I N G O B J E C T I V E S
1. Be able to explain what is meant by business success.
2. Be able to describe the different components of business failure.
3. Understand that statistics on business failure can be confusing and contradictory.
4. Understand that small business failure can be traced to managerial inadequacy, financial issues, and
