Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:


Locally owned small businesses pack powerful economic punch

Thinking small and local, not big and global, may help communities ignite long-term economic growth, according to Penn State economists.

Small, locally owned businesses and startups tend to generate higher incomes for people in a community than big, nonlocal firms, which can actually depress local economies, said Stephan Goetz, professor of agricultural and regional economics.

"Local ownership matters in important ways," said Goetz. "Smaller, locally owned businesses, it turns out, provide higher, long-term economic growth."

The association of small businesses with enhancing economic growth in communities, regardless of the community's population size and density, was statistically significant, said Goetz, who serves as director of the Northeast Regional Center for Rural Development. Small local businesses are standalone firms with 10 to 99 employees owned by residents or businesses with headquarters in the same state.

The presence of large firms that employ more than 500 workers and that are headquartered in other states was associated with slower economic growth.

Big-box and large corporations have internal systems for services such as accounting, legal, supply and maintenance that are not necessarily based within the county or state. In addition to outsourcing services that were once provided by community businesses, nonlocal large companies may displace more entrepreneurial small firms. Examples of non-locally owned large companies include retail chain stores such as Wal-Mart and Best Buy, and service providers such as U.S.-based call centers for car rental agencies, banks, health care providers and telecommunications firms.

According to Goetz, small businesses and startups provide more than just jobs for community members. They also can improve innovation and productivity on a local level and use other businesses in the community such as accounting and wholesalers, while larger businesses develop their own infrastructure.

The researchers, who report their findings in the current issue of Economic Development Quarterly, studied data from the Edward Lowe Foundation on the economic growth and residence status of business owners in 2,953 U.S. counties, including both rural and urban counties.

"This is really a story about startups," said Goetz. "Many communities try to bring in outside firms and large factories, but the lesson is that while there may be short-term employment gains with recruiting larger businesses, they don't trigger long-term economic growth like startups do."

Goetz, who worked with David A. Fleming, graduate student in agriculture, environmental and regional economics, said the economic benefit of locally owned businesses appears to diminish as the firm grows. Medium-sized and large-sized businesses owned by residents are not associated with faster economic growth in later years.

Goetz said a better strategy to promote economic growth may be encouraging local businesses rather than recruiting large outside firms.

"We can't look outside of the community for our economic salvation." Goetz said. "The best strategy is to help people start new businesses and firms locally and help them grow and be successful."

Matt Swayne | EurekAlert!
Further information:

More articles from Business and Finance:

nachricht Blockchain Set to Transform the Financial Services Market
28.09.2016 | HHL Leipzig Graduate School of Management

nachricht Paper or plastic?
08.07.2016 | University of Toronto

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Etching Microstructures with Lasers

Ultrafast lasers have introduced new possibilities in engraving ultrafine structures, and scientists are now also investigating how to use them to etch microstructures into thin glass. There are possible applications in analytics (lab on a chip) and especially in electronics and the consumer sector, where great interest has been shown.

This new method was born of a surprising phenomenon: irradiating glass in a particular way with an ultrafast laser has the effect of making the glass up to a...

Im Focus: Light-driven atomic rotations excite magnetic waves

Terahertz excitation of selected crystal vibrations leads to an effective magnetic field that drives coherent spin motion

Controlling functional properties by light is one of the grand goals in modern condensed matter physics and materials science. A new study now demonstrates how...

Im Focus: New 3-D wiring technique brings scalable quantum computers closer to reality

Researchers from the Institute for Quantum Computing (IQC) at the University of Waterloo led the development of a new extensible wiring technique capable of controlling superconducting quantum bits, representing a significant step towards to the realization of a scalable quantum computer.

"The quantum socket is a wiring method that uses three-dimensional wires based on spring-loaded pins to address individual qubits," said Jeremy Béjanin, a PhD...

Im Focus: Scientists develop a semiconductor nanocomposite material that moves in response to light

In a paper in Scientific Reports, a research team at Worcester Polytechnic Institute describes a novel light-activated phenomenon that could become the basis for applications as diverse as microscopic robotic grippers and more efficient solar cells.

A research team at Worcester Polytechnic Institute (WPI) has developed a revolutionary, light-activated semiconductor nanocomposite material that can be used...

Im Focus: Diamonds aren't forever: Sandia, Harvard team create first quantum computer bridge

By forcefully embedding two silicon atoms in a diamond matrix, Sandia researchers have demonstrated for the first time on a single chip all the components needed to create a quantum bridge to link quantum computers together.

"People have already built small quantum computers," says Sandia researcher Ryan Camacho. "Maybe the first useful one won't be a single giant quantum computer...

All Focus news of the innovation-report >>>



Event News

#IC2S2: When Social Science meets Computer Science - GESIS will host the IC2S2 conference 2017

14.10.2016 | Event News

Agricultural Trade Developments and Potentials in Central Asia and the South Caucasus

14.10.2016 | Event News

World Health Summit – Day Three: A Call to Action

12.10.2016 | Event News

Latest News

Greater Range and Longer Lifetime

26.10.2016 | Power and Electrical Engineering

VDI presents International Bionic Award of the Schauenburg Foundation

26.10.2016 | Awards Funding

3-D-printed magnets

26.10.2016 | Power and Electrical Engineering

More VideoLinks >>>