Wednesday, June 06, 2007

Big or small? Which is better?

Do you live in an area where politicians fight to attract new large firms to the area? Or have you read that small firms have been the main job creators over the past few decades?

If you said yes to either, then you should read The Role of Small and Large Business in Economic Development by Kelly Edmiston of the KC Fed.

A few look-ins:

* " The attribution of the bulk of new job creation to small business arises largely from relatively large job loses at large firms, not to especially robust job creation at small firms....

* "...from the perspective of society at large, aggressive courting of large firms can distort rational behavior, causing a waste of economic resources....While welfare in the winning region may improve (but not necessarily), welfare for the larger community encompassing the region will suffer."

* "The overarching question is whether promoting entrepreneurship and small business makes sense in an economic development strategy. The article concludes it probably does but with some caveats...."

*"...on average, large businesses offer better jobs than small businesses in terms of both compensation and stability....little convincing evidence to suggest that small businesses have an edge over larger businesses in innovation.""

Interesting and thought provoking.

Read the entire thing: The Role of Small and Large Business in Economic Development

(BTW I reordered the look-ins slightly, but did not change meanings.)

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