Tuesday, May 16, 2006

Small is Big

Sometimes people ask me whether small organizations operating at the grassroots level can make a systemic difference.

The answer is: Definitely.

Consider the US economy, which for all its problems in the most vibrant in the world.

Small businesses in the US account for 99.7 percent of all employers, pay 44 percent of the entire US payroll, generate 60 to 80 percent of net new jobs in the US annually, and create more than half of all US GDP.

Furthermore, small businesses produce 13x more patents than larger businesses. And those patents are twice as likely to be among the most cited.

And consider this: even the largest of US companies were small businesses when they began. That includes eBay, Amazon, Google, MySpace, and on and on.

Do all small businesses end up becoming big or contributing to growth and innovation? Of course not. At least half of them fail in the first four years of their existence. The good thing about the US economy - and others like it - is that it encourages lots of experimentation, and failure is generally not a stigma (as long as there was no fraud). Small business owners who fail often dust off their pants and try again. And again.

What are the implications for international development?

Source: Small Business Administration, "Small Business by the Numbers," 2003