Great partners: small business, large corporations
Policymakers and candidates are elevating small business as the economic engine of the country, worthy of special support. Agreed, but that's not the whole story.
The House Committee on Small Business held a hearing last week, March 28, "Large and Small Businesses: How Partnerships Can Promote Job Growth," summarized, "Increasingly, large and small businesses are partnering to access the research, innovations and services they need to be successful. Large firms are joining with small firms to benefit from their leanness, nimbleness, and creativity. Small companies can also benefit by tapping into the larger distribution networks, financing opportunities, and mentoring programs that large businesses can supply."
Agreed! And we're getting pretty close to the whole story.
One of the witnesses was Matt Slaughter, Associate Dean for the MBA Program and Signal Companies Professor of Management at Dartmouth College's Tuck School of Business. (Slaughter has worked with Business Roundtable in the past, co-authoring a 2010 study for BRT and the U.S. Council for International Business, "Mutual Benefits, Shared Growth: Small and Large Companies Working Together.") His testimony put context and dollar figures to the far-reaching relationship between small business and U.S.-based multinational firms. (Testimony in .pdf available here.) Slaughter concluded:
Small and big businesses in America are connected to and working with each other through their supply-chain partnership. The parent operations of U.S. multinationals buy an estimated 24% of all their intermediate inputs from U.S. small businesses—an estimated $1.52 trillion in total, which is about 12.3% of all sales by U.S. small businesses.
Slaughter followed with three key points:
- One important policy implication follows from this analysis: government policies targeted at just small business or at just big business affect all firms, not just firms of a particular size. So, government policies should be aiming to promote investment growth and job creation for all U.S. businesses.
- A second important policy implication is that the supply-chain partnership between large and small businesses will almost surely become more important, not less so, in the future.
- A third important policy implication is that to better understand the partnerships between large and small businesses, U.S. government data need improving.
Thank you to Committee Chairman Sam Graves (R-MO) for holding the hearing. In his opening statement he made this important observation:
For many years, businesses have entered into agreements with other companies to supply a part for a larger product, or to provide a good or service. Increasingly, large companies create alliances with small firms to access their innovative ideas. These partnerships allow the larger companies to expand their current market or product offerings, enter into new markets, or simply gain a competitive advantage in a challenging economy. Small companies also benefit from these alliances by tapping into the larger distribution networks, financing opportunities, and mentoring programs that large businesses can supply.